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

*Major BEA Shareholder Under Stress In Front Of Merger: CaixaBank SA (CABK.SM), an 17.3% holder of Bank of East Asia’s (23.HK) [BEA] shares, has significant capital concerns. Combined with the acquisition of Bankia (BKIA.SM), pro forma CaixaBank’s (surviving entity) core CET1 target is 11.0%-11.5%. With CaixaBank's restructuring charge only sufficient to fund EUR 1 bn in cost cuts, CaixaBank will need to find additional ways to manufacture capital in order to fund restructuring  - including asset sales, lower dividends, and/or capital raise; and*Expecting A BEA Offload: With an ownership value at EUR 786 mn, a capital charge of EUR 1.6 bn at pro forma CaixaBank under Basel III, the aforementioned solvency constraints at Caixabank, a fundamentally struggling BEA, and a resurgent mainland China, CaixaBank would have to finally be looking for an exit – which would be a massive overhang on the shares of BEA. The key terms of the CaixaBank/BEA Shareholder  Agreement likely cannot be upheld by the former given that its financial problems prevent it from fulfilling its responsibilities.

*Major BEA Shareholder Under Stress In Front Of Merger: CaixaBank SA (CABK.SM), an 17.3% holder of Bank of East Asia’s (23.HK) [BEA] shares, has significant capital concerns. Combined with the acquisition of Bankia (BKIA.SM), pro forma CaixaBank’s (surviving entity) core CET1 target is 11.0%-11.5%. With CaixaBank's restructuring charge only sufficient to fund EUR 1 bn in cost cuts, CaixaBank will need to find additional ways to manufacture capital in order to fund restructuring  - including asset sales, lower dividends, and/or capital raise; and*Expecting A BEA Offload: With an ownership value at EUR 786 mn, a capital charge of EUR 1.6 bn at pro forma CaixaBank under Basel III, the aforementioned solvency constraints at Caixabank, a fundamentally struggling BEA, and a resurgent mainland China, CaixaBank would have to finally be looking for an exit – which would be a massive overhang on the shares of BEA. The key terms of the CaixaBank/BEA Shareholder  Agreement likely cannot be upheld by the former given that its financial problems prevent it from fulfilling its responsibilities.  

Bank of East Asia – Caixa Shake-Out Very Likely

*Don’t Be Misled By Better Numbers: Industrial and Commercial Bank of China (1398.HK) [ICBC] reported stronger 3Q20 results than 2Q20, coming in at CNY 80.3 bn - increasing CNY 15.6 bn (24.1%) linked quarter. The linked quarter Improvement is largely attributed to three factors: a) net interest income improvement of CNY 4.0 bn (2.6%) on both a 1 bp NIM improvement to 1.92%, and 2.6% loan growth; b) a CNY 11.7 bn (17.7%) decline in loss provisioning despite marked credit weakness; and c) a 700 bp decline in ICBC’s tax rate to 15.2%; and *Credit Risk Rising: As ICBC is the benchmark name to which all mainland Chinese banks are measured, an increase of such magnitude is more than alarming – and intimates mainland Chinese bank credit risk is moving in oppositive directions to their counterparts in India. When one considers the current break in credit quality reserves would appear to be incredibly light – in the neighborhood of CNY 419 bn which amounts to over a year of pre-tax results at ICBC.

*Don’t Be Misled By Better Numbers: Industrial and Commercial Bank of China (1398.HK) [ICBC] reported stronger 3Q20 results than 2Q20, coming in at CNY 80.3 bn - increasing CNY 15.6 bn (24.1%) linked quarter. The linked quarter Improvement is largely attributed to three factors: a) net interest income improvement of CNY 4.0 bn (2.6%) on both a 1 bp NIM improvement to 1.92%, and 2.6% loan growth; b) a CNY 11.7 bn (17.7%) decline in loss provisioning despite marked credit weakness; and c) a 700 bp decline in ICBC’s tax rate to 15.2%; and *Credit Risk Rising: As ICBC is the benchmark name to which all mainland Chinese banks are measured, an increase of such magnitude is more than alarming – and intimates mainland Chinese bank credit risk is moving in oppositive directions to their counterparts in India. When one considers the current break in credit quality reserves would appear to be incredibly light – in the neighborhood of CNY 419 bn which amounts to over a year of pre-tax results at ICBC.      

