HK flags tighter trade scrutiny, says China cooperation key-regulator 

Hong Kong's securities regulator on Tuesday said it was considering monitoring trading at client level and stressed the importance of sharing information with Beijing, in comments likely to unnerve investors. 

PHOTO: AFP

OCT 13, 201511:19 AM

[HONG KONG] Hong Kong's securities regulator on Tuesday said it was considering monitoring trading at client level and stressed the importance of sharing information with Beijing, in comments likely to unnerve investors.

Hong Kong Securities and Futures Commission (SFC) Chief Executive Ashley Alder also told the Thomson Reuters 6th Pan-Asian Regulatory Summit that the watchdog was exploring an overhaul of the way it oversaw the Chinese territory's market.

His comments come as Chinese regulators ramp up surveillance of foreign investors operating in China's stock markets to stem a broad market rout.

Like most international markets, Hong Kong's regulators oversee trading behaviour only at the broker level. But in China, participants at any level are accorded a unique identification code which allows regulators to drill deeper into order books.

Although Alder did not provide more details, a move to allow the exchange and regulators to see which underlying firms are trading would bring Hong Kong in line with mainland Chinese markets and allow the SFC to see which funds are participating in Hong Kong.

Some investors have also raised concerns that schemes to bring mainland stock markets closer to the former British colony, such as a landmark Hong Kong Shanghai stock connect launched last November, increase the likelihood of more interference by China's regulators.

But on Tuesday, Alder rebuffed concerns expressed in the media and among market participants over fears mainland regulators have been interfering in the Hong Kong market, saying closer cooperation was essential for the future of Hong Kong. "Some have raised doubts about whether we should be sharing information with the mainland at all ... but without closer cooperation and information sharing, Hong Kong's markets would be exposed to unacceptable risks," Alder said.

REUTERS

      

Interconnected systems key to assessing systemic risk in banking sector: DTCC

OCT 13, 201511:41 AM

FINANCIAL networks tend to be robust yet fragile, absorbing shocks up to a certain tipping point, beyond which they spread risks rather than contain them, according to the Depository Trust & Clearing Corporation (DTCC).

In its white paper entitled "Understanding Interconnectedness Risk", DTCC said these interconnections - the network of credit exposures, trading links and other relationships and dependencies between financial agents - serve as a conduit for contagion and have proven to propagate shocks beyond their original impact, amplifying them in the process

"The impact of the failure of a large interconnected entity can spread rapidly and extensively across the financial system, to the point where it can cause worldwide financial instability," according to the report.

This was evident in the collapse of Lehman Brothers in September 2008, which triggered the worst financial crisis since the Great Depression. The initial crisis originated in the US subprime mortgage-backed securities and collateralised debt obligations markets, but quickly affected market participants around the world through a complex web of direct and indirect links.

The risk of contagion generally increases with the size of the shock and the centrality of the affected entities; all else being equal, the more central the location of a failing node, the greater the likelihood of contagion.

It noted that some research has suggested that networks with a moderate level of interconnectedness may be the most resilient ones.

"That said, studies on the relationship between a network's interconnectedness and its ability to withstand shocks also suggest that many other factors come into play, including the type of financial shocks, the maturity structure of banks' liabilities, existence of information problems and other financial frictions," it said.

DTCC said risk management practitioners may benefit most from incorporating interconnectedness analysis into everyday risk management activities, to enhance systemic resilience, both for individual organisations and for the financial industry as a whole.

      

HSBC whistleblower skips Swiss trial

The Swiss trial against a former HSBC employee who leaked documents alleging the bank helped clients evade millions of dollars in taxes opened on Monday, but in his absence it was immediately adjourned. 

PHOTO: AFP

OCT 13, 201512:01 PM

[GENEVA] The Swiss trial against a former HSBC employee who leaked documents alleging the bank helped clients evade millions of dollars in taxes opened on Monday, but in his absence it was immediately adjourned.

