Listed companies cash in from the cash-starved

Some 58 listed mainland companies lent more than 16 billion yuan (HK$19.55 billion) in the first eight months of this year in so-called entrusted loans to cash-starved, mostly small and medium-sized enterprises and real estate developers, to take advantage of high unofficial interest rates.

In such loans, a bank acts as an agent on a third-party loan between a depositor and a borrower, and books a fee.

As of August 26, the Shanghai and Shenzhen stock exchanges had issued 110 entrusted loan-related notices, for an accumulated total of more than 16 billion yuan, up 38 per cent year-on-year, according to Wind Information, a Shanghai-headquartered financial data provider.

The data compiled by Wind shows that 30 of the 58 companies were lending money, and receiving rates that comfortably exceeded the official bank rates, with the highest being paid 21.6 per cent interest on a 12-month loan, compared with a benchmark one-year interest rate of 6.56 per cent from a mainland bank.

'More listed companies are not focusing on their main business but are investing in other fields because the real economy is stagnant and it is easier to make a profit from high interest rates than from their core business,' said a Wind researcher.

'For the lenders, the return may be high, but the borrowers are often small companies so they had better be aware of the risk of default.'