* Central Huijin poised to support flagging bond market
* Bond prices have fallen sharply in recent weeks
* Huijin may buy bonds from state-owned financial firms
* Banks are selling subordinate debt to boost capital
SHANGHAI, Dec 10 Central Huijin Investment Ltd.,
the state-owned holding company for China's largest financial
institutions, has gained approval to trade bonds in the
interbank market, paving the way for the government to support
the flagging market.
Chinese bond prices have fallen sharply in recent weeks,
amid tight liquidity in the domestic money market and
expectations that reforms to deregulate interest rates will push
rates higher. Bond prices fall when interest
A notice on Central Huijin's approval to trade bonds was
published Monday afternoon. On Tuesday morning, bond yields
extended their rising trend.
Central Huijin, a unit of the country's sovereign wealth
fund, China Investment Corporation, has periodically
purchased listed shares of commercial banks and other financial
firms on the secondary market to boost confidence during periods
of market weakness.
The approval will enable the government to do the same for
bonds issued by banks such as Industrial and Commercial Bank of
China and insurers like New China Life
At least 12 Chinese listed banks have already announced
plans to raise about 425 billion yuan ($70 billion), as they
strive to meet tough new capital adequacy requirements that took
effect this year in line with global rules known as Basel III.
The fundraising will occur largely through subordinate bond
issues. The new capital rules from the China Banking Regulatory
Commission allow subordinate debt to count as regulatory capital
for the first time.
The approval for Huijin came from the National Interbank
Funding Center, an industry body backed by the central bank that
regulates China's interbank.
The approval came in response to an application from the
People's Bank of China's Shanghai branch, according to the
announcement posted on the center's website, www.chinamoney.com.
($1 = 6.0723 Chinese yuan)
(Reporting by Gabriel Wildau; Editing by Richard Borsuk)