AsianInvestor's regulatory roundup, July 2

Shenzhen connect awaits cabinet approval; Vietnam foreign ownership boost; Funds not too-big-to-fail; MPFA shelves adjustment proposal; Australia update on collective action
AsianInvestor's regulatory roundup, July 2

China: Shenzhen-HK stock connect waiting for cabinet approval

The much anticipated Shenzhen-Hong Kong stock connect link is ready to go and is just waiting for China’s State Council, the China Securities Regulatory Commission and Hong Kong’s Securities Futures Commission to give it the go-ahead, according to a Shenzhen stock market spokesman.

Liu Fuzhong, vice-director of strategy and international relations at the Shenzhen Stock Exchange, speaking at the Stock Connect 360 forum organised by AsianInvestor this Monday, said the systems to connect the two markets are ready and are able to handle extra volume, to avoid any initial teething problems.

When asked what lessons can be learnt from the existing Shanghai-Hong Kong stock connect, Liu said that the systems need to be more investor friendly from day one.

Connecting Shenzhen with Hong Kong’s markets would allow international investors to access China’s “new economy” stocks for the first time. Often dubbed the Nasdaq  of China, the Shenzhen stock exchange is the hosting bourse for many of China's tech IPOs and smaller entrepreneurial companies currently operating in China.

International: Iosco backs out from too-big-to-fail label for funds

The International Organisation of Securities Commissions (Iosco) has said it will now shelve plans to categorise certain fund managers as 'systemically-important' and therefore too big to fail in the event of another global financial crisis. The review board does not rule out a resumption of the fund manager methodology at some point in the future, however.

The report, announced on June 17, is likely to be welcomed by fund managers, who have consistently argued that funds do not pose a threat to the financial system because fund assets are held by third party custodian banks rather than on their own balance sheets.

The global financial regulatory association will instead turn its attention to assisting international efforts to identify potential "systemic risks and vulnerabilities" in the financial system as a whole.

The official statement from Iosco says, “The Board believes that this review should take precedence over further work on methodologies for the identification of systemically-important asset management entities. After the review is completed, work on methodologies for the identification of such entities should be reassessed."

Vietnam: foreign ownership cap removed on industries

The Vietnamese government has lifted the 49% limit on foreign ownership, with effect from September 1 this year.

The liberalisation move, which was signed off under a decree by prime minister Nguyen Tan Dung last Friday, will mean that foreign investors can fully own listed companies.

The Vietnam government did not give specific guidelines on which sectors would be available for investment, but according to FinanceAsia the financial sector is one that is likely to remain ring-fenced. For example, the limit on foreign ownership of banks at 30% will not be changed.

Hong Kong: MPFA shelves automatic adjustment proposal

The Mandatory Provident Fund Schemes Authority (MPFA) has decided not to push forward with plans to set up an automatic adjustment mechanism for MPF scheme members, in the face of widespread opposition to the idea.

The rejected proposal would have seen the MPFA adopt a system whereby the level of income employees must reach before they have to make contributions would be automatically adjusted every two years in relation to the average Hong Kong income

But responses to the consultation paper, which were released last week, showed the vast majority of respondents, from the investing public and the employer representatives, did not support the proposal. Some considered the mechanism lacking flexibility and not taking into account other factors such as social and economic background, income distribution and inflation movements.

Australia: regulator updates guidance on collective action

The Australian Securities and Investments Commission (Asic) has updated its regulatory guidance for investors looking to take collective action while avoiding contravening takeover and substantial holding provisions.

Collective action involves a number of investors working in concert to solve management issues. It has been suggested by some who oppose the extension of powers for collective action, that it can be used by shareholders to take over management and install nominee directors.

The guidance, published on June 23, now includes illustrations of what kind of collective actions may (or may not) trigger the takeover and substantial holding provisions. It also lays out Asic’s approach to enforcement of these provisions, depending on whether it views actions as control-seeking rather than simply promoting good corporate governance.



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