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

Thematic (Sector/Industry)

*Yongcheng Coal Default: According to Shanghai Clearing House, Yongcheng Coal and Electricity (YCE) in Henan Province failed to repay a CNY 1 bn (USD 151 mn) short-term bond despite being given the highest rating by one of mainland China’s awful domestic credit ratings agencies; and*Watch Your Banks: The yield on benchmark five-year “AAA” rated mainland Chinese corporates was 3.99% - up over 100 bp from their April 2020 low. Investor flight is pushing financing costs higher and squeezing local corporate funding in a market which is just barely recovering from the COVID-19 pandemic. Concerns remain over higher problem loans as debt service risk is heightened over higher rates, unreliable financial statements and ratings agency reports, and now an inability to refinance public debt with a number of bond sales being canceled. Further, the degradation of corporate bond values is limiting their usage as collateral.

*Yongcheng Coal Default: According to Shanghai Clearing House, Yongcheng Coal and Electricity (YCE) in Henan Province failed to repay a CNY 1 bn (USD 151 mn) short-term bond despite being given the highest rating by one of mainland China’s awful domestic credit ratings agencies; and*Watch Your Banks: The yield on benchmark five-year “AAA” rated mainland Chinese corporates was 3.99% - up over 100 bp from their April 2020 low. Investor flight is pushing financing costs higher and squeezing local corporate funding in a market which is just barely recovering from the COVID-19 pandemic. Concerns remain over higher problem loans as debt service risk is heightened over higher rates, unreliable financial statements and ratings agency reports, and now an inability to refinance public debt with a number of bond sales being canceled. Further, the degradation of corporate bond values is limiting their usage as collateral.

Equity Bottom-Up

*Potential Deal For Tahoe Life: According to a Bloomberg report, Ping An Insurance (2318.HK) [Ping An] (along with Sunshine Insurance Group in Beijing] is a finalist to acquire Tahoe Life, the Hong Kong-based life insurance subsidiary of Tahoe Investment, for over USD 1 bn; and*Other Goodies May Come Along With Deal: In addition to Tahoe Life, Tahoe Investment is a founding shareholder of Haixia Life Insurance and a major shareholder of Fujian Haixia Bank, Rural Credit Bank of Fuzhou, and Dongxing Securities. Given the financial troubles of Tahoe, we would have to imagine the sale of these businesses would also be on the table for Ping An and Sunshine as well.

*Potential Deal For Tahoe Life: According to a Bloomberg report, Ping An Insurance (2318.HK) [Ping An] (along with Sunshine Insurance Group in Beijing] is a finalist to acquire Tahoe Life, the Hong Kong-based life insurance subsidiary of Tahoe Investment, for over USD 1 bn; and*Other Goodies May Come Along With Deal: In addition to Tahoe Life, Tahoe Investment is a founding shareholder of Haixia Life Insurance and a major shareholder of Fujian Haixia Bank, Rural Credit Bank of Fuzhou, and Dongxing Securities. Given the financial troubles of Tahoe, we would have to imagine the sale of these businesses would also be on the table for Ping An and Sunshine as well.

Ping An Insurance – Where There Is Smoke...

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

AIA Group – Greater China and Investments Remain Risks

*Weak Great Eastern Returns: Great Eastern Life (GE.SP) [Great Eastern] reported 3Q20 bottom-line results of SGD 287.9 mn, declining SGD 9.6 mn (3.2%) linked quarter. On an operating basis excluding market-related gains, the decline in profits was even more pronounced at SGD 24.6 mn or 9.4% over the period due to new business strain. Earnings were materially weaker than what consensus has built in for Overseas Chinese Banking Corp. (OCBC.SP) (earnings release date November 5, 2020) – and pose a modest consensus miss for OCBC. Higher volatility in reported Great Eastern earnings decreases confidence in forecasts; and*Better Readacross to Regional Insurers: MTM gains would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers.

