Shanghai Exchange eyes launch of high-yield junk bonds in H1 -paper

SHANGHAI, March 5 Sun Mar 4, 2012 8:45pm EST

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SHANGHAI, March 5 (Reuters) - The Shanghai Stock Exchange aims to launch high-yield corporate debt in the first half of this year to help small companies raise funds, the Shanghai Securities News said on Monday, citing the exchange's chairman Geng Liang.

Geng is the first senior securities industry official to confirm China's plans to authorise high-yield debt after weeks of speculation in local media.

The exchange is now working out details of establishment mechanisms and approval procedures to curb risks, Geng told the newspaper in an interview.

It is considering setting up a special fund to compensate investors in cases of default, with the money to be collected from debt issuers as well as the exchange, Geng was quoted as saying.

Local media has reported since early February that China may soon launch a high-yield junk-bond market to expand credit access to small private firms largely shut out of China's state-dominated financial system.

(Reporting by Lu Jianxin and Fayen Wong; Editing by Jonathan Hopfner)

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