WMPs Funding Vanke Takeover Battle

Bloomberg: Vanke Share Slide May Spur Liquidity Squeeze at Baoneng Fund
Baoneng has used about 43 billion yuan ($6.4 billion) to purchase Vanke shares in the secondary market, JPMorgan analysts led by Katherine Lei wrote in a July 12 note. About 26 billion yuan was lent by six banks through asset-management plans, or AMPs, a type of shadow-banking arrangement that is used for stock purchase in China, according to the note. Banks including China Construction Bank Corp., China Minsheng Banking Corp. and China Zheshang Bank Co. participated in the financing, according to a China Business News report on July 8.

...According to industry practice, if a stock’s drop hits a stop-loss level leading to a 20 percent decline in the fund’s net asset value, Baoneng would need to inject more cash into it, otherwise senior investors such as the banks can liquidate the fund to limit their losses, according to JPMorgan analysts.
Vanke shares were trading at 14 yuan back in November 2015 before the takeover attempt began, were halted above 24 yuan per share in December 2015, and fell to 22 yuan when trading resumed on July 4, now trading at 17.11 yuan per share (The Shenzhen listed 000002).

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