Morning News &Views -Asia:A Summary of Select Global Markets Research

Regulatory headwinds underway and risks likely to unwind. Moving into April, the CBRC issued multiple guidelinestightening risk control over China banks - especially on interbank operations, WMPs and non-standard credit assetsmanagement - with focus on implicit guarantees and regulatory arbitrage. We see the move addressing fundamentalconcerns over China banks, though risks may likely unwind (China/HK financials - Risks may start unwinding 2017,10 Jan 2017). Deleveraging accelerated since April; NIM took hit first but may stabilise into 2H17F per ourestimates. Meanwhile, deleveraging accelerated into April, and a reflection on the interbank market was thatovernight SHIBOR exceeded the recent peak in March during the Macro Prudential Assessment (MPA) assessmentperiod, and touched a 2-year high of 2.8% by the end of April.