ICBC – Be Very Wary Of Worsening Credit

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hsbc-holdings-plc-a723bd63-0890-486f-aaa0-3bb9ad2b95ce" target="_blank" data-smartkarma-citation="entities:21976:1" rel="noopener">HSBC Holdings (HSBA LN)</a> delivered an encouraging set of results, driven primarily by lower expected credit losses and a very healthy core capital ratio</li>
<li>In addition, there was positive progress in the European and US restructuring, and in the group’s cost reduction programme</li>
<li>Updates on the strategic review of HSBC France retail and the US operations will be provided by management in February 2021</li>
<li>On the negative side, there was Asian interest margin erosion in the quarter due largely to the lower HIBOR, HSBC MENA loss deepened and the group’s 3Q20 cost of risk may be unsustainably low</li>
<li>HSBC Mexico offers some constructive read across for <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MF)</a> 3Q20 results on cost of risk and also on revenues</li>
<li>HSBC has a very strong and liquid balance sheet, and has contained credit delinquency while maintaining NPL coverage</li>
<li>We are cautiously optimistic that medium term returns will exceed consensus expectations, on the back of management’s non-core business restructurings and cost attrition supported by growth in fee generating business in Asia</li>
<li>Risks to our view include worse than expected credit quality, intensifying competition in Asia putting pressure on fees and loan margins and slower than expected execution on restructurings</li>
</ul>



HSBC Holdings (HSBA LN) delivered an encouraging set of results, driven primarily by lower expected credit losses and a very healthy core capital ratio
In addition, there was positive progress in the European and US restructuring, and in the group’s cost reduction programme
Updates on the strategic review of HSBC France retail and the US operations will be provided by management in February 2021
On the negative side, there was Asian interest margin erosion in the quarter due largely to the lower HIBOR, HSBC MENA loss deepened and the group’s 3Q20 cost of risk may be unsustainably low
HSBC Mexico offers some constructive read across for Grupo Financiero Banorte-O (GFNORTEO MF) 3Q20 results on cost of risk and also on revenues
HSBC has a very strong and liquid balance sheet, and has contained credit delinquency while maintaining NPL coverage
We are cautiously optimistic that medium term returns will exceed consensus expectations, on the back of management’s non-core business restructurings and cost attrition supported by growth in fee generating business in Asia
Risks to our view include worse than expected credit quality, intensifying competition in Asia putting pressure on fees and loan margins and slower than expected execution on restructurings


HSBC (HSBA LN): Signs of Progress, Within a Mixed Set of 3Q20 Results

Thematic (Sector/Industry)

*Odd Finance Minister Commentary: A report on Bloomberg, suggests that Finance Minister Albayrak has ruled out capital controls in Turkey. This is strange, as capital controls have already been in place for well over a year given the longer settlement dates, higher taxes, limited liquidity, threats of prison, et al. These reported comments suggest a full blown crisis is a fait accompli;  *Low Rates Destroying TRY: Turkey is a slow moving train wreck thanks largely to the policies of President Erdogan. The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting – against consensus of a 200 bp increase. Despite what were punitive capital controls (in contravention to the Finance Minister’s comments), the Turkish lira (TRY) actually declined 2% on the day the CBT failed to raise rates at its last meeting – now nearing 8.2 TRY/USD and achieving another record low down 40% YTD versus the USD when most other currencies are strengthening versus the USD;  and*Risk Is High For Europe, and an EM Domino Effect Is Real: BBVA (BBVA.SM), BNP Paribas (BNPP.FP), and Unicredit (UCG.IM), and HSBC Holding (5.HK) are most exposed. With Turkish corporates/banking system F/X debt in the USD hundreds of billions, worries over counterparty risks are arising. Investors are likely to continue to take advantage an artificially high TRY by continuing to sell while the getting is still good. Geopolitical risk only adds to our concern.

*Odd Finance Minister Commentary: A report on Bloomberg, suggests that Finance Minister Albayrak has ruled out capital controls in Turkey. This is strange, as capital controls have already been in place for well over a year given the longer settlement dates, higher taxes, limited liquidity, threats of prison, et al. These reported comments suggest a full blown crisis is a fait accompli;  *Low Rates Destroying TRY: Turkey is a slow moving train wreck thanks largely to the policies of President Erdogan. The Central Bank of Turkey (CBT) is keeping interest rates low, and failed to raise interest rates at its latest meeting – against consensus of a 200 bp increase. Despite what were punitive capital controls (in contravention to the Finance Minister’s comments), the Turkish lira (TRY) actually declined 2% on the day the CBT failed to raise rates at its last meeting – now nearing 8.2 TRY/USD and achieving another record low down 40% YTD versus the USD when most other currencies are strengthening versus the USD;  and*Risk Is High For Europe, and an EM Domino Effect Is Real: BBVA (BBVA.SM), BNP Paribas (BNPP.FP), and Unicredit (UCG.IM), and HSBC Holding (5.HK) are most exposed. With Turkish corporates/banking system F/X debt in the USD hundreds of billions, worries over counterparty risks are arising. Investors are likely to continue to take advantage an artificially high TRY by continuing to sell while the getting is still good. Geopolitical risk only adds to our concern.

