What’s new: Haitong Securities Co. Ltd. and subsidiaries are suspected of providing assistance to Yongcheng Coal and Electricity Holding Group Co. Ltd. in the illegal issuance of bonds and market manipulation, according to China’s interbank bond market regulator.
Haitong, one of China’s biggest brokerages, became part of a widening probe of the state-owned coal mining company’s default for its role in the issuance of 1 billion yuan ($151 million) bond that Yongcheng failed to repay last week.
The National Association of Financial Market Institutional Investors (NAFMII), a self-regulatory body under the People's Bank of China, didn’t provide details of Haitong’s suspected violations. Caixin learned that Haitong holds large positions in more than 40 billion yuan of bonds issued by Yongcheng and its state-owned parent company, Henan Energy and Chemical Industry Group Co. Ltd.
The background: The Shanghai-based brokerage house and investment bank is a major underwriter for bonds issued by state-owned enterprises (SOEs). Its clients include SOEs in coal mining and steel and local government financing vehicles (LGFVs).
According to data from information provider Wind, Haitong underwrote 1,562 bonds worth 436 billion yuan in the first 10 months of 2020, ranking sixth-largest among bond underwriters in China by value.
Last week, Yongcheng’s bond default has set off a chain reaction that spread to other coal mining companies and local government financing vehicles in other provinces.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).
Related: Exclusive: Debt-Ridden Coal Miner Faces Nov. 24 Deadline to Avoid Triggering More Bond Defaults
