Underwriting charges in China’s bond market have fallen to shockingly low ranges—underneath $100, triggering a regulatory probe into among the nation’s prime funding banks. The crackdown comes as authorities attempt to rein in a worsening value conflict that’s eroding revenue margins and destabilising honest competitors.
The Nationwide Affiliation of Monetary Market Institutional Buyers (NAFMII) has launched an investigation into six banks concerned in a 35 billion yuan ($4.9 billion) bond deal by China Guangfa Financial institution, following their ultra-low price bids, which drew consideration. Some underwriters charged as little as 700 yuan ($98) every earlier than tax.
The mixed price price for the deal was simply 0.00018%, considerably decrease than the standard 0.01% seen in previous transactions. Regardless of repeated warnings, banks and brokerages proceed to underbid in an effort to climb league tables and win future mandates.
Main gamers, together with Guotai Haitong Securities and Citic Securities, are additionally a part of the continuing investigation. Authorities have said that any violations shall be met with strict motion, together with potential fundraising bans.
This isn’t the primary time lowball pricing has been scrutinised. Earlier probes in 2020 and 2019 focused equally unsustainable practices. Consultants say the extraordinary competitors, typically described as “involution,” is damaging long-term trade stability. Regulators now goal to information the market again to rational pricing and more healthy competitors.
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