Chinese State Fund Taps WMPs in Financing Shift, Merchants Says

  • China Securities Finance raised 460 billion yuan from WMPs
  • May invest in high dividend-yield stocks: Merchants analysts

China Securities Finance Corp., the state entity that borrowed more than 1 trillion yuan ($153 billion) from banks at the government’s behest to stabilize stocks last year, is adjusting its liabilities by repaying loans with funds borrowed from lenders’ wealth management products, according to China Merchants Securities Co.

China Securities Finance has borrowed about 460 billion yuan from off-balance-sheet wealth management products, or WMPs, issued by banks as of the end of the first quarter, up from about 370 billion yuan in the fourth quarter last year, China Merchants Securities analysts Ma Kunpeng and He Yue wrote in a note on Tuesday.

The shift has given China Securities Finance a sustainable and stable funding source because WMPs can be rolled over with new issuance, easing pressure on the government entity to sell its holdings, the analysts said. The Beijing-based firm may prefer buying stocks with a high dividend yield to cover the WMP funding costs, which may be around 2.5 percent annually, as part of its future investment strategy, they said.

China Securities Finance declined to comment when contacted by Bloomberg News.

The firm received more than $400 billion from the central bank and other sources to help prop up share prices after the nation’s stocks crashed in June. It repaid some of those loans by transferring stocks it purchased during the market support operation to entities such as Wutongshu Investment Platform Co., a wholly owned unit of the foreign-exchange regulator.

— With assistance by Jun Luo

Before it's here, it's on the Bloomberg Terminal.