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)

<p><strong><em>*Staring Into The Abyss: </em></strong>Although the market has rebounded since March, we were very close to looking into the abyss with the S&amp;P 500 closing in on 2000 (or lower). The problems with market structure remain in place, despite the wall of liquidity thrown at markets by central bankers across the globe – posing an existential crisis;</p><p><strong><em>*Tail Wagging The Dog: </em></strong>The remote tail risk for single sector/security/levered ETFs/ETNs has been known for some time now following the VIX blowup in 2018  - but the USO ETF blow-up was even more spectacular given the multiplier impact on the global economy.  An even bigger problem resides in broader market ETFs as there is no restriction on liquidity and the resulting order imbalances could result in the inability of ETFs to provide the required physical exposure to underlying securities; and  </p><p><strong><em>*Regulatory Screws Too Tighten: </em></strong>Unfortunately, significantly more financial sector regulation is coming to address the existential threats of massive liquidity.</p>

*Staring Into The Abyss: Although the market has rebounded since March, we were very close to looking into the abyss with the S&amp;P 500 closing in on 2000 (or lower). The problems with market structure remain in place, despite the wall of liquidity thrown at markets by central bankers across the globe – posing an existential crisis;*Tail Wagging The Dog: The remote tail risk for single sector/security/levered ETFs/ETNs has been known for some time now following the VIX blowup in 2018  - but the USO ETF blow-up was even more spectacular given the multiplier impact on the global economy.  An even bigger problem resides in broader market ETFs as there is no restriction on liquidity and the resulting order imbalances could result in the inability of ETFs to provide the required physical exposure to underlying securities; and  *Regulatory Screws Too Tighten: Unfortunately, significantly more financial sector regulation is coming to address the existential threats of massive liquidity.

Providing Crack To An Addict Is Not A Sustainable Global Strategy

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

<ul>
<li>Market weakness, poor breadth and renewed focus on lockup expiries created a fragile backdrop for Hong Kong equities.</li>
<li>Single stock implied vol remained elevated relative to index implied vol, extending a trend that has led to a widening divergence.</li>
<li>The recent outperformance in Financial stocks came to an end as sector breadth deteriorated sharply.</li>
</ul>


Market weakness, poor breadth and renewed focus on lockup expiries created a fragile backdrop for Hong Kong equities.
Single stock implied vol remained elevated relative to index implied vol, extending a trend that has led to a widening divergence.
The recent outperformance in Financial stocks came to an end as sector breadth deteriorated sharply.


Hong Kong Single Stock Options Weekly June 15–18: Lockups and Vol Divergence in Focus

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<div><p>In tomorrow's Smartkarma Webinar, <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> talks about the myriad risks global banks are facing all at once. The webinar will be held on 22 April 2020 at 1700hrs Singapore/Hong Kong time.</p></div><hr><div><div><div class="content-highlight"><h2>
<a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=98886398668" target="_blank" rel="noopener">Register for the Webinar here</a>.</h2></div></div></div><hr><div>
<p>Daniel Tabbush has 25 years experience analyzing Asia-Pacific banks, including HSBC, Standard Chartered, Japanese and Australian banks. At the same time, his research and consulting focuses on global banking issues, including the regulatory environment. He was the Head of Asian Bank research at the number one Asian brokerage CLSA for most of his career, overseeing coverage of 80 banks and 10 analysts in Asia-Pacific.</p>
<p>Daniel started his own independent bank research and consultancy in 2012, under the banner name Tabbush Report. Since 2014, he has been a member of University of California San Diego Economics Leadership Council (ELC), supporting Economic students at the University through this alumni association, and providing guidance on Economics program development. Daniel grew up in Los Angeles, graduated from UCSD in Economics, cum laude and with Phi Beta Kappa honors. He lives with his family in Bangkok, and enjoys cooking, running and chess.</p>
</div>

In tomorrow's Smartkarma Webinar, Daniel Tabbush talks about the myriad risks global banks are facing all at once. The webinar will be held on 22 April 2020 at 1700hrs Singapore/Hong Kong time.
Register for the Webinar here.
Daniel Tabbush has 25 years experience analyzing Asia-Pacific banks, including HSBC, Standard Chartered, Japanese and Australian banks. At the same time, his research and consulting focuses on global banking issues, including the regulatory environment. He was the Head of Asian Bank research at the number one Asian brokerage CLSA for most of his career, overseeing coverage of 80 banks and 10 analysts in Asia-Pacific.
Daniel started his own independent bank research and consultancy in 2012, under the banner name Tabbush Report. Since 2014, he has been a member of University of California San Diego Economics Leadership Council (ELC), supporting Economic students at the University through this alumni association, and providing guidance on Economics program development. Daniel grew up in Los Angeles, graduated from UCSD in Economics, cum laude and with Phi Beta Kappa honors. He lives with his family in Bangkok, and enjoys cooking, running and chess.


