Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.   

Postal Savings Bank of China C / Equity Bottom-Up

*Blowout 3Q21 Results: Established in 2007, Postal Savings Bank of China (1658.HK) [PSB], mainland China’s youngest large commercial bank, reported 3Q21 bottom-line results of CNY 23.5 bn – increasing CNY 3.7 bn (18.6%) linked quarter. Much of the improvement at PSB is due to credit leverage, as loss provisions declined CNY 9.3 bn (54.3%); and*Credit Quality Continues Its Positive Turn, But Reserves More Than Adequate: Net new NPLs did increase CNY 7.8 bn or 61.0% annualized versus CNY 14.9 bn or 116.6% at 2Q21. Despite the increase in net new NPLs, it would appear that PSB’s reserves would remain excessive to the tune of CNY 100 bn or about a year of pre-tax profits – begging the question of why not reverse loss reserves?

*Blowout 3Q21 Results: Established in 2007, Postal Savings Bank of China (1658.HK) [PSB], mainland China’s youngest large commercial bank, reported 3Q21 bottom-line results of CNY 23.5 bn – increasing CNY 3.7 bn (18.6%) linked quarter. Much of the improvement at PSB is due to credit leverage, as loss provisions declined CNY 9.3 bn (54.3%); and*Credit Quality Continues Its Positive Turn, But Reserves More Than Adequate: Net new NPLs did increase CNY 7.8 bn or 61.0% annualized versus CNY 14.9 bn or 116.6% at 2Q21. Despite the increase in net new NPLs, it would appear that PSB’s reserves would remain excessive to the tune of CNY 100 bn or about a year of pre-tax profits – begging the question of why not reverse loss reserves?

Postal Savings Bank of China – Reserve Reversals Expected

China Merchants Bank H / Equity Bottom-Up

*3Q21 Bottom-Line Is Not What It Appears: China Merchants Bank (3968.HK) [CMB] reported 3Q21 bottom-line results of CNY 32.7 bn, increasing CNY 3.3 bn (11.3%) linked quarter. However, when we exclude gains and the unreasonable drop in loss provisions, we find that CMB's adjusted core operating result looks something closer to CNY 12.6 bn - declining CNY 8.8 bn or 41.2% over the same period; and*Credit Has Fallen Off Of A Cliff: Unfortunately for CMB, net new problem loans continue to accelerate at Indian bank pace of CNY 23.5 bn or 172.3% annualized. Provided that the accelerated net new NPL trajectory remains, we foresee a significant decline in NPL cover into the 150% territory from nearly 450% – which is lower than the average mainland Chinese bank.

*3Q21 Bottom-Line Is Not What It Appears: China Merchants Bank (3968.HK) [CMB] reported 3Q21 bottom-line results of CNY 32.7 bn, increasing CNY 3.3 bn (11.3%) linked quarter. However, when we exclude gains and the unreasonable drop in loss provisions, we find that CMB's adjusted core operating result looks something closer to CNY 12.6 bn - declining CNY 8.8 bn or 41.2% over the same period; and*Credit Has Fallen Off Of A Cliff: Unfortunately for CMB, net new problem loans continue to accelerate at Indian bank pace of CNY 23.5 bn or 172.3% annualized. Provided that the accelerated net new NPL trajectory remains, we foresee a significant decline in NPL cover into the 150% territory from nearly 450% – which is lower than the average mainland Chinese bank. 

China Merchants Bank – An Optical Illusion

*Quarter Highlighted By Weak Credit: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q21 results of CNY 11.7 bn – increasing CNY 4.1 bn (55.0%). Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An is seemingly pulling on its bank lever to offset what looks to be another quarter self-inflicted harm  within its investment portfolio;  and *Credit Challenges: By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.

*Quarter Highlighted By Weak Credit: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported 3Q21 results of CNY 11.7 bn – increasing CNY 4.1 bn (55.0%). Don’t shoot off the streamers just yet, credit quality was abysmal and Ping An is seemingly pulling on its bank lever to offset what looks to be another quarter self-inflicted harm  within its investment portfolio;  and *Credit Challenges: By our analysis, we find that credit remains incredibly challenged as net new NPLs are now accelerating at Indian bank pace of CNY 12.4 bn or 159.8% annualized.  Assuming the accelerated credit break in the PAB portfolio continues to remain at its current level, we find that PAB’s reserves remain CNY 19 bn light.

