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I. Regulation and Policy

1. Regulatory measures for programmed trading will be introduced soon, and high-frequency strategies may be slowed down

On July 10, the head of the relevant department of the CSRC answered reporters' questions about the progress of program trading supervision and introduced the next five regulatory arrangements for program trading, once again clarifying the regulatory attitude. In the next step, the CSRC will thoroughly implement the deployment requirements of the new "National Nine Articles". First, guide the stock exchanges to issue detailed implementation rules for program trading management as soon as possible, improve the program trading reporting system, and strengthen the verification of reported information and on-site inspections. Second, guide the stock exchanges to announce and implement the monitoring standards for abnormal program trading as soon as possible, draw the "red line" for program trading monitoring, and further promote the frequency and speed reduction of program trading, especially high-frequency trading. Third, strengthen communication and coordination with Hong Kong, speed up the formulation and release of the reporting guidelines for program trading of northbound funds, and apply the same regulatory standards to northbound investors as domestic investors. Fourth, clarify the differentiated charging arrangements for high-frequency quantitative trading. Based on indicators such as the number of applications and the cancellation rate, study and clarify the standards for charging additional traffic fees and cancellation fees for high-frequency quantitative trading, so as to "increase capital" and promote "speed reduction". Fifth, continue to strengthen the monitoring and supervision of trading behavior, and resolutely crack down on and severely investigate and punish those who use program trading, especially high-frequency quantitative trading, to engage in illegal and irregular behaviors in accordance with the law.

2. The CSRC has completely suspended the securities lending business

On July 10, the CSRC announced that it had approved China Securities Finance Corporation's application to suspend its securities lending business in accordance with the law, which will be implemented from July 11. Existing securities lending contracts can be extended, but must be settled no later than September 30. At the same time, the CSRC approved the stock exchanges to increase the margin ratio for securities lending from no less than 80% to 100%, and the margin ratio for private securities investment funds participating in securities lending from no less than 100% to 120%, which will be implemented from July 22, 2024.

3. Four departments issued the "Opinions on Strengthening Business and Financial Collaboration to Support the High-quality Development of Cross-border Trade and Investment"

The Ministry of Commerce, the People's Bank of China, the State Administration of Financial Supervision and the State Administration of Foreign Exchange jointly issued the "Opinions on Strengthening Commerce and Finance Collaboration to Support the High-quality Development of Cross-border Trade and Investment" (hereinafter referred to as the "Opinions"), guiding local commerce departments and branches of the People's Bank of China, financial supervision bureaus, foreign exchange bureaus and financial institutions to strengthen cooperation and linkage to form a greater joint force to support the high-quality development of cross-border trade and investment. The "Opinions" focus on key areas such as stabilizing foreign trade, stabilizing foreign investment, deepening "Belt and Road" economic and trade cooperation and outward investment cooperation, and key links such as promoting financing, preventing risks, and improving services, and put forward 11 policy measures in five aspects. First, promote the quality and quantity of foreign trade and optimize the comprehensive financial services of foreign trade. Second, promote the stability of foreign investment and improve the quality, and strengthen the guarantee of foreign investment financial services. Third, deepen the "Belt and Road" economic and trade cooperation and outward investment cooperation, and improve diversified investment and financing services. Fourth, facilitate the development of cross-border trade and investment and optimize the payment and settlement environment. Fifth, do a good job in cross-border trade, investment and financial risk prevention and control, and keep a solid bottom line of security.

4. The central bank creates temporary overnight repo and reverse repurchase operations

According to the website of the People's Bank of China on July 8, in order to maintain a reasonable level of liquidity in the banking system and improve the accuracy and effectiveness of open market operations, the People's Bank of China will carry out temporary positive repurchase or temporary reverse repurchase operations as appropriate from now on, from 16:00 to 16:20 on working days, with a term of overnight, using a fixed interest rate and quantity bidding, and the interest rates of temporary overnight positive and reverse repurchase operations are 20bp less and 50bp more than the 7-day reverse repurchase operation rate respectively. If the operation is carried out on the same day, the "Open Market Business Transaction Announcement" will be issued after the operation is completed.

