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     BEIJING (MNI) - More convertible bond issuances are on the way for Chinese
bond investors this year, with eased regulations and ample market demand
encouraging companies to step into the market.
     As of the end of October, a total of 11 convertible bonds worth CNY44.6
billion had been issued this year, more than double the CNY21.2 billion issued
all of last year, according to data from Wind, a Shanghai-based financial data
supplier.
     In the past, listed companies preferred not to issue convertible bonds
because they could not meet the financial requirements needed by regulators for
such an issuance, and also because issuing new stocks to a targeted group of
investors was a much easier way of raising funds, simply because there was
nothing to limit companies from doing so. 
     But convertible bonds became more popular as regulators began reining in
publicly listed companies from refinancing by placing new shares to investors. 
     In February, the China Securities Regulatory Commission (CSRC) issued
guidance saying that publicly listed companies now must wait 18 months after the
last time they received funds -- whether through share placements, initial
public offerings or other refinancing methods -- before the next new share
placement can be made, with the scale of issuance not exceeding 20% of total
shares. 
     The CSRC also ruled that the pricing benchmark day of the new share placing
can only be the first day of the issuance period, while before companies could
use the day the company board published its approval of the share-placing plan
to be the pricing benchmark day -- usually meaning that the share placement
price would be cheaper than the market price.  
     Convertible bonds, however, are exempt from a similar rule. In addition, on
Sept. 8 the CSRC revised bidding rules for convertible bonds from a "money
bidding" process to a "credit bidding" process, which essentially means
investors now do not have to put their money into escrow during the bidding
process, and even individual investors who have small amounts of principal can
bid on convertible bonds for the full possible amount, creating ample demand for
such bonds.
     So far this year, 170 listed companies have published their plans to
refinance by issuing convertible bonds, with a total planned issuance of
CNY480.1 billion. And 97 out of the 170 listed companies published their
convertible bond issuance plans after Sept. 8 -- the day bidding rules were
revised.
     The CSRC also has accelerated its approval process for listed companies to
issue convertible bonds. As of last Friday, the CSRC had approved the requests
of 30 companies to issue convertible bonds this year, and 65 other company
requests are currently under CSRC review.
     "Convertible bond issuance has started to gain momentum, and we expect the
issuance pace will not be slow in the next several months, and some [issuances]
might even have a very large scale," Industrial Securities said in a report last
weekend. "The credit-bidding rule makes it easy for the market to absorb the
impact of those issuances, while we need to watch whether the large supplies
will cause downward pressures on their pricing."
--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MT$$$$,M$$FI$]