WMPs May Be Banned From Stock Market

The impetus for the A-share slide:

Bloomberg: China Stocks Tumble on Report of Wealth Management Product Curbs
China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

“There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Under such circumstances, ChiNext is especially vulnerable, given its high valuations and the recent gains.”

The China Banking Regulatory Commission met with some lenders this month on the rule revision and a final version hasn’t been drafted, the 21st Century Business Herald report said. The CBRC didn’t immediately reply to a fax seeking comment.
Bloomberg: China Said to Weigh Tighter Rules on Wealth-Management Products
The China Banking Regulatory Commission has drafted regulations designed to protect mass-market investors, limit the involvement of smaller banks and ensure that lenders have adequate capital to cushion against potential losses, said the person, who asked not to be identified discussing private information.

Restrictions would be placed on banks with less than 5 billion yuan ($750 million) of net capital or fewer than three years of experience with wealth-management products, the person said. They would be required to invest the proceeds of any WMPs they issue in less-risky assets, such as government bonds and bank deposits, the person added.

Larger, better-capitalized banks would be allowed to conduct "comprehensive" wealth business, and allowed to put the money into equities and other riskier “non-standard assets” such as loans, the person said.
The draft text of the new rules is posted at iFeng along with some analysis from Guotai Junan: 史上最严银行理财意见稿已下发(全文+解析)

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