*Weak Great Eastern Returns: Great Eastern Life (GE.SP) [Great Eastern] reported 3Q20 bottom-line results of SGD 287.9 mn, declining SGD 9.6 mn (3.2%) linked quarter. On an operating basis excluding market-related gains, the decline in profits was even more pronounced at SGD 24.6 mn or 9.4% over the period due to new business strain. Earnings were materially weaker than what consensus has built in for Overseas Chinese Banking Corp. (OCBC.SP) (earnings release date November 5, 2020) – and pose a modest consensus miss for OCBC. Higher volatility in reported Great Eastern earnings decreases confidence in forecasts; and*Better Readacross to Regional Insurers: MTM gains would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers. 

Oversea Chinese Banking Corp – Still Not A Great Eastern

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</div><div>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a>, <a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener">PCCW Ltd (8 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</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> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.</div><div>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/nexon-co-ltd" target="_blank" data-smartkarma-citation="entities:16032:1" rel="noopener">Nexon (3659 JP)</a>, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/familymart-co-ltd" target="_blank" data-smartkarma-citation="entities:320:1" rel="noopener">FamilyMart Co Ltd (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>. Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.</div><div>Shorts increased in Korea for the week. Biggest increase in shorts were on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. </div><div>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">Au Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a> and <a href="https://www.smartkarma.com/entities/catcher-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:4957:1" rel="noopener">Catcher Technology (2474 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>, <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">Ta Chen Stainless Pipe Co (2027 TT)</a>. </div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on ICBC (H) (1398 HK), PCCW Ltd (8 HK), China Construction Bank H (939 HK) and Ping An Insurance (H) (2318 HK) while there was short covering on Meituan (3690 HK), Alibaba Group (9988 HK), HKEX (388 HK) and HSBC Holdings (5 HK). Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.In Japan, stocks that saw the most shorts were Nexon (3659 JP), Ana Holdings (9202 JP), Fast Retailing (9983 JP) and Sbi Holdings (8473 JP) while shorts decreased on FamilyMart Co Ltd (8028 JP), Toshiba Corp (6502 JP), Sumitomo Mitsui Financial Group (8316 JP) and Advantest Corp (6857 JP). Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.Shorts increased in Korea for the week. Biggest increase in shorts were on Samsung Electronics (005930 KS), SK Hynix (000660 KS), LG Household &amp; Health Care (051900 KS), LG Chem Ltd (051910 KS) and Naver Corp (035420 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Au Optronics (2409 TT), Acer Inc (2353 TT) and Catcher Technology (2474 TT) while shorts were covered on Walsin Technology (2492 TT), Nanya Technology (2408 TT), Novatek Microelectronics Corp (3034 TT) and Ta Chen Stainless Pipe Co (2027 TT). 

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

Hong Kong

AIA Group Limited offers insurance and financial services. The Company writes life insurance for individuals, businesses, accident, and health insurance, as well as retirement planning and wealth management services.

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AIA Group Ltd (1299 HK)

Another Day, Another Default

MAINLAND CHINA DEFAULT: Yongcheng Coal Defaulted On Its Debt, Leading To Concerns About The Credibility Of AAA Rated Corporates In Mainland China...

Thomas J. Monaco

Ping An Insurance – Where There Is Smoke...

PING AN INSURANCE: Tahoe Life Appears To Be Up For Sale, Given The Financial Troubles Of Tahoe Investment. Ping An Is Likely A Bidder, And Other...

Thomas J. Monaco

AIA Group – Greater China and Investments Remain Risks

AIA GROUP: While VONB Has Seen Improvement Linked Quarter, Greater China Challenges and The Investment Portfolio Are Big Risks To The Bottom-line

Thomas J. Monaco

Oversea Chinese Banking Corp – Still Not A Great Eastern

OVERSEA CHINESE BANKING CORP: Great Eastern Life Posts Another Weak Quarter; Margins Were Weaker and EPS Reliant On Gains. OCBC Consensus Appear...

Thomas J. Monaco

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

We highlight the largest changes in short interest on stocks across Hong Kong, Japan, Korea and Taiwan to provide insight into the positions being...

Brian Freitas

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