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Central bank to resume MTN issuance
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By Fan Junmei

In a move to tackle current financial problems, it was announced last night that the People's Bank of China will allow the National Association of Financial Market Institutional Investors to accept the re-registration of medium term notes (MTN) of non-financial companies. Companies that have already registered MTNs but have not yet issued, or have issued in part but have not achieved the registered amount within the period of validity, can reissue their medium term notes.

Analysts had already predicted that the central bank would adopt this measure to support central enterprises  increasing their stake in their listed companies. As a more marketable product, the efficiency, liquidity, and financing cost of the medium term note are more advantageous than those of corporate bonds and enterprise bonds.

According to the announcement, the central bank will give priority to listed companies with weighted shares – funds collected through the issuance of medium term notes can be used to repurchase their own stocks. Backbone enterprises in coal, power, oil and transportation will also get priority in registering their medium term notes.

The central bank took this measure in the middle of April, but suspended it in late June. Within only 2 months, sums involved had reached 73.5 billion yuan. The main reasons for the suspension were reported to be inefficient coordination and management.

On the same day, the China Securities Regulatory Commission (CSRC)announced that it would soon launch margin trading business for securities firms, which has long been expected by the market. Sources with the China Securities Regulatory Commission identified the principle of starting the business as "test run first and to be extended gradually".

This is another crucial move after three influential measures were taken on September 18: Stamp tax on securities transactions to be collected unilaterally and its rate to remain at 1‰; China's Huijin Investment Corporation to take increased stakes in Industrial and Commercial Bank of China, Bank of China, and China Construction Bank; the State-owned Assets Supervision and Administration Commission (SASAC) to support central enterprises to increase or repurchase stocks.

(China.org.cn October 6, 2008)

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