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

<ul>
<li>There are 2 additions and 1 deletion for the MVIS Vietnam Index at the upcoming rebalance at the close on 17 June. Plus capping and float changes.</li>
<li>The adds are <a href="https://www.smartkarma.com/entities/saigon-hanoi-commercial" target="_blank" data-smartkarma-citation="entities:17575:1" rel="noopener">Saigon - Hanoi Commercial (SHB VN)</a> and <a href="https://www.smartkarma.com/entities/viet-nam-construction-impo" target="_blank" data-smartkarma-citation="entities:17309:1" rel="noopener">Viet Nam Construction &amp; Impo (VCG VN)</a>, while Tien Phong Securities (ORS VN) is the deletion.</li>
<li>The largest passive outflows are on <a href="https://www.smartkarma.com/entities/vingroup-jsc" target="_blank" data-smartkarma-citation="entities:13213:1" rel="noopener">Vingroup Jsc (VIC VN)</a>, <a href="https://www.smartkarma.com/entities/feng-tay-enterprise-co-ltd" target="_blank" data-smartkarma-citation="entities:18329:1" rel="noopener">Feng Tay Enterprise (9910 TT)</a> and <a href="https://www.smartkarma.com/entities/eclat-textile-company-ltd" target="_blank" data-smartkarma-citation="entities:13209:1" rel="noopener">Eclat Textile Company (1476 TT)</a>. </li>
</ul>


There are 2 additions and 1 deletion for the MVIS Vietnam Index at the upcoming rebalance at the close on 17 June. Plus capping and float changes.
The adds are Saigon - Hanoi Commercial (SHB VN) and Viet Nam Construction &amp; Impo (VCG VN), while Tien Phong Securities (ORS VN) is the deletion.
The largest passive outflows are on Vingroup Jsc (VIC VN), Feng Tay Enterprise (9910 TT) and Eclat Textile Company (1476 TT). 


MVIS Vietnam Index Rebalance: Two Adds, One Delete, Capping & Float Changes

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.

Thematic (Sector/Industry)

Many of Asia’s banks have high levels of fixed deposits, and as these mature, they will re-price at lower rates. The scope for margin expansion is considerable. Vietnam’s banks stand out here, as does AMMB and Tisco.

Many of Asia’s banks have high levels of fixed deposits, and as these mature, they will re-price at lower rates. The scope for margin expansion is considerable. Vietnam’s banks stand out here, as does AMMB and Tisco. 

Asian Banks – Funding Costs Can Surprise

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Vietnam Joint Stock Commercial Bank For Industry and Trade / Equity Bottom-Up

Vietnam Joint Stock Commercial Bank For Industry and Trade

While we remain mindful of certain aspects of Vietnam’s Banking Sector, regarding Provisioning and Capitalization levels as well as other Balance Sheet concerns, we cannot be impressed by another strong PH Score™ quarter, and by the growth generated. Not as good as Pakistan, in terms of PH Score™ but in second place globally. We highlight two of the less expensive institutions.CTG <a href="https://www.smartkarma.com/entities/vietnam-js-commercial-bank-f" target="_blank" data-smartkarma-citation="entities:647:1" rel="noopener">Vietnam Js Commercial Bank F (CTG VN)</a> With a PH Score™ of 8.3, Vietnam JSCB of Industry and Trade commands robust Profitability progression, an expanding NIM, better Efficiency while Capitalization and Liquidity show discrete improvement. This bank has a more muscular profile than SHB though LDR is still too elevated.The shares are somewhat more expensive than we would normally pay for a bank. A FV of 12%, a PBV of 1.39x, and an Earnings Yield of 10% are not unattractive though given the growth underway. They trade above common-sense thresholds of 10%, 1x, and 10%, respectively.  However, these are not “out of sight” valuations and most lower-rated entities have nowhere near the growth that CTG possesses.SHB <a href="https://www.smartkarma.com/entities/saigon-hanoi-commericial" target="_blank" data-smartkarma-citation="entities:17575:1" rel="noopener">Saigon Hanoi Commericial (SHB VN)</a> With a PH Score™ of 10, Saigon Hanoi is progressing. Profitability is expanding with a fatter NIM and a lower CIR. Improvement is broad with advances in Asset Quality, Capitalization, Liquidity, and Provisioning. A “full house” if you like. Caveats stem from a high LDR and D/E, low coverage of NPLs, and still lowly Capital Adequacy and Liquidity Asset ratio levels. This is a softer profile despite the Score than many other Vietnam lenders.A FV of 10%, a PBV of 1.1x, and an Earnings Yield of 12.6% are not unattractive and reflect risk. They trade in close proximity to common-sense thresholds of 10%, 1x, and 10%, respectively.