Smartkarma Webinar | Global Banks: The Purge

<p><strong><em>* All That Glitters Isn’t Gold: </em></strong>Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on capital markets businesses. However, as a sector, these subsidiaries are NIM-challenged, wholesale funded, and have bloated cost structures (like their parent companies) - all of which challenge operating returns; </p><p><strong><em>* COVID-19 Challenges At US Franchises: </em></strong>Our “burn down” results for MUFGA were a surprise. We calculate that MUFG Americas’ (8306.JP) [MUFGA] 4Q19 CET1/Tier 1 capital ratios would decline from 14.1% to 3.9% - implying a regulatory capital shortfall, while the same analysis suggests COVID-19 will be a multi-year earnings event for both SMBC Americas (8316.JP) [SMBCA] and Mizuho Americas (8411.JP); and</p><p><strong><em>* Exhaustive Megbank Challenges: </em></strong>Japanese Megabanks were struggling to meet their FY (March) 2020 and 2021 business plans. Chronic weak returns, weak/negative growth in Japan, increased reliance of volatile capital markets revenues, impairments charges on previous acquisitions, EPS deal dilution, Softbank Group (9984.JP) exposures, and growth in Asia (Ex-Japan) risk just as the USD significantly strengthened all continue to hamper Megabank returns – even before the impact of COVID-19.  </p>

* All That Glitters Isn’t Gold: Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on capital markets businesses. However, as a sector, these subsidiaries are NIM-challenged, wholesale funded, and have bloated cost structures (like their parent companies) - all of which challenge operating returns; * COVID-19 Challenges At US Franchises: Our “burn down” results for MUFGA were a surprise. We calculate that MUFG Americas’ (8306.JP) [MUFGA] 4Q19 CET1/Tier 1 capital ratios would decline from 14.1% to 3.9% - implying a regulatory capital shortfall, while the same analysis suggests COVID-19 will be a multi-year earnings event for both SMBC Americas (8316.JP) [SMBCA] and Mizuho Americas (8411.JP); and* Exhaustive Megbank Challenges: Japanese Megabanks were struggling to meet their FY (March) 2020 and 2021 business plans. Chronic weak returns, weak/negative growth in Japan, increased reliance of volatile capital markets revenues, impairments charges on previous acquisitions, EPS deal dilution, Softbank Group (9984.JP) exposures, and growth in Asia (Ex-Japan) risk just as the USD significantly strengthened all continue to hamper Megabank returns – even before the impact of COVID-19.  

Japan Mega Banks – Avenue of the Americas

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/889/original/2020-04-01_12-59-11.png?1585713567" class="editor-image img-responsive" data-smartkarma-image-id="125889"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>DIVIDENDS AT RISK</strong> - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC (5 HK) </a>and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/899/original/2020-04-01_13-47-18.png?1585716458" class="editor-image img-responsive" data-smartkarma-image-id="125899"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>30% HAIRCUT</strong> - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/905/original/2020-04-07_13-29-26.png?1586233784" class="editor-image img-responsive" data-smartkarma-image-id="126905"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>WHO'S CUTTING NEXT?</strong> - Some serial dividend 'cutters', like <a href="https://www.smartkarma.com/entities/nipro-corp" target="_blank" data-smartkarma-citation="entities:18346:1" rel="noopener">Nipro (8086 JP)</a> above, have already announced a cut for the fiscal year just ended. In the<strong> DETAIL</strong> section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.</p>

Source • Japan AnalyticsDIVIDENDS AT RISK - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following HSBC (5 HK) and Standard Chartered (STAN LN) moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.Source • Japan Analytics30% HAIRCUT - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.Source • Japan AnalyticsWHO'S CUTTING NEXT? - Some serial dividend 'cutters', like Nipro (8086 JP) above, have already announced a cut for the fiscal year just ended. In the DETAIL section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

United Kingdom

HSBC Holdings Plc is a British universal bank and financial services group operating worldwide. It offers a wide range of services including retail and personal banking, wealth management, commercial banking, global banking, and markets and securities services. The company was founded in British Hong Kong in 1865 and is headquartered in London, England.

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HSBC (HSBA LN)

Providing Crack To An Addict Is Not A Sustainable Global Strategy

*Staring Into The Abyss: Although the market has rebounded since March, we were very close to looking into the abyss with the S&P 500 closing...

Thomas J. Monaco

Hong Kong Single Stock Options Weekly June 15–18: Lockups and Vol Divergence in Focus

Hong Kong stocks weakened in a holiday-shortened week as poor breadth, lockup concerns and widening implied vol divergence shaped the backdrop.

John Ley

Smartkarma Webinar | Global Banks: The Purge

In tomorrow's Smartkarma Webinar, Daniel Tabbush talks about the myriad risks global banks are facing all at once. The webinar will be held on 22...

Smartkarma Research

Japan Mega Banks – Avenue of the Americas

* All That Glitters Isn’t Gold: Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on...

Thomas J. Monaco

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

DIVIDENDS AT RISK - As noted in our daily Results & Revisions Updates in the last few days, Japanese companies are starting to shore up their...

Campbell Gunn

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