TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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Liz Mak
07 August 2015
A potentially toxic item packaged as an innocuous sounding innovation has appeared on the queue for listing on the Shanghai Stock Exchange late on Thursday.
China’s Huatai Securities has carved out its client loan books for margin financing, repackaged and securitized the loans as an asset-backed securities product (ABS). The ABS is due to be listed and will be sold to investors through the exchange.
Huatai is advised by Guotai Junan Securities as the product structurer. It will be sold in two tranches and put RMB 500 million back on Huatai’s balance sheet. The preferential class of the product is said to have received a AAA rating.
Investors in the ABS will bear the risks for the gains and losses in the underlying margin loans portfolio.
The minimum investments starts from RMB100,000. The exposure limit to a single borrower is set at 5 per cent.
The approval allowing Chinese brokerages to securitize margin loans was granted by the China Securities Regulatory Commission on July 1. More brokerages are expected to follow and they will seek capital on both the Shanghai and Shenzhen Stock Exchange.
It may be early days to see the innovation as an exit mechanism for the government propping up margin losses from total collapse. However, the move will help recapitalise brokerages balance sheets as issuances come into scale.
Responsibility for the loans, however, will be outsourced by passing the potato to investors. Brokerages’ liability will be limited to passing through and servicing the proceeds from repayment of the loans – effectively washing their hands clean.
Previously, ABS in China was limited to sleepy sounding securities with stable long-term cash generation. Assets that have gone into traded portfolios were rent income, car loans and credit card repayments.
Margin loans, in contrast, are significantly much more volatile than such securities. With the latest change, ABS in China may swerve for the worse.
“The size of margin financing may not appear great,” said Zhu Haibin, chief China economist at JP Morgan. “But they said the same about subprime” alluding to the mortgage-backed US securities which was a prime cause of the global financial crisis in 2008.
Zhu said the size of margin loans had shrunk from about 4 trillion yuan at its peak to between RMB 2 to 3 trillion. The mainland press puts the latest figure at 1.31 trillion yuan.
“Is this (the loans) a system risk? This is subject to debate. It is not a huge figure in the context of total social financing. But people had said the same about the sub-prime loans in the US,” he told reporters last week.