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)

*Document 15: Recently the China Bank and Insurance Regulatory Commission (CBIRC) issued guidance to both banks and insurers on implicit debt of local government financing vehicles (LGFV) via Document 15 – tightening the screws even further;  and*No Let Up In Sight: Coupled with the structural reforms of an increase in risk-based capital minimums for certain state banks, the partial bank Wealth Management Product (WMP) resolution, and the recent reserve requirement ratio (RRR) reduction, these tightening measures should act to contain some of the out of control financial risk within the mainland Chinese financial system.

*Document 15: Recently the China Bank and Insurance Regulatory Commission (CBIRC) issued guidance to both banks and insurers on implicit debt of local government financing vehicles (LGFV) via Document 15 – tightening the screws even further;  and*No Let Up In Sight: Coupled with the structural reforms of an increase in risk-based capital minimums for certain state banks, the partial bank Wealth Management Product (WMP) resolution, and the recent reserve requirement ratio (RRR) reduction, these tightening measures should act to contain some of the out of control financial risk within the mainland Chinese financial system.

*D-SIB Standards Released: The People’s Bank of China (PBOC) and China Bank and Insurance Regulatory Commission (CBIRC) on April 2, 2021 released finalized new capital standards for the country’s domestic systemically important banks (D-SIBs), and indicated that the need for banking  crisis liquidation plans; and* Aggressive Capital Raises Expected: In our view, the forthcoming regulations are likely to focus on: additional paid-in capital; leverage ratios; risk concentrations; corporate governance; disclosure levels; and mechanism to prevent systemic risk; and internal controls. The idea is to finally strengthen mainland Chinese bank balance sheets and improve their loss absorption capacity. Problem for equity raises is that P/BV must be over 1.0x for the raise and many of the potential D-SIBs are trading below book value.

*D-SIB Standards Released: The People’s Bank of China (PBOC) and China Bank and Insurance Regulatory Commission (CBIRC) on April 2, 2021 released finalized new capital standards for the country’s domestic systemically important banks (D-SIBs), and indicated that the need for banking  crisis liquidation plans; and* Aggressive Capital Raises Expected: In our view, the forthcoming regulations are likely to focus on: additional paid-in capital; leverage ratios; risk concentrations; corporate governance; disclosure levels; and mechanism to prevent systemic risk; and internal controls. The idea is to finally strengthen mainland Chinese bank balance sheets and improve their loss absorption capacity. Problem for equity raises is that P/BV must be over 1.0x for the raise and many of the potential D-SIBs are trading below book value. 

China Banks – Big Capital Raises Coming

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<li>
China Loves the "F" Word: The China Bank and Insurance Regulatory Commission's (CBIRC) latest bout of bank capital forbearance in reaction to the negative economic implications of the corona virus pandemic: 1) Banks can now roll over loans to companies at risk of missing payment deadlines and relaxing guidelines on how to categorize overdue debt; and 2) Some banks are also refraining from reporting delinquencies to mainland China's centralized credit-scoring system and allowing borrowers to skip interest payments for up to six months.</li>
<li>
Sick Man of Asia Is a Double Entendre: Not only is mainland China the epicenter for the corona virus outbreak, but it certainly appears its struggling financial system is as ill as the folks in Wuhan. There are increasing and hidden risks on bank balance sheets. Its latest bout of forbearance is reversing a several year trend of vigilance and discipline within its financial system.  </li>
</ul></div>



China Loves the "F" Word: The China Bank and Insurance Regulatory Commission's (CBIRC) latest bout of bank capital forbearance in reaction to the negative economic implications of the corona virus pandemic: 1) Banks can now roll over loans to companies at risk of missing payment deadlines and relaxing guidelines on how to categorize overdue debt; and 2) Some banks are also refraining from reporting delinquencies to mainland China's centralized credit-scoring system and allowing borrowers to skip interest payments for up to six months.

Sick Man of Asia Is a Double Entendre: Not only is mainland China the epicenter for the corona virus outbreak, but it certainly appears its struggling financial system is as ill as the folks in Wuhan. There are increasing and hidden risks on bank balance sheets. Its latest bout of forbearance is reversing a several year trend of vigilance and discipline within its financial system.  