Turkey – Start Worrying About Counterparties

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.
Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/cspc-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:229:1" rel="noopener">CSPC Pharmaceutical Group (1093 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <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> 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/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 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/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a>. Shorts increased in Financials stocks and decreased in Health Care, Information Technology and Real Estate names.
</div><div>In Japan, stocks that saw the most shorts covered were <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>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a> and <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, while shorts increased on <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/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group Holdings (2502 JP)</a>, <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a> and <a href="https://www.smartkarma.com/entities/terrasky-co-ltd" target="_blank" data-smartkarma-citation="entities:27747:1" rel="noopener">TerraSky Co Ltd (3915 JP)</a>. Sectorally, shorts increased on Industrials, Real Estate and Consumer Staples, while shorts were covered on Consumer Discretionary and Information Technology names.</div><div>Shorts threw in the towel in Korea with a large drop in short interest due to short covering. Largest shorts were covered in <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/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 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> and <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 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/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a>, <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a> and <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <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/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> and <a href="https://www.smartkarma.com/entities/wiwynn-corp" target="_blank" data-smartkarma-citation="entities:27838:1" rel="noopener">Wiwynn Corp (6669 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 CSPC Pharmaceutical Group (1093 HK), Xiaomi Corp (1810 HK), HSBC Holdings (5 HK) and Ping An Insurance (H) (2318 HK) while there was short covering on Ping An Healthcare and Technology Company Limited (1833 HK), Alibaba Group (9988 HK), Xinyi Solar Holdings (968 HK) and Evergrande Real Estate Group (3333 HK). Shorts increased in Financials stocks and decreased in Health Care, Information Technology and Real Estate names.
In Japan, stocks that saw the most shorts covered were Fast Retailing (9983 JP), Canon Inc (7751 JP), Taiyo Yuden (6976 JP) and Yaskawa Electric (6506 JP), while shorts increased on Toshiba Corp (6502 JP), Asahi Group Holdings (2502 JP), Nippon Building Fund (8951 JP) and TerraSky Co Ltd (3915 JP). Sectorally, shorts increased on Industrials, Real Estate and Consumer Staples, while shorts were covered on Consumer Discretionary and Information Technology names.Shorts threw in the towel in Korea with a large drop in short interest due to short covering. Largest shorts were covered in Samsung Electronics (005930 KS), NCSOFT Corp (036570 KS), SK Hynix (000660 KS) and Netmarble Corporation (251270 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Acer Inc (2353 TT), Unimicron Technology (3037 TT) and Asustek Computer (2357 TT) while shorts were covered on Yageo Corporation (2327 TT), Walsin Technology (2492 TT), Largan Precision (3008 TT) and Wiwynn Corp (6669 TT). 

Asia Short Interest Weekly: Xiaomi, Evergrande, Toshiba, Asahi, NBF, Samsung, Hynix, TSMC, Acer

United Kingdom

HSBC Holdings plc is the holding company for the HSBC Group. The Company provides a variety of international banking and financial services, including retail and corporate banking, trade, trusteeship, securities, custody, capital markets, treasury, private and investment banking, and insurance.  The Group operates worldwide.

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

HSBC Holdings (5 HK)

Bank of East Asia – Caixa Shake-Out Very Likely

BANK OF EAST ASIA: Pro Forma CaixaBank Is Under Severe Fundamental Pressure Prior To Its Bankia Merger And In Need of Capital. BEA's Stake Likely...

Thomas J. Monaco

ICBC – Be Very Wary Of Worsening Credit

INDUSTRIAL AND COMMERCIAL BANK OF CHINA: Don't Believe The Hype. Numbers Manufactured, and Credit Risk Suggests Long Winter For ICBC and Mainland...

Thomas J. Monaco

HSBC (HSBA LN): Signs of Progress, Within a Mixed Set of 3Q20 Results

HSBC's 3Q20 results were constructive, with signs of restructuring benefits coming through, as well as well contained delinquencies; there is much...

Victor Galliano

Turkey – Start Worrying About Counterparties

TURKEY RISK: Odd Comments From Finance Minister Suggest Lack Of Understanding Of Capital Controls In Place. No Rate Hikes, Weak TRY/USD, And...

Thomas J. Monaco

Asia Short Interest Weekly: Xiaomi, Evergrande, Toshiba, Asahi, NBF, Samsung, Hynix, TSMC, Acer

In Korea, shorts are throwing in the towel while short positions keep increasing in Taiwan. The report looks at stocks where there have been large...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)