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- Shenzhen bourse to apply full price on transaction of corporate
Date: 21-Sep-2007 Sources: (People's Daily)
Shenzhen Stock Exchange is to apply same-day trading and full price transaction of corporate bonds with no daily fluctuation limit, according to a circular released on Thursday.
It said corporate bonds could be bought and sold in the same day in spot trading and accrued interest would be included in the price of a bond in the quoting process.
So far, eight companies have prepared to issue corporate bonds worth 30 billion yuan with maturities from three to ten years.
Based on overseas experience, interest rates of corporate bonds are usually two percentage points lower than the five-year bank loan rate.
The annual yield of ten-year corporate bonds should reach 5.25 percent under the current circumstances, according to industry insiders.
The government last month issued rules allowing firms to issue corporate bonds on a trial basis in a long-awaited move to expand fund raising channels and bolster the country's fledgling debt market.
Under the new regulatory arrangement, Chinese companies listed in Shanghai, Shenzhen or overseas will be allowed to sell corporate bonds with maturities of more than a year.
These firms need no bank guarantees for their debt sales and can use the proceeds to repay loans, among other purposes.
Previously, the National Development and Reform Commission, China's economic planning agency, was in charge of vetting applications by domestic companies that issued debt of longer than a year.
But the issues needed bank guarantees and were largely limited to the big state-owned enterprises, which could only use the proceeds in designated investment projects. (One U.S. dollar is equal to 7.52 yuan)
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