Weekly Digest: China to expand NSSF investment scope; Nippon Life buys $68mn green bonds
TOP NEWS OF THE WEEK
China plans to update domestic investment regulations for its National Social Security Fund (NSSF), expanding the scope of what it can invest in, and increasing the maximum investment proportions for equity.
According to the Ministry of Finance’s announcement on December 6, the draft for public consultation plans to include pension products and certain futures for hedging. It also plans to moderately lower the upper limits for management fee rates and custody fee rates.
The existing rules governing the investment of the NSSF came into effect in 2001 and can no longer fully accommodate the development of the financial market or the fund’s investment management, the Ministry said.
Source: Ministry of Finance of the People’s Republic of China
Nippon Life Insurance has bought half of the ¥10 billion ($68.5 million) digital green bonds issued by Japanese conglomerate Hitachi Group. This is the first investment in a digital green bond for Japan’s largest insurer and largest private asset owner.
Nippon Life says it purchased ¥5 billion worth of the bonds under its financing facility for environmental, social and governance (ESG) and decarbonization investments. The insurer plans to spend as much as ¥3 trillion on sustainable investments under this facility by 2030, including transition finance and renewable energy.
The five-year bonds utilise blockchain technology to improve data transparency for green investments and have a yearly coupon rate of 0.098%. Hitachi will use the proceeds to refinance construction and refurbishment of its central research laboratory.
Source: Nippon Life
AUSTRALIA
Qantas Super has provided an update on its merger plans, which involve the formation of a dedicated committee and the identification of three key issues.
The $5.5 billion fund (A$8.4 billion) expressed its intention to explore options for future sustainability in September. CEO Michael Clancy emphasised that any potential merger partner must be capable of managing defined benefit entitlements and offering equivalent benefits to Qantas Super members. The fund also aimed to enhance member services and reduce fees and costs.
Qantas Super cited three reasons as to why it is pursuing a merger despite its decent performance: its inability to compete with larger funds due to economies of scale, the impact of regulatory changes such as fund stapling, and concerns about future sustainability. Consequently, Qantas Super believes that its members would be better served by joining a larger fund with a broader membership and stronger cash flow.
Source: Qantas Super
CHINA
Eastspring Investments and Barings LLC have been cutting jobs at their China hedge fund operations, highlighting the challenges global asset managers face in gaining a foothold in the Rmb6 trillion ($835 billion) local market.
Eastspring, Prudential’s asset management arm, saw at least seven people, or almost a third of its onshore team, depart in recent months, according to people familiar with the matter. The company may shut some of its local hedge funds to focus on overseas markets, they said, asking not to be named because the matter is private.
Barings, the unit of Massachusetts Mutual Life Insurance with $347 billion under management, has also reduced the team under its domestic private fund management license, the people said. Barings plans to put more emphasis on the outbound business through the so-called Qualified Domestic Limited Partners program, which raises money from local clients to invest in overseas assets.
Source: Bloomberg
Moody's Investors Service on December 5 changed the outlook to negative from stable on China's government credit ratings while affirming China's A1 long-term local and foreign-currency issuer and senior unsecured ratings and the A1 foreign-currency senior unsecured shelf rating.
The change to a negative outlook reflects rising evidence that financial support will be provided by the government and wider public sector to financially stressed regional and local governments and State-Owned Enterprises (SOEs), posing broad downside risks to China's fiscal, economic and institutional strength. It also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector, the rating agency said.
China’s Ministry of Finance expressed disappointment with Moody's downgrade of its outlook, emphasising the economy's strong recovery, good fundamentals and policy tools to manage risks.
Source: Moody's Investors Service; Ministry of Finance of the People’s Republic of China
HONG KONG
Moody's Investors Service on December 6 changed the outlook to negative from stable on government of Hong Kong SAR. The change reflects Moody's assessment of tight political, institutional, economic and financial linkages between Hong Kong and the mainland which keep the rating gap no wider than one notch.
The negative outlook on China's rating therefore implies a negative outlook on Hong Kong's rating. The affirmation of Hong Kong's Aa3 ratings, one notch above China, reflects Moody's assessment of its significant credit strengths, including its wealthy and competitive economy, substantial fiscal and external buffers, and track record of effective monetary and fiscal policy, the rating agency said.
Disagreeing with Moody’s decision to change Hong Kong's credit outlook to negative on the ground of tight linkage of credit profiles with the mainland, the Hong Kong SAR government said in a statement on the same day that: “Hong Kong's deepening and expanding economic and financial ties with the mainland should not be a rating constraint. On the contrary, these ties are a source of strength for Hong Kong's long-term development.”
Source: Moody's Investors Service; HKSAR Government
JAPAN
Dai-ichi Life Holdings announced plans for a competing takeover bid on December 7 to acquire Japanese corporate welfare benefits provider Benefit One, for which M3 Inc is already offering a bid.
Benefit One’s parent company Pasona Group had already agreed to tender all of its 51.16% stake in Benefit One to M3, a Japan-based company mainly engaged in the provision of services centering on the platform of healthcare, which launched a tender offer last month.
Dai-Ichi Life said it plans to offer ¥1,800 ($12.39) per Benefit One share, against M3’s bid of ¥1,600.
Source: Dai-ichi Life Holdings
KOREA
The National Pension Service (NPS) and Korea’s central bank are in talks to extend their foreign exchange swap programme that was due to expire in December, according to two government sources with direct knowledge of the matter.
The NPS, the world's third-largest public pension fund, and the Bank of Korea (BOK) established in April a foreign exchange swap line of $35 billion to ease pressure on the local currency from the pension fund's growing investments abroad.
The swap allows the NPS to use the BOK's foreign exchange reserves in times of currency market volatility, removing one of the heaviest sources of pressure on the won in the spot market.
Source: Reuters
MALAYSIA
The federal employees’ pension fund, Kumpulan Wang Persaraan (KWAP) has been provided with an A$207 million ($136 million) green loan to refinance a Grade A green office tower in Australia by Singapore-based bank DBS. This is the first green loan that KWAP has secured.
Wholly owned by KWAP, the 17-level office building located in Collins Street, Melbourne, holds a six-star NABERS energy rating (without Green Power) – the highest rating for building energy efficiency in Australia. This is in recognition of its many sustainability attributes, including rooftop solar panels and a trigeneration system that recycles waste heat from onsite power generation for heating and cooling purposes.
Hazman Hilmi Sallahuddin, CIO of KWAP, said: “Building a portfolio that generates long-term returns for our stakeholders has always been KWAP’s top priority as part of our value creation journey. It is an even greater achievement if it can be accomplished in a way that supports our effort to continue spearheading the ESG agenda.”
Source: DBS
SINGAPORE
The Monetary Authority of Singapore on December 7 announced new digital finance and capital markets initiatives to expand its financial cooperation with China.
One initiative is the cross-border e-CNY Pilot between China and Singapore, which will allow travellers from both countries to use e-CNY for tourism spending in Singapore and China.
Others include the launch of the Exchange Traded Funds (ETF) Product Link between the Singapore Exchange and Shanghai Stock Exchange, and signing of MOU between SGX and Guangzhou Futures Exchange.
Source: Monetary Authority of Singapore