5. Jiang Huifen, Deputy Director of the Financial Markets Department of the Central Bank: Work with the Ministry of Finance to study and improve tax exemption policy arrangements for overseas investors

Jiang Huifen, deputy director of the Financial Markets Department of the People's Bank of China, said at the Bond Connect Anniversary Forum 2024 on July 9 that the People's Bank of China is actively studying optimization measures to promote the opening up of the bond market and enhance the level of cross-border investment and financing facilitation. First, deepen and expand the interconnection of domestic and foreign financial markets, continue to improve the Bond Connect swap mechanism arrangement, steadily and orderly promote the interconnection and cooperation between domestic and foreign infrastructure custodian banks, promote the mutual recognition of cross-border regulatory qualifications for infrastructure, and orderly promote the infrastructure to go out and provide cross-border services. Second, improve the liquidity management and risk hedging tools for foreign investors, enrich derivatives such as interest rates and exchange rates, and explore and expand the mechanism of using RMB bonds as offshore eligible collateral. Third, reduce the investment costs of foreign investors entering the market, and work with the Ministry of Finance to study and improve the tax exemption policy arrangements for foreign investors, further optimize the investment process for entering the market, and provide a more friendly and convenient investment environment for foreign investors.

2. Industries and Institutions

Personnel changes:

-On July 11, reporters from 21st Century Business Herald learned from multiple sources that Guo Dayong, former member of the Party Committee and deputy governor of the Jiangsu Branch of the People's Bank of China, had joined UnionPay on the 10th to take up the post of deputy secretary of the Party Committee. After the appointment procedures are completed, he will become the president of UnionPay.

-On July 11, a reporter from 21st Century Business Herald learned from UBS Securities that Hu Zhihui, CEO of Credit Suisse China and Chairman of Credit Suisse Securities, has joined UBS Securities. With the approval of UBS Securities' shareholders' meeting and board of directors, he will serve as Vice Chairman of UBS Securities from July 11, 2024.

-On July 11, the central bank’s official website showed that Zhou Chengjun, director of the central bank’s Financial Research Institute, has been appointed as the party secretary and president of the central bank’s Jiangsu Branch, and Lu Weifeng, member of the party committee and deputy president of the Zhejiang Branch, has been appointed as the party secretary and president of the Hainan Branch.

-On July 10, according to the Central Commission for Discipline Inspection and the National Supervisory Commission’s Discipline Inspection and Supervision Group stationed in the Industrial and Commercial Bank of China and the Shaanxi Provincial Commission for Discipline Inspection and Supervision, Xu Nojin, former deputy chairman of the Finance and Economics Committee of the Henan Provincial People’s Congress and former chairman of Zhongyuan Bank, was “double-opened.”

-On July 10, according to the Discipline Inspection and Supervision Group of the Central Commission for Discipline Inspection and the National Supervisory Commission stationed in the Industrial and Commercial Bank of China and the Shaanxi Provincial Commission for Discipline Inspection and Supervision: Wu Ningfeng, former Party Secretary and President of the Inner Mongolia Branch of the Industrial and Commercial Bank of China, is suspected of serious violations of discipline and laws. He is currently undergoing disciplinary review by the Discipline Inspection and Supervision Group of the Central Commission for Discipline Inspection and the National Supervisory Commission stationed in the Industrial and Commercial Bank of China and an investigation by the Shaanxi Provincial Supervision Commission.

-On July 10, Huisheng Fund announced that Shi Wei assumed the position of deputy general manager on July 9. According to his past work experience, Shi Wei had worked for China Life Insurance, China Life Asset Management, Xingzheng Global Fund, and China Life Security Fund.

- On July 10, Guolian Fund issued an announcement stating that, after the resolution of the company's shareholders' meeting and the board of directors, Zhang Huannan and Yan Jun were appointed as directors of the company's fifth board of directors, and Zhang Huannan was elected as vice chairman, and Yan Jun, the former deputy general manager of the company, was elected as general manager. At the same time, Wang Jie no longer serves as a director of the company. After this change, the members of the company's fifth board of directors are: Ge Xiaobo, Wang Yao, Zhang Huannan, Zhao Xueqin, Qiu Xiaojian, Yan Jun, Sheng Songcheng, Zhu Hengyuan, and Chen Lihua.

