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CSRC Confirms Support For VIE Structure

Key news

Asian equities were mixed overnight on light volumes with former British territories Hong Kong, Australia, and New Zealand closed for yesterday’s Boxing Day. However, India was open. Markets were quiet overnight though there was a fair amount of news.

The China Securities Regulatory Commission (CSRC), China’s SEC, issued a statement that “publicly solicits opinions on relevant systems and rules for overseas listing” followed by a press conference. In both the statement and in the press conference, the language spoke to China opening up, stating “the direction of opening up will not change” and that they are allowing companies to list overseas twenty days after filing with the CSRC. Potentially related to the US’ HFCAA, it states, “for companies involved in foreign investment security reviews…the company should apply for security  review in accordance with the law.”

On the variable interest entity (VIE) structure, the release states that “VIE structure companies that meet the compliance requirements can go to overseas listing after filing.” This puts a fork in the VIE narrative ban story. The way this has been reported by the Financial Times and Bloomberg News is absolutely laughable.

Ironically, the National Development and Reform Commission and Ministry of Commerce cut the number of areas foreign investors can invest in from 33 to 31 items.

According to Mainland media source Shine, “foreign ownership caps on passenger car manufacturing companies will be removed.” There also was talk of expanding a pilot real estate tax while the PBOC stated Saturday that it will support the economy through monetary policy tools.

Industrial profits increased +9% in November year-over-year and have increased +38% year-to-date. All things energy-related showed strong increases such as coal, which grew revenues +222%, oil, and natural gas, which grew revenues +284% while utility companies took the brunt of higher prices as power supply as their revenues fell -28%.

Due to the lack of Western media coverage, I assume the investment by Cinda Asset Management in Ant Group’s Chongqing Ant Consumer, its consumer finance platform, is a positive development.  

Shanghai fell -0.06%, Shenzhen gained +0.09%, and the STAR Board fell -0.23% on volume that was -13% lower than Friday, which is only 92% of the 1-year average. Liquor stocks Kweichow Moutai and Wuliangye Yibin were off -2.84% and -2.37%, respectively, weighing on staples. Real estate gained +0.54% on reports that Evergrande is on pace to finish 39,000 property units, up from 10,000 for each of the last three months. Onshore bonds and the currency were basically flat and copper was off a touch.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.37 versus 6.37 Friday
  • CNY/EUR 7.21 versus 7.22 Friday
  • Yield on 1-Day Government Bond 1.54% versus 1.54% Friday
  • Yield on 10-Year Government Bond 2.81% versus 2.81% Friday
  • Yield on 10-Year China Development Bank Bond 3.09% versus 3.08% Friday
  • Copper Price -0.09% overnight