cc 6002 presentation

8/14/2019 CC 6002 Presentation

1/100

Chinas Economy In Transformation / Presentation 06

Key Problems and Challenges of Chinas MONEY and SECURITIES market


2/100

Money Market


3/100

money marketa place for short term borrowing and lendingspecializes in debt securities that mature in less than one year


4/100


5/100


6/100


7/100

treasury notes

treasury bills

bankers acceptancecerticates of deposit

repurchase agreement (repo)

commercial paper


8/100


9/100

1980


10/100


11/100

Short Term


12/100


13/100

State of Disorder

realizinginvestment in

prohibitedareas

securities andreal estate

market

inationand

bubbleeconomy

central bank reformpackage


14/100

1996


15/100

Unified national interbank funding market


16/100

16headquarters of commercial banks


17/100

RMB 587.2 billiontotal trading volume


18/100

2006


19/100


20/100

interbank credit borrowing & lending

bond reposspot bond transactions


21/100


22/100

6439market players in interbank bond market


23/100


24/100

Problems


25/100

Inadequate market tools

underdeveloped treasury bond marketlack of treasury bills with maturity less than 1 yearinactive commercial paper market


26/100

fragmented market


27/100


28/100

Different interest rates and trading rules

Low liquidity of the market betweenregional and national market


29/100

Challenges


30/100

Interest Rates Liberalization


31/100

% : Adjustment to balance supply and demand for money


32/100


33/100

Interest Rate

Loanable Funds

M1

MD

%1

M2


34/100

Interest Rate

Loanable Funds

M1

MD

%1

1

M2


35/100


36/100

Interest Rate

Loanable Funds

M1

MD

%1

1

M2

3

%22


37/100

China Peoples Bank of China stipulates the commercial banksbenchmark deposit and lending rates of all maturities, with acertain degree of flexibility


38/100

Interbank rates normally serve as animportant benchmarks for settinginterest rates for other financial

products

Ultimate goal: Allow commercial banksto decide all their commercial rates in

accordance with markets forces


39/100

Central Bank Paper


40/100


41/100

Foreign Currency Purchase

RMB

FX Market


42/100


43/100

Liquidity Absorption

Central Bank Paper Money Market


44/100

Liquidity Absorption

Central Bank Paper Money Market

Foreign Currency Purchase

RMB

FX Market


45/100

Capital Market


46/100

capital marketmarket for securities where companies and governmentcan raise long terms funds


47/100

Stock Exchange

SharesUnit Trust

Bond


48/100

Shanghai Stock Exchange

Shenzhen Stock Exchange

3 share markets & 3 types of shares

Hong Kong Stock Exchange


49/100


50/100


51/100

A Shares B Shares

priced in RMB priced in USD / HKD

locals + QFII * locals and foreigners

* QFII : Qualified Foreign Institutional Investor System


52/100

Number of domestically listed PRC companies

1996 - 2005


53/100

1504listed companies in Aug 2007


54/100

23.55 trillionmarket capitalization


55/100

8 trilliontradable market capitalization


56/100

60% increasecompared to August 2003


57/100

Problems


58/100


59/100

" Chinas captial market only has one leg at the moment "

"... hope to see smooth development of the corporate bond market"

Mandy Wang, Chief Executive of China International FundManagement, of which JPMorgan Chase owns 49 %


60/100

A mass of regulationsInterest rate limitation

Government control on listing


61/100

Inappropriate positioning of stock market


62/100

...A-share listing is politically drivenIt's not a business decisionCCB has no urgent need for fresh capital

China Construction Bank listing on 25/9/07

Paddy Ran, analyst at Nomura International (HK)


63/100

To please the citizensDevelop Shanghai as regional financial center


64/100

CCB H-shares in 3 months time

39%


65/100

Over-speculation and bubble formation


66/100

7 SINS In Chinas Captial Market

China Securities Regulatory CommissionChairman Shang Fu Lin


67/100



Immoral for stock dealers to lurestudents investing their livesaving into stocks


68/100




Stock prices of companies withpoor performance still shot up


69/100





Share prices of newlisted stock ran up too

much


70/100






much

Insider trading and manipulationIntentionally destroy evidence


71/100






much


1/ Companies Restructure2/ Rubbish asset injection3/ Speculation4/ Rise stop board


72/100






much



Fraud in rise of newly openaccounts in A

shares


73/100






much



Fraud in rise of newly openaccounts in A

shares

Misleading descriptions of financial products


74/100


75/100


76/100


77/100


78/100


79/100

"The valuation of China Eastern is too high and thecompany is still loss-making , so it would take time toreflect synergies and other benefits from the deal,"said an analyst with a European investment bank


80/100

Wealth Effect


81/100


82/100


83/100

P/E Ratio : Price per share / Earning per share


84/100

p/E ratio of U.S equity market

14


85/100

p/E ratio of developed markets

20


86/100

p/E ratio of Shanghai Composite IndexAugust 2007

59.17


87/100

p/E ratio of Shenzhen Component IndexAugust 2007

68.99


88/100

RISE


89/100


90/100

Clearly, something is wrong


91/100

Strengthen Corporate Governance

Market LiberalizationDelisting and Listing RegulationsShare Reform


92/100

...sustaining growth requires deepening Chinas capitalmarkets. It is not likely that the current bank-basedsystem will be able to meet Chinas needs fordiversified , dynamic and competitive financialintermediation. The short-term challenge is managingthe fallout from a stock market bubble . For the long-term, Chinese policy-makers might also consider furtherliberalizing capital markets by lifting restrictions onforeign and domestic private firms and developing newasset classes, especially corporate and municipal debt .

Innovative new players, such as private equity firms , areparticularly needed to inject competition and dynamisminto Chinas capital markets...


93/100



deepening


94/100



deepening

diversified


95/100



deepening

diversified

bubble


96/100



deepening

diversified

bubble

liberalizing


97/100



deepening

diversified

bubble

liberalizing

corporate and municipal debt


98/100



deepening

diversified

bubble

liberalizing

corporate and municipal debt

private equity firms


99/100


100/100

cc 6002 presentation

Documents