-On July 8, the Jiangsu Provincial Party Committee Financial Committee held a plenary meeting. At the meeting, Xin Changxing, Secretary of the Provincial Party Committee and Director of the Provincial Party Committee Financial Committee, presided over the meeting and delivered a speech. Xu Kunlin, Governor and Director of the Provincial Party Committee Financial Committee, made arrangements for specific work.

-On July 8, China Everbright Bank issued a series of personnel adjustment announcements: former Vice President Qu Liang resigned due to work adjustments, and Liu Yan was appointed as the new Vice President. On the same day, the "Resolution of the 20th Meeting of the Ninth Board of Directors" issued by China Everbright Bank showed that it agreed that Hao Cheng would replace Wang Zhiheng, who had recently gone to the Agricultural Bank of China, as the new president of China Everbright Bank and a candidate for executive director of the Ninth Board of Directors.

After nearly 7 months, three new personal pension wealth management products were added.On July 10, China Financial Management Network released information showing that Agricultural Bank of China Wealth Management, Bank of China Wealth Management, and China Post Wealth Management each added one product, bringing the total number of personal pension wealth management products to 26. This is the fifth batch of products since the first batch of personal pension wealth management products were launched in February 2023. (21st Century Business Herald)

After a bank’s wealth management subsidiary received a fine of tens of millions of yuan, the Financial Regulatory Administration again mentioned that it “has fangs and thorns.” In the context of increasingly stringent financial supervision, the "fangs and thorns" of supervision are becoming increasingly prominent. Recently, the State Financial Supervision and Administration Bureau has intensively disclosed a number of fines for wealth management business. The fined institutions include Jianxin Wealth Management, Bank of China Wealth Management, Xinyin Wealth Management, CMB Wealth Management, and Ping An Wealth Management. The five bank wealth management subsidiaries were fined a total of 29 million yuan. According to the State Financial Supervision and Administration Bureau, on July 8, the Financial Supervision Bureau held a warning education meeting on party discipline learning and education in the system, deeply analyzed typical cases of violations of discipline and law in the system of the Bureau, deepened the use of cases to explain morality, discipline, law, and responsibility, and further promoted the study and education of party discipline to go deeper and more practical. The meeting emphasized that it is necessary to earnestly learn the profound lessons of serious violations of discipline and law in the system, draw inferences from one case and take it as a warning, and truly turn "lessons seen in the eyes" into "warning engraved in the heart". It is necessary to further strengthen the discipline of the masses, firmly establish the value orientation of people-centeredness, do a good job in petition, consumer protection, inclusive finance and other work with responsibility and emotion, severely crack down on illegal financial activities, and strive to solve outstanding problems closely related to the vital interests of the people. We must further strengthen work discipline, comprehensively strengthen the "five major supervisions", and ensure that supervision is "strong and sharp". (Southern Metropolis Daily)

The scale of bank wealth management is approaching 30 trillion yuan, and the "moving" of deposits is obvious.Just one week into July, the scale of bank wealth management has risen again. Due to the return of wealth management products to the balance sheet at the end of the quarter, the outstanding scale of all wealth management products in June has seen a decline. Mainly concentrated in the third and fourth weeks of June, the total monthly wealth management scale fell by 640.2 billion yuan. But now, just one week into July, the scale of wealth management products has rebounded rapidly. According to statistics from the West China Securities Research Institute, in the first week after the cross-season in July, the scale of wealth management rebounded as expected, increasing by 924.2 billion yuan month-on-month to 29.66 trillion yuan, basically returning to the level before the cross-season. Since 2024, multiple factors have been driving the expansion of the scale of bank wealth management. Major banks have taken turns to lower deposit interest rates, coupled with a series of measures by regulatory authorities to standardize notice deposits and agreement deposits, prohibit interest subsidies, and so on. The phenomenon of deposit relocation is obvious, and the "moved" deposits have flowed to bank wealth management. (Interface News)

