China’s State Council introduced a series of measures that support the country’s developing securitization market but it won’t be enough to significantly boost issuance in the short-term, said Fitch Ratings.
The State Council has proposed to allow securitized products to be traded on stock exchanges in an effort to boosts the financial instrument’s liquidity. The measures would limit these stock exchange traded securitizations to “high quality” assets.
The State Council also intends to strengthen control over the securitization market.
The measures, introduced last week , would boost market liquidity, broaden the investor base and enhance regulatory and risk controls for securitization. What they won’t do is facilitate any “meaningful risk transfer from the banking system,” according to Fitch.
The State Council’s move, said senior director of structured finance at Fitch, Stan Ho, “ does not go far enough to radically alter the size or structure of the securitization market nor does it carry any huge near-term implications for China’s overall financial system.”
Still Ho says it’s a step in the right direction. The State’s Council proposal to strengthen regulatory control of the market, for example, would go some way to boosting investors’ confidence and overall liquidity-- in the fledgling market; and listing the securities publicly means opening the market to wider investor base.
Currently, China’s securitization market remains structurally fragmented by the existence of two securitziation frameworks the Credit Asset Securitization scheme and the Specific Asset Management Plan, which are goverened by different regulators.