China Economic Perspectives:Tightening financial regulation in the era of asset management-rationale

Implications for major asset classes

    Bonds: Bond market supply-demand should remain favourable in the near term.Deleveraging is reducing leveraged capital in the debt market; however, incrementalfunds are continually flowing into the debt market. Therefore, the impact on bond yieldfrom deleveraging alone should be limited. Equities: WMPs will have their access to thestock market constrained in the short term, but we believe there is still long-termupside. Specific sectors: In the near term, property firms and LGVFs are posting decentcash flow. However, noting the heavy issuance of corporate bonds with maturities inthe 2-3year range since 2015, we think risks could materialize in the next 2-3years ifrefinancing standards for such firms keep tightening.