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Report: China bans HSBC mutual funds from IPO purchase

China's securities association has banned HSBC Holdings Plc's nine mutual funds from buying IPO shares due to misconduct, the Financial Times reported Aug. 4.

The move followed a crackdown by the China Securities Regulatory Commission-controlled association in the week of July 31, wherein 1,012 funds and individual investors were banned from buying IPO shares for up to a year. The blacklist was based on inspections of 52 IPOs from November to December 2016, with about 125 institutions, including banks, brokerages, insurers and funds, being cited.

The FT added, citing local media, that many accounts were punished for submitting winning bids without actual share purchases.

The nine HSBC funds, with combined assets of 14.2 billion yuan, are managed by HSBC Jintrust Fund Management Co. Ltd., which is a joint venture between HSBC Global Asset Management and Shanxi Trust Co. Among the funds is HSBC Jintrust Large Cap Equity Securities Investment Fund, which has 4.7 billion yuan of assets under management.

HSBC Jintrust said nine of its funds participated in the price discovery process for Xinjiang Sailing Information Technology Co. Ltd.'s IPO in December 2016. However, it has decided not to proceed with the stock subscription.

The nine funds do not exclusively invest in IPOs as they are equity and balanced ones, the group said, adding that the ban will have minimal impact on the funds' returns.

As of Aug. 4, US$1 was equivalent to 6.72 Chinese yuan.