PBOC to Create Equity Finance Tool, Expand Bond Financing Tool

(Bloomberg) — The People’s Bank of China will expand the bond financing tool it announced last month and is pushing financial institutions to set up a similar tool for equities, the bank’s governor told a government-affiliated newspaper.

• The central bank is studying the possibility of offering initial capital to the equity tool, which would support private firms with funding difficulties, Governor Yi Gang said in an interview with the Economic Daily.
• The tool would actually be set up by qualified financial institutions, such as private funds, securities companies and the investment divisions of commercial banks.
• There were no amounts mentioned in the interview, or details on how equity financing would work
• The central bank and the securities regulator are drafting a plan to support bonds of private companies
• Aggregate liquidity is “adequate,” but the problem remains in how to guide the funds to private firms and the sector most in need

Key Insights

• The initiative appears aimed at widening recent measures to help private companies who have suffered the worst of a campaign to cut over-leverage in the economy
• The PBOC last month announced it was providing 10 billion yuan ($1.5 billion) as startup capital to the bond tool, which aims to to assist private companies issues bonds
• The Politburo said last month that more stimulus to support the economy would be rolled out
• The PBOC has repeatedly talked about the problem of ensuring that monetary stimulus gets to the sectors and companies that need it most. Yi’s mention of guiding funds to them indicates that the bank is still struggling with this “transmission” issue

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at [email protected]

To contact the editors responsible for this story: Jeffrey Black at [email protected], James Mayger

©2018 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.