According to media reports, the debt-to-equity swap work of the four major banks has been suspended. although the debt-to-equity swap done above has realized the consolidation of rights and interests in accounting, it is still a real debt of Ming shares, fixed income, a buyback arrangement, and a time limit, and the National Development and Reform Commission has verbally informed all banks that the debt-to-equity swap of Ming stock real debt must have the same rights as shares. The later Development and Reform Commission denied the rumors.

According to a report released by BoCom International, most of the debt-to-equity swaps that have been implemented at present contain implicit gambling provisions, and enterprises have reached certain conditions to convert shares or set certain buyback clauses, and the buyback clause means that they have the attribute of debt rights. but in fact, at present, there is also a more thorough debt-to-equity swap. BoCom International believes that the overall suspension is inaccurate, at least for a complete debt-to-equity swap should be supported at the regulatory level.

The work meeting of the CBRC in 2017 put forward four guidelines, and BoCom International believes that the debt-to-equity swap business should also return to its essence. Although the innovation of repurchase clauses in debt-to-equity swap will help banks to promote the enthusiasm of debt-to-equity swap, it may also make banks reduce their requirements on corporate fundamentals and fail to give full play to the role of shareholders in corporate governance and management. it does not fundamentally reduce corporate leverage. BoCom International pointed out that encouraging genuine debt-for-equity swaps is the right regulatory direction, but regulators should define the boundaries between debt and equity more clearly to avoid disputes in the implementation process. Of course, this will also reduce the potential market space for debt-for-equity swaps.

The report said that the current 17-year PE and PB of the industry are 5.57 and 0.72 times, BoCom International maintains the leading banking rating, China CITIC Bank Corporation (00998-HK), China Huarong (02799-HK) buy rating, and Construction Bank (00939-HK), Bank of China (03988-HK) long-term buy rating.