Shenzhen banks suspend financing amid dodgy trade figures

June 1, 2013 Leave a comment

Shenzhen banks suspend financing amid dodgy trade figures

Staff Reporter

2013-06-01

An unusual amount of speculative capital has flooded into Shenzhen of late, with speculators using false trade to conduct heavy cross-border arbitrages, thus forcing the renminbi to repeatedly hit new highs against the dollar and confounding the true figures of China’s imports and exports. The Shenzhen city government has therefore announced a new policy to suspend trade financing by partial banks, our affiliate Commercial Times reports.

The move has triggered plenty of complaints, however, especially from banks and foreign traders who say suspending financing will cause genuine import/export businesses to find it difficult to secure credit.Shenzhen registered first-quarter trade, including imports and exports, of US$171 billion, up 80% from the same quarter a year earlier. Exports grew 68.8% to US$113.16 billion, while imports jumped 95.5%. April’s exports have even doubled from a year ago, the report said.

Shenzhen’s banking regulator in late April convened all banks in the city and ordered them to report their trade financing situation, the Shanghai Securities News reports.

The Shenzhen regulator then issued a notice requesting banks to strengthen client management, review the authenticity of trade and take extra caution in approving trade loans.

All Shenzhen banks swiftly conducted investigations as requested, temporarily suspending financing for high-end products such as gold, jewelry and hi-tech products. They also largely slowed down the process of approving loans to other sectors. Some small and medium banks as well as foreign banks even suspended all businesses related to trade financing.

Chang Chou-yuan, a Taiwanese businessman trading in sporting goods, said the move won’t have a major impact on Taiwanese businesses there, as most Taiwanese companies have chosen to seek financing in Hong Kong due to higher loan rates in Shenzhen.

Furthermore, labor costs in Shenzhen have risen sharply in recent years, forcing many Taiwanese businesses to relocate their main factories inland and leave only some processing plants in Shenzhen. Therefore, most Taiwanese businesses have moved their import/export businesses out of Shenzhen and the local government’s move should not have more than a limited impact on Taiwanese businesses there, Chang said.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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