(ATF) China bonds fell Tuesday as investors sold financial credits following a regulatory crackdown to stem a crisis in micro-lending.
The yield on China Minsheng Bank's 2.75% bond surged after it was named by China’s Banking and Insurance Regulatory Commission (CBIRC) for making illegal charges on loans to micro and small-sized enterprises. The outing added to gloom in credit markets, that have been buffeted by a string of bond defaults and a selloff that wiped billions of dollars off the value of the benchmark ATF China Bond 50 Index.
The credits of finance companies and state-owned enterprises were also hit by an announcement by the Shanghai Stock Exchange (SSE) late last week that it plans to strengthen risk management measures in a bid to stanch the string of defaults by more than 120 companies.
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The CB50 Index fell 0.01%, led by a 0.02% drop on the Financials sub-index. The SOE-heavy Enterprises gauge was unchanged after yesterday halting a six-day slide on the back of the defaults crisis.
The yield on China Minsheng’s 2.75% bond slumped 2.69 percentage points after it was named along with Industrial and Commercial Bank of China (ICBC) by the CBIRC. The charges at Minsheng’s headquarter and branches for the September 2016 to November 2019 period totalled 43.7 million yuan after it was found to have charged high fees in insurance-related businesses.
The Shanghai Stock Exchange said it would improve monitoring of risks presented by of corporate bonds, strengthen cross-market regulatory cooperation, continue improving the issuance and trading mechanism of bonds and strengthen information disclosure.
Financial bonds were also hit after the Insurance Association of China said the nation is facing a pension funding gap of between 8 trillion yuan and 10tn yuan in the next five to 10 years.
Among the other indexes, Local Governments and Corporates climbed 0.01%.