China: Pensions unification proposed
China’s cabinet, the State Council, announced reform plans for its pensions system on February 7 by combining the separate provisions for urban and rural residents into a unified system. This will see pension funds diverted into one pool from various levels of society, including individuals, social institutions and governments. The proportion of government contributions are expected to be more heavily weighted to people from the more impoverished central and western regions. Under the plan it appears a pensioner from an Eastern province, for example, would receive 50% of a full central government subsidy, while those from the central and western provinces get a full subsidy. It is hoped this will improve social security and facilitate a better standard of living, helping to dampen population migration from rural to urban centres. A stronger safety net is also expected to help increase local consumption and encourage entrepreneurship.
India: Cut to FII commercial paper quota
The Securities and Exchange Board of India (Sebi) moved to slash the overall quota of foreign institutional investors (FIIs) in Indian commercial paper as of February 14. Previously FIIs and qualified foreign investors (QFIs) had been allowed to invest up to $3.5 billion in commercial paper. This has since been almost cut in half, to $2 billion due to lack of utilisation, with just 58% of quota having been filled, reports the Business Standard newspaper. Commercial paper is a sub-section of the corporate debt quota, which remains unchanged at $51 billion. The leftover $1.5 billion can be ploughed back into total debt limit. The changes comes after Sebi announced on January 29 it was doubling to $10 billion the total investable amount for foreign central banks, multilateral agencies, sovereign wealth funds, insurance firms, pensions and endowments. At the same time, it reduced the cap for FIIs outside this category by $5 billion to $20 billion. Separately, Sebi chairman U.K. Sinha has been handed a two-year extension to his current term, which now runs to February 2016.
Singapore: Consultation on stock market reform
The Monetary Authority of Singapore together with Singapore Exchange Limited co-launched a consultation paper on February 7 in a drive to improve the stock market. Areas identified for improvement include orderly trading and responsible investing; transparency of market intervention measures; new listing processes; and enforcement against breaches of listing rule. One proposal is to set a minimum trading price threshold for issuers, with S$0.10-S$0.20 suggested as one possibility. Companies with share prices below the agreed threshold could be removed from the main board. Low-priced shares are seen as susceptible to speculation and manipulation. Another proposal is for an independent listing advisory committee to be established, with responsibility for reviewing listing applications and setting policy. There are similar proposals for an independent listings disciplinary committee and listings appeals committee. The process is designed to improve transparency and resolve conflict of interest for SGX as both exchange and listing authority.
International: Asia (ex-India) outside global tax standard
The Organisation for Economic Cooperation and Development (OECD) unveiled a single global standard for the exchange of information between tax authorities worldwide on February 13. Still in draft form, it calls for financial institutions from signatory jurisdictions to collect financial account information from other jurisdictions annually. More than 40 countries have committed to early adoption of the standard, of which many are in the EU including France, Germany and the UK. Offshore islands including Bermuda, British Virgin Islands and the Cayman Islands are also on the list. The US and Asian jurisdictions (with the exception of India) are not current signatories to the standard. “Offshore tax evasion remains a serious problem for countries and jurisdictions worldwide, with vast amounts of funds deposited abroad and sheltered from taxation when taxpayers fail to comply with obligations in their home countries,” the OECD said in a statement.
International: AIFMD engagement ‘surprisingly’ low
There remains a negative perception among market participants of Europe’s regulatory framework for alternative fund managers. One of the biggest selling points for the alternative investment fund managers’ directive (AIFMD) is the ability for signatories to distribute products across the European Union’s 28 markets. But a survey conducted by Northern Trust found that less than 15% of managers, prospective clients and consultants see AIFMD as a strategically important business opportunity. Some 66% see the directive as a compliance exercise first and foremost.
Further, 62% of market practitioners say AIFMD will have no implication on their future product strategy. More than half of those surveyed believe investors will not be engaged in AIFMD by the end of 2015. “Next year is an important milestone in AIFMD deployment,” says Ian Headon of Northern Trust Depositary Services. “The fact that managers still feel investors, the intended beneficiaries of the directive, will not be engaged by December 2015 comes as a surprise.”
Previous regulatory update reported by AsianInvestor:
AsianInvestor's regulatory roundup, Feb 6