External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

China Huarong Asset Management / Equity Bottom-Up

<ul><li>China CITIC Financial Asset Management (Huarong) announced the transfer of its 60% stakes in China Huarong Financial Leasing (Financial Leasing) to CITIC Group for a consideration of cRMB12bn (cUSD1.7bn).</li><li>The share transfer will boost Huarong’s liquidity and is in line with the Huarong’s strategy to re-focus on distressed asset management.</li><li>While the conviction levels of HRINTHs are lower after a good run since 2H23, HRINTHs, especially HRINTH 4.25 Perp, remain to be our top picks in the sector. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China CITIC Financial Asset Management (Huarong) announced the transfer of its 60% stakes in China Huarong Financial Leasing (Financial Leasing) to CITIC Group for a consideration of cRMB12bn (cUSD1.7bn).The share transfer will boost Huarong’s liquidity and is in line with the Huarong’s strategy to re-focus on distressed asset management.While the conviction levels of HRINTHs are lower after a good run since 2H23, HRINTHs, especially HRINTH 4.25 Perp, remain to be our top picks in the sector. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HRINTH: Will Huarong do another round of bond repurchase after completion of share transfer?

<ul>
<li>Evergrande’s seven-member risk management committee includes China Cinda, a major Evergrande creditor;    </li>
<li>Adding insult to injury, a China Cinda senior executive was appointed as an Evergrande director; and </li>
<li>This is massive conflict of interest coupled with the local municipality bonepickers give us little confidence that any creditor will be treated fairly. </li>
</ul>


Evergrande’s seven-member risk management committee includes China Cinda, a major Evergrande creditor;    
Adding insult to injury, a China Cinda senior executive was appointed as an Evergrande director; and 
This is massive conflict of interest coupled with the local municipality bonepickers give us little confidence that any creditor will be treated fairly. 


China Evergrande Group – Fox in Henhouse

China

China Huarong Asset Management Co., Ltd. operates as an investment management company. The Company offers financial services, asset management services, asset management services, and more. China Huarong Asset Management serves customers worldwide.

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China Huarong Asset Management (HUAZ CH)

China Banks – Screws Tighten On LGFVs

CHINA BANKS: Recently the CBIRC issued guidance on implicit LGFV debt via Document 15 – further tightening the screws on mainland China's financial...

Thomas J. Monaco

China Banks – Big Capital Raises Coming

CHINA BANKS: The PBOC and CBIRC released finalized new capital standards for the country’s D-SIBs. Equity raises require P/BV over 1.0x and many of...

Thomas J. Monaco

China Banks - Abracadabra

China Loves the "F" Word: The China Bank and Insurance Regulatory Commission's (CBIRC) latest bout of bank capital forbearance in reaction to the...

Thomas J. Monaco

China Evergrande Group – Fox in Henhouse

EVERGRANDE: Evergrande’s risk management committee includes China Cinda, a major Evergrande creditor. This is massive conflict provides little...

Thomas J. Monaco

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Banks – Screws Tighten On LGFVs

CHINA BANKS: Recently the CBIRC issued guidance on implicit LGFV debt via Document 15 – further tightening the screws on mainland China's financial...

Thomas J. Monaco

China Banks – Big Capital Raises Coming

CHINA BANKS: The PBOC and CBIRC released finalized new capital standards for the country’s D-SIBs. Equity raises require P/BV over 1.0x and many of...

Thomas J. Monaco

China Banks - Abracadabra

China Loves the "F" Word: The China Bank and Insurance Regulatory Commission's (CBIRC) latest bout of bank capital forbearance in reaction to the...

Thomas J. Monaco

HRINTH: Will Huarong do another round of bond repurchase after completion of share transfer?

While the conviction levels of HRINTHs are lower after a good run since 2H23, HRINTHs, especially HRINTH 4.25 Perp, remain to be our top picks in...

CMB International

China Evergrande Group – Fox in Henhouse

EVERGRANDE: Evergrande’s risk management committee includes China Cinda, a major Evergrande creditor. This is massive conflict provides little...

Thomas J. Monaco