Herve Falciani, the 43-year-old French-Italian national who exposed the so-called Swissleaks scandal, has said he would not come to Switzerland for the trial, and on the first day the prosecutor opened the case by requesting an adjournment.

Prosecutor Carlo Bulletti stressed to the federal court in the southern Swiss town of Bellinzona the need for the man of the hour to be present to explain and defend himself, the ATS news agency reported.

The court followed the recommendation, postponing the proceedings until November 2.

See who is talking about HSBC

Last 30 days:

• 4515
• 150
• 1083

30 days avg

HOT COMPANIES

SABMiller +770% messages

• Barclays +495%
• Royal Mail +334%
• IAG Airlines +102%
• Rolls-Royce +96%
• Land Securities +87%
• GlaxoSmithKline +79%
• Unilever +68%
• Rio Tinto +64%
• ARM Holdings +59%

• Barclays +495%
• Royal Mail +334%
• IAG Airlines +102%
• Rolls-Royce +96%
• Land Securities +87%
• GlaxoSmithKline +79%
• Unilever +68%
• Rio Tinto +64%
• ARM Holdings +59%

Falciani, had told media several weeks ago he would not travel to attend the hearings in Switzerland, where he would risk immediate arrest, questioning whether the Swiss trial would be fair.

Falciani leaked a cache of documents indicating that HSBC's Swiss private banking arm helped over 120,000 clients to hide 180.6 billion euros from tax authorities.

While Falciani is widely viewed as a whistleblower and hailed as a hero in countries where his leaked information is helping net tax cheats, Swiss authorities are prosecuting him for data theft, industrial espionage, and violating the country's long-cherished banking secrecy laws.

"Do I have the right to a just and fair trial? Maybe, but can one really call this a trial?" Falciani told the Swiss business weekly HandelsZeitung last week.

The trial had been set to run through October 20.

Falciani became an IT worker for HSBC in 2000 and moved to the bank's offices in Geneva in 2006.

The so-called "Snowden of tax evasion" and "the man who terrifies the rich" obtained access to a massive database of encrypted customer information.

In 2007 Falciani took the names of over 120,000 clients and by 2008 headed for Lebanon with his mistress and a plan to sell the data. Swiss authorities described it as "cashing in".

Yet suspicious bankers in Lebanon were not interested in buying the dubiously sourced client list, and at least one instead tipped off counterparts in Switzerland to Falciani's activities.

After his plan to sell the data fell apart, Falciani got in contact with European fiscal authorities and began passing them the pilfered information, which prompted numerous tax evasion audits.

Falciani rejects that he was only seeking financial gain, insisting he had only ever been interested in exposing how banks support tax evasion and money laundering.

Though he remains wanted on data theft charges, France and Spain have offered him protection by refusing to extradite him to Switzerland.

He did, however, spend a couple months in a Spanish prison in 2012 at Switzerland's request before winning his release for helping Spain track down its tax cheats.

AFP

    
 

China Huarong IPO seeks US$2.8b; boost seen from Cinda share surge  

OCT 13, 201512:41 PM

[HONG KONG] China Huarong Asset Management Co Ltd's initial public offering will seek to raise up US$2.8 billion, its indicative price range shows, marking the biggest Hong Kong listing in 10 months as investors venture back into equities after a market slump this year.

The second of China's four biggest bad debt managers to list after China Cinda Asset Management Co Ltd raised US$2.8 billion in 2013, Huarong is likely to benefit from a 21.5 per cent surge in Cinda's shares over the past nine trading sessions. "Cinda has been on a tear the past few days, so that's obviously very good," said a source familiar with the deal.

Huarong and some of its shareholders plan to offer shares equivalent to 16.4 per cent of its enlarged share capital in an indicative range of HK$3.03 to HK$3.39 each, sources with direct knowledge of the plans said on Tuesday.

The sources declined to be identified as details of the deal have not been released to the public. Huarong did not immediately respond to a request for comment.