The issuance increased by nearly 130% in the first half of the year, and the increase in supply did not hinder the downward trend in the yield of Eryong bonds.From 2024 to date, 949.85 billion yuan of bank second-tier perpetual bonds (secondary capital bonds and perpetual bonds) have been issued. In the first half of the year, banks issued 783.05 billion yuan of second-tier perpetual bonds, compared with only 341.3 billion yuan in the same period last year. Since July, the issuance of second-tier perpetual bonds has remained hot, and 8 banks, including CCB and ICBC, have issued 10 second-tier perpetual bonds with a total scale of 166.8 billion yuan, covering large state-owned banks, joint-stock banks and urban and rural commercial banks. This year, the issuance of bank second-tier perpetual bonds has increased in volume, with the issuance scale in the first half of the year alone increasing by nearly 130% year-on-year. It is expected that the supply of second-tier perpetual bonds will remain strong in the second half of the year, but analysts believe that the credit spread center of second-tier perpetual bonds can still move downward. Second-tier perpetual bonds have both trading and allocation attributes. As high-interest municipal bonds become increasingly scarce, the sinking of second-tier perpetual bonds has become a good option. (Cailianshe)

After the central bank announced that it would "sell bonds", many wealth management products matured ahead of schedule.On July 10, China Post Wealth Management Co., Ltd. announced on its official website that it would terminate the 18th issue of the 2022 closed-end RMB wealth management product of Youyin Wealth Intelligence and Hongye Yuantu (Shengding Edition) ahead of schedule. This is the second product that China Post Wealth Management announced to terminate ahead of schedule within 10 days. It is worth noting that since July, many banks such as Hua Xia Bank, Everbright Bank, and Ningbo Bank have also announced on their official websites that their agency-sold wealth management products have expired ahead of schedule. A macro analyst at a brokerage firm told Cailianshe reporters that the underlying assets of fixed-income wealth management products issued by bank wealth management subsidiaries are mostly bonds, and in order to obtain higher returns, a certain leverage ratio is often superimposed. For various reasons, this year's bond market is obviously "too crowded." After the central bank "singed short" on treasury bonds, the investment returns in the bond market will inevitably fluctuate in the short term. Against the backdrop of increasing market risks, it is a wise move for banks to terminate some wealth management products ahead of schedule. (Cailianshe)

China Europe Fund and Debang Fund disclosed their second quarter fund reports: equity funds made obvious adjustments to their portfolios and stock swaps.The top ten stocks of Sino-Europe Jinquan in the second quarter changed a lot. Jinkong Coal, Yanzhou Coal, Jiangsu Bank and other stocks all dropped out of the top ten, while Xugong Machinery, Yanjing Beer, Chifeng Gold and other stocks entered the top ten. Secondly, although the stock position of Sino-Europe Jinli Hybrid was not high at the end of the second quarter, it also made a relatively large adjustment. Gree Electric Appliances, Luzhou Laojiao, Chengdu Bank and other stocks dropped out of the top ten, and Luxshare Precision, CNOOC, Mindray Medical, BYD and other stocks entered the top ten. (Daily Economic News)

The truth behind the “breakup”: The fund distribution industry is undergoing an accelerated reshuffle.According to statistics, as of July 11, six fund companies have announced their "breakup" with agency sales agencies since July. At the same time, fund companies are also constantly announcing new agency sales cooperation "partners". Wind statistics show that as of the end of 2023, among the top 100 fund agency sales agencies, the proportion of non-monetary public offerings held by securities companies will increase from 17.73% in the first quarter of 2023 to 20.36%. Industry insiders said that under the current environment, the fund agency sales market is accelerating the survival of the fittest. With the further development of the fund industry, the requirements for professional level of public offering agency sales business will increase day by day, and the industry's elite talents will gradually concentrate on the head institutions, and the market structure will further differentiate. Some securities practitioners analyzed that with the implementation of the public fund rate reform, channel fees will be further standardized, which is expected to have an impact on third-party agency sales agencies in the short term. Benefiting from the development of the investment advisory end, wealth management institutions with leading transformation are expected to stand out. (China Securities Journal)

Wuliangye Group established a private equity fund with 600 million yuan.According to Qichacha, Yibin Wurun Equity Investment Partnership (Limited Partnership) was recently established with a capital contribution of 600 million yuan. The business scope is to engage in equity investment, investment management, asset management and other activities with private equity funds. Qichacha's equity penetration shows that the company is jointly held by Zhejiang Merchants Sugar and Wine Group Co., Ltd., Wuhan Friendship Subsidiary Food Commercial Co., Ltd., Baichuan Mingpin Supply Chain Co., Ltd., Shenzhen Haoming Wine Co., Ltd., Tianjin Hengyi Huitong Technology Development Co., Ltd., Yibin Wuliangye Fund Management Co., Ltd. and others. Executive Partner Zhao Na also serves as a director of Yibin Wuliangye Fund Management Co., Ltd. (Shanghai Securities News)

