Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

<ul>
<li>Major pressure on net interest income where deposits are growing much faster than loans in the past six months, especially with term deposits, is creating major NIM contraction</li>
<li>Earnings may disappoint based on weakening net interest income, weakening margins, and where the overlay is far higher credit costs; from KRW17bn to KRW59bn in 2 yrs to 2Q23</li>
<li>Operating costs are not helping to support ROA and with a new virtual bank investment in Thailand, costs can remain high; fixing operational risks can also keep costs high.</li>
</ul>


Major pressure on net interest income where deposits are growing much faster than loans in the past six months, especially with term deposits, is creating major NIM contraction
Earnings may disappoint based on weakening net interest income, weakening margins, and where the overlay is far higher credit costs; from KRW17bn to KRW59bn in 2 yrs to 2Q23
Operating costs are not helping to support ROA and with a new virtual bank investment in Thailand, costs can remain high; fixing operational risks can also keep costs high.


KakaoBank - Term Deposits +47% | Net Int Inc/Assets -80bps | Provisions: 10% to 23% of Net Int Inc

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

Brilliance China Automotive / Index Rebalance

<ul>
<li>It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.</li>
<li>
<a href="https://www.smartkarma.com/entities/brilliance-china-automotive" target="_blank" data-smartkarma-citation="entities:469:1" rel="noopener">Brilliance China Automotive (1114 HK)</a> had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.</li>
<li>A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.</li>
</ul>


It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.

Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.


Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10

<ul>
<li>The <a href="https://www.smartkarma.com/entities/mirae-asset-tiger-top-10-etf" target="_blank" data-smartkarma-citation="entities:36042:1" rel="noopener">Mirae Asset Tiger Top 10 ETF (292150 KS)</a> tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.</li>
<li>We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.</li>
<li>There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.</li>
</ul>


The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.


FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul>
<li>One of the biggest stories in the Korean economy in the past two days have been the quasi bank run at MG Community Credit Cooperative (MGCCC) (새마을금고).</li>
<li>The negative news about this has contributed to KOSPI falling two consecutive days (down 2% from July 5th to 7th). </li>
<li>MGCCC's delinquency rate jumped from 1.93% at the end of 2021 to 3.59% at the end of 2022 and 6.18% as of June 29th 2023.</li>
</ul>


One of the biggest stories in the Korean economy in the past two days have been the quasi bank run at MG Community Credit Cooperative (MGCCC) (새마을금고).
The negative news about this has contributed to KOSPI falling two consecutive days (down 2% from July 5th to 7th). 
MGCCC's delinquency rate jumped from 1.93% at the end of 2021 to 3.59% at the end of 2022 and 6.18% as of June 29th 2023.


A Quasi Bank Run at MG Community Credit Cooperative - What's Next?

<ul>
<li>We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.</li>
<li>The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.</li>
<li>The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).</li>
</ul>


We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising delinquencies.
The major reasons for higher loans and cards delinquency ratios include higher interest rate burdens, higher inflation rates, inverted yield curve, weakening economy, and pressures on disposable income.
The delinquency ratios of the largest nine banks in Korea all worsened in 1Q 2023 (for both banks and credit cards).


Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

South Korea

KB Financial Group Inc. (the "Company"), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfer with the former shareholders of its subsidiaries including Kookmin Bank in order to provide management services and financing to associated companies. The headquarters are located at Seoul, Korea

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KB Financial ADR (KB US)

KakaoBank - Term Deposits +47% | Net Int Inc/Assets -80bps | Provisions: 10% to 23% of Net Int Inc

Major net interest income pressure, NIM down sharply in past 6 months. Operating costs not supporting ROA. Credit metrics worsening: LLP from 10%...

Daniel Tabbush

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

A long add/short delete trade has performed well historically. Currently, there is one add/delete pair in Dec; that could increase to two. Short...

Brian Freitas

A Quasi Bank Run at MG Community Credit Cooperative - What's Next?

One of the biggest stories in the Korean economy in the past two days have been the quasi bank run at MG Community Credit Cooperative (MGCCC) (새마을금고).

Douglas Kim

Korean Banks: Sharp Rise in Delinquency Ratios in 1Q 2023 & Inverted Yield Curve

We believe that the nine Korean banks (on average) are likely to continue to underperform KOSPI in the next 6-12 months due to the continued rising...

Douglas Kim

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