Shanghai Stock Exchange tightens corporate bond issuance scrutiny as regulators seek to limit financial risks

Bourse chides Ningxia Yuangao Industrial Group for ‘fake’ and inadequate disclosure ahead of its default, sends warning letters to its underwriter and law firm

China has about US$4.5 trillion of outstanding corporate bonds, which are traded on the country’s exchanges and the interbank market

1-MIN READ1-MIN

Shanghai Stock Exchange has launched onsite inspections on select bond issuance applicants with a focus on robustness of due diligence by underwriters. Photo: AFP

Published: 1:56pm, 2 Apr 2021Updated: 1:56pm, 2 Apr 2021

The Shanghai Stock Exchange (SSE) said on Friday it is tightening scrutiny over corporate bond issuance, and has punished a brokerage for lax due-diligence in bond underwriting.

The move comes after Chinese exchanges strengthened inspections on initial public offerings (IPOs), as regulators seek to limit financial risks while promoting growth of China’s capital markets.

China has about US$4.5 trillion of outstanding corporate bonds, traded on the country’s exchanges and the interbank market.

SSE, China’s main exchange for corporate bond trading, said it has launched on-site inspections on select bond issuance applicants with a focus on robustness of due diligence by underwriters.

Yi Huiman, China’s top regulator, has vowed to punish underwriters who try to bring ‘sick’ companies to the IPO market. Photo: Reuters

The bourse said in a statement it publicly censured metal products maker Ningxia Yuangao Industrial Group for “fake” and inadequate disclosure ahead of its default, and sent warning letters to its underwriter Huaxi Securities and its law firm.