Private equity reshuffle: managers with “more outflows than inflows” and strong supervision that “supports the best and limits the worst”.As of the end of 2023, there were 21,625 existing private equity fund managers, a year-on-year decrease of 8.6%, and the scale of funds managed by private equity funds was 20.58 trillion yuan. As of the end of May 2024, there were 20,860 existing private equity fund managers, with a scale of funds under management of 19.89 trillion yuan. Under the policy background of "supporting the best and limiting the worst" in the private equity industry, the strong regulatory attitude that fund managers must operate in compliance has become increasingly tough. On July 14, 2023, the China Securities Investment Fund Association issued the "Self-Discipline Inspection Rules of the China Securities Investment Fund Association", which clarified the specific requirements of the China Securities Investment Fund Association for on-site and off-site inspections of private equity managers. On the same day, the China Securities Investment Fund Association issued the "Guidelines for Handling Loss of Contact of Private Equity Fund Managers", which sorted out and standardized the whole chain of handling loss of contact, effectively connected the front-end daily management and the back-end disposal and clearance from the institutional level, established and improved a normalized self-discipline management system for private equity funds, and implemented policies in a classified manner to "support the best and limit the worst." (China Business Network)

Xiangcai Securities' parent company, listed brokerage Xiangcai Holdings, announced the introduction of a Zhejiang state-owned shareholder.On the evening of July 8, Xiangcai Shares announced that Xinhu Holdings, Caishang Industrial, Zheshang Assets, and Zheshang Special Capital signed a "Cooperation Agreement" and other documents. The executive partner of Hangzhou Jinxin is expected to be changed from Xinhu Holdings to Zheshang Special Capital (a wholly-owned subsidiary of Zheshang Assets). Zheshang Assets plans to acquire 17.49% of the corresponding interests of Xiangcai Shares by controlling Hangzhou Jinxin and Caishang Industrial, and better empower the listed company. (Shanghai Securities News)

Non-standard asset portfolios face numerous challenges, and trust companies are exploring the “non-standard + standard” transformation path.Recently, the trust industry has ushered in a new regulatory trend. Many trust companies said they had received window guidance, saying that non-standard trusts need to conduct portfolio investments and set a limit that a single asset should not exceed 25%. However, faced with the current situation where there are few non-standard assets with different characteristics, such as different maturity dates and uneven risk levels, people from many trust companies admitted that it is not easy to combine four non-standard projects in a single trust product. In view of this, the trust industry is actively seeking a way out, and has turned its attention to the "non-standard + standard" portfolio investment model, and accelerated the process of transformation to standardized investment. Industry insiders believe that there are two reasons for non-standard trusts to conduct portfolio investments under regulatory guidance: one is to effectively control concentration risks, and the other is to promote the transformation of the trust industry to standardized investments. The adjustment also means that the trust industry will have huge growth potential in the field of standardized investments. (China Securities Journal)

The asset management trust market rebounded significantly in June, with both non-standard and standard product businesses picking up.In June, both the issuance and establishment of the asset management trust market have significantly heated up. Among them, the number of non-standard trust products has clearly rebounded. Affected by the tightening of supervision, the fastest growing is the industrial and commercial enterprise trust business. In terms of standard trust products, the number and scale of establishment have rebounded, and the scale of fund raising for bond investment trust products has increased significantly. According to the data released by Yongyi Trust, a total of 2,371 asset management trust products were issued in June, an increase of 416 from the previous month, an increase of 21.29%; the issuance scale was 103.749 billion yuan, an increase of 14.706 billion yuan from the previous month, an increase of 16.52%. Last month, a total of 2,150 asset management trust products were established, an increase of 277 from the previous month, an increase of 14.80%, and the establishment scale was 61.39 billion yuan, an increase of 13.635 billion yuan from the previous month, an increase of 28.55%. Similar to the issuance side, the asset management trust establishment market has clearly rebounded in June, the fund raising of non-standard trust products has increased significantly, and the establishment scale of standard trust products has increased steadily. (China Finance Network)