Huarong's price range is equivalent to a forecast price-to-book ratio of 0.96 to 1.05 times for 2015, the sources said, compared with 0.9 times for Cinda.

Huarong's deal is slated to be launched on Thursday, just days after an up to US$2 billion IPO from China Reinsurance (Group). The companies received approvals weeks ago but the deals were delayed due to a steep slide in China equities as well as volatility in other global markets.

Huarong's IPO would be the largest in Hong Kong since property developer Dalian Wanda Commercial Properties Co Ltd raised $4 billion in December.

China's bad debt management firms make money by buying soured loans from banks and other companies and then restructuring the debt or recovering cash from the borrowers. Huarong said it plans to use most of the proceeds from the IPO to expand its distressed debt business.

The Huarong IPO secured commitments worth about $1.8 billion from around 12 to 13 cornerstone investors, the sources said. The final names on the list might change, but include real estate developer Sino-Ocean Land Holdings and utility State Grid Corp of China, with pledges of US$680 million and US$300 million respectively, one of the sources said.

Sino-Ocean and State Grid did not immediately respond to Reuters e-mailed requests for comment on the IPO.

REUTERS

      

Former Anglo Irish Bank CEO to face extradition hearing in Boston

      

The former chief executive of Anglo Irish Bank is due in federal court in Boston on Tuesday for an extradition hearing as Irish authorities reportedly are preparing to charge him for his role in the collapse of that bank. 

PHOTO: BLOOMBERG

OCT 13, 20151:12 PM

[BOSTON] The former chief executive of Anglo Irish Bank is due in federal court in Boston on Tuesday for an extradition hearing as Irish authorities reportedly are preparing to charge him for his role in the collapse of that bank.

The executive, David Drumm, was arrested on Saturday in a suburb of Boston, where he had been living since the bank was nationalised in early 2009, and has been in custody since awaiting Tuesday's hearing, according to a spokeswoman for the US Attorney's Office in Boston.

An Irish court in July sentenced three lower-ranking executives of the bank to serve 18 to 36 months in prison, making them the first bankers jailed since the country's financial crash.

Anglo Irish's failure, linked to casino-style lending that drove Ireland's "Celtic Tiger" boom, cost the state 30 billion euros (S$47.8 billion) in bailout funds.

Irish national broadcaster RTE reported in January that Ireland had sent an extradition file to the US government, outlining charges to be prepared against Drumm by the Director of Public Prosecution on up to 30 different offenses.

An attorney for Drumm declined to comment ahead of the hearing.

REUTERS

      

China plans up to 30% cut in natural gas prices

      

Gas storage tanks are seen at the construction site of Beijing Jingxi Gas-fired Thermal Power Co Ltd, which will be used to replace the old coal-fired power plants, in Beijing in this on Oct 25, 2013 file photograph.

PHOTO: REUTERS

OCT 13, 201510:21 AM

[SHANGHAI] China plans to cut city-gate non-residential natural gas prices by up to 30 per cent in some provinces at the end of October, the Securities Times reported on Tuesday, citing sources.

Flagging growth in natural gas demand has hurt Beijing's efforts to replace coal, a major source of smog and greenhouse gas emissions.

Demand has risen just 3 per cent this year versus double-digit increases between 2000-2013, with experts blaming Beijing's inflexible pricing policy.

The cuts in the non-residential city-gate rate for each province would differ, said the sources, adding that the price setting method will also be reformed in order to become more market-orientated.

"For provinces which currently have a low city-gate rate the price could fall by 0.4 to 0.5 yuan per cubic metre, for provinces with a higher city-gate rate it could fall by 0.7 to 0.8 yuan per cubic metre," the newspaper quoted the source as saying, meaning cuts of between 20 to 30 per cent.

On April 1, city-gate prices for new non-residential users were cut by 0.440 yuan (S$0.098) per cubic metre.

REUTERS