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Ping An A-shares <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> are trading at a 11% premium to the H-shares <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>. This continues the cycle of premiums and discounts going back to 2015.The last time the A-shares traded at a premium this large to the H-shares was in December last year. By mid to late January, the A-shares were trading near parity versus the H-shares.With <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> trading at a 11% premium to <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> the risk/reward is favourable to setting up a premium contraction trade. The current premium lies at the 95th percentile over the last 5 years and the premium has widened faster than that of the HSAHP Index.Northbound and Southbound Stock Connect holdings of <a href="https://www.smartkarma.com/entities/ping-an-insurance-group-co-of-china" target="_blank" data-smartkarma-citation="entities:24682:1" rel="noopener">Ping An Insurance Group Co Of China (601318 CH)</a> and <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> have dropped sharply over the last couple of months, though there has been an uptick over the last couple of weeks.In this Insight, we look at the historical premium for Ping An and compare it to the premium on the AH index and other large caps, and look at some catalysts that could lead to an contraction of the premium.

The Ping An A-shares Ping An Insurance Group Co Of China (601318 CH) are trading at a 11% premium to the H-shares Ping An Insurance (H) (2318 HK). This continues the cycle of premiums and discounts going back to 2015.The last time the A-shares traded at a premium this large to the H-shares was in December last year. By mid to late January, the A-shares were trading near parity versus the H-shares.With Ping An Insurance Group Co Of China (601318 CH) trading at a 11% premium to Ping An Insurance (H) (2318 HK) the risk/reward is favourable to setting up a premium contraction trade. The current premium lies at the 95th percentile over the last 5 years and the premium has widened faster than that of the HSAHP Index.Northbound and Southbound Stock Connect holdings of Ping An Insurance Group Co Of China (601318 CH) and Ping An Insurance (H) (2318 HK) have dropped sharply over the last couple of months, though there has been an uptick over the last couple of weeks.In this Insight, we look at the historical premium for Ping An and compare it to the premium on the AH index and other large caps, and look at some catalysts that could lead to an contraction of the premium.

Ping An A/​H: Discount Turns to a BIG Premium

China

Bank of China Limited provides banking services. The Company offers deposits, loans, foreign currency transaction, fund settlement, and other services. Bank of China provides its services to individuals, enterprises, and other clients.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Bank of China (601988 CH)

China Evergrande Group – Kaisa Rolled

EVERGRANDE: Kaisa missed a bond payment, and has the second largest level of short-term debt due. We await official word Evergrande’s Scenery...

Thomas J. Monaco

Postal Savings Bank of China – Reserve Reversals Expected

POSTAL SAVINGS BANK: PSB's QOQ 3Q21 increased 18.6%, due largely to credit leverage and net interest income improvement. PSB’s reserves appear...

Thomas J. Monaco

China Merchants Bank – An Optical Illusion

CHINA MERCHANTS BANK: CMB's QOQ 3Q21 adjusted core operating result declined 41.2%, by our calculation. Net new problem loans continue to...

Thomas J. Monaco

Ping An Insurance – Breaking The Bank

PING AN: PAB reported 3Q21 QOQ growth of 55.0%. Credit quality was abysmal and Ping An is pulling on its bank lever to offset another quarter self...

Thomas J. Monaco

Ping An A/H: Discount Turns to a BIG Premium

Ping An A-shs are now trading at a 11% premium to the H-shs. This is in the 95th percentile and is partly driven by the buyback on A-shs. We like a...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Evergrande Group – Kaisa Rolled

EVERGRANDE: Kaisa missed a bond payment, and has the second largest level of short-term debt due. We await official word Evergrande’s Scenery...

Thomas J. Monaco

Postal Savings Bank of China – Reserve Reversals Expected

POSTAL SAVINGS BANK: PSB's QOQ 3Q21 increased 18.6%, due largely to credit leverage and net interest income improvement. PSB’s reserves appear...

Thomas J. Monaco

China Merchants Bank – An Optical Illusion

CHINA MERCHANTS BANK: CMB's QOQ 3Q21 adjusted core operating result declined 41.2%, by our calculation. Net new problem loans continue to...

Thomas J. Monaco

Ping An Insurance – Breaking The Bank

PING AN: PAB reported 3Q21 QOQ growth of 55.0%. Credit quality was abysmal and Ping An is pulling on its bank lever to offset another quarter self...

Thomas J. Monaco

Ping An A/​H: Discount Turns to a BIG Premium

Ping An A-shs are now trading at a 11% premium to the H-shs. This is in the 95th percentile and is partly driven by the buyback on A-shs. We like a...

Brian Freitas

Ping An A/H: Discount Turns to a BIG Premium