China Overseas Trust, China Construction Trust, and the former Anxin Trust and related practitioners were fined a total of 7.89 million yuan.On July 9, the administrative penalty information of the Shanghai Regulatory Bureau of the State Financial Supervision and Administration Bureau showed that: Zhonghai Trust was fined a total of 4.05 million yuan for 12 violations of laws and regulations; Aijian Trust was fined a total of 3.09 million yuan for 8 violations of laws and regulations. Tan Chunji, then assistant general manager of the company's standard asset management headquarters, was warned and fined 50,000 yuan; Zhang Huan, then deputy general manager of the trust business department of Anxin Trust, and Chen Qingjun, then general manager of the trust business department of Anxin Trust, were warned for being directly responsible for illegally diverting trust property for non-trust purposes. The two were fined 200,000 yuan and 400,000 yuan respectively. Feng Zhixin, then risk control director and general manager of the trust business department of Anxin Trust, was banned from working in the banking industry for 15 years. (Financial Times)

The Dalian Municipal Government takes the lead in managing Huaxin Trust, and Dalian Port Group has listed the trust equity it holds for transfer.On July 11, 3.09% (204 million shares) of Huaxin Trust Co., Ltd. (hereinafter referred to as "Huaxin Trust") was listed for transfer. The transferor was Dalian Port Group Co., Ltd. (hereinafter referred to as "Dalian Port Group"), and the disclosure period of the project was from July 12, 2024 to July 14, 2025. Dalian Port Group's wholly-owned subsidiary Dalian Port Investment and Financing Holding Group Co., Ltd. (hereinafter referred to as "Dalian Port Investment and Financing Company") also recently transferred 6.41% of the equity of Huaxin Huitong Group Co., Ltd. (hereinafter referred to as "Huaxin Huitong"), the major shareholder of Huaxin Trust. (21st Century Business Herald)

3. Market and Data

Bond Market:Last week, bond yields generally showed a trend of rising first and then falling. On Monday, the central bank announced that it would carry out temporary positive/reverse repurchase operations. The market was worried about the tightening of liquidity and the bond market adjusted, but the funding situation remained loose this week, and the credit and inflation data were also significantly weak. Under multiple positive factors, the treasury yield curve was "bullish". The 10-year treasury bond yield fell 1.50bp weekly to close at 2.26%, and the 30-year bond fell 2.09bp to 2.4921%. In the overseas bond market, US inflation fell faster than expected, and expectations for interest rate cuts increased. The 10-year US Treasury yield fell and closed at 4.18%. In other overseas bond markets, Japan's 10-year government bond yield rose 0.90bp to 1.08%, and Germany's 10-year government bond yield fell 6.00bp to 2.53%. (Shenwan Hongyuan Bond)

Stock Market: Last week, A-shares and the Hang Seng Index rebounded. The Shanghai Composite Index rose 0.72%, the Shenzhen Component Index rose 1.82%, the ChiNext Index rose 1.69%, and the CSI 300 rose 1.20%. In terms of sectors, electronics, automobiles, and beauty care performed well, rising 6.12%, 5.37%, and 3.15% respectively; coal, media, and agriculture, forestry, animal husbandry, and fishery performed poorly, falling 7.49%, 2.94%, and 2.02% respectively. This week, northbound funds had an overall net inflow of 15.907 billion yuan, with the overall net purchase amounts of the Shanghai Main Board and the Shenzhen Main Board being 8.282 billion yuan and 1.08 billion yuan respectively, and the ChiNext was a net seller, with a reduction of 2.031 billion yuan. In terms of market value distribution, the increase in the holdings of the constituent stocks of the CSI 100, CSI 200, and CSI 1000 indices was 7.626 billion yuan, 3.67 billion yuan, and 34 million yuan respectively, and the reduction in the holdings of the constituent stocks of the CSI 500 Index was 624 million yuan. (Western Profit Fund, ChiNext Observation)

Foreign exchange market:Last week, the US dollar index closed down 0.75% on a weekly basis at 104.10 points; the euro/dollar rose 0.62% to 1.0907 points; the dollar/yen fell 1.79% to 157.9085 points; the dollar/renminbi fell 0.24% to 7.2728 points. (BRICS Exchange)