While we remain mindful of certain aspects of Vietnam’s Banking Sector, regarding Provisioning and Capitalization levels as well as other Balance Sheet concerns, we cannot be impressed by another strong PH Score™ quarter, and by the growth generated. Not as good as Pakistan, in terms of PH Score™ but in second place globally. We highlight two of the less expensive institutions.CTG Vietnam Js Commercial Bank F (CTG VN) With a PH Score™ of 8.3, Vietnam JSCB of Industry and Trade commands robust Profitability progression, an expanding NIM, better Efficiency while Capitalization and Liquidity show discrete improvement. This bank has a more muscular profile than SHB though LDR is still too elevated.The shares are somewhat more expensive than we would normally pay for a bank. A FV of 12%, a PBV of 1.39x, and an Earnings Yield of 10% are not unattractive though given the growth underway. They trade above common-sense thresholds of 10%, 1x, and 10%, respectively.  However, these are not “out of sight” valuations and most lower-rated entities have nowhere near the growth that CTG possesses.SHB Saigon Hanoi Commericial (SHB VN) With a PH Score™ of 10, Saigon Hanoi is progressing. Profitability is expanding with a fatter NIM and a lower CIR. Improvement is broad with advances in Asset Quality, Capitalization, Liquidity, and Provisioning. A “full house” if you like. Caveats stem from a high LDR and D/E, low coverage of NPLs, and still lowly Capital Adequacy and Liquidity Asset ratio levels. This is a softer profile despite the Score than many other Vietnam lenders.A FV of 10%, a PBV of 1.1x, and an Earnings Yield of 12.6% are not unattractive and reflect risk. They trade in close proximity to common-sense thresholds of 10%, 1x, and 10%, respectively. 

CTG: Vietnam Opportunities: Growth of Risk Rather than Risk of Growth

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

Vietnam Technological & Commer / Equity Bottom-Up

* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the Vietnamese banking sector. Techcombank is Vietnam's largest joint stock bank by operating income and PBT – remaining the country’s most profitable bank from an ROA perspective despite having only a 3% deposit market share. Techombank is also the leader in mortgage, bancassurance, credit cards, and investment banking;  * Sector Credit Risks Are High: As we review each bank individually we continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. In our view, Vietnam has essentially done very little to address its legacy NPLs - which we estimate to be over USD 50 bn or 20% of total loans – and the SBV’s newly adopted “extend and pretend” policy will be substantially additive to the current heap of problem assets even if not labelled such; and* Capital Pressures Rising: With almost no end in sight to the growth of net new NPLs (doubling every year), and capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow. The draft amendments to a Decree for tax payment deferral and the SBV’s request not to pay a cash dividend confirms Basel II compliance pressures.

* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the Vietnamese banking sector. Techcombank is Vietnam's largest joint stock bank by operating income and PBT – remaining the country’s most profitable bank from an ROA perspective despite having only a 3% deposit market share. Techombank is also the leader in mortgage, bancassurance, credit cards, and investment banking;  * Sector Credit Risks Are High: As we review each bank individually we continue to find that net new NPL growth ranges between 50%-150% per annum over the past five years through 2019 – despite the stated NPL figure declining on a growthy loan portfolio and placement of problem loans below the line. In our view, Vietnam has essentially done very little to address its legacy NPLs - which we estimate to be over USD 50 bn or 20% of total loans – and the SBV’s newly adopted “extend and pretend” policy will be substantially additive to the current heap of problem assets even if not labelled such; and* Capital Pressures Rising: With almost no end in sight to the growth of net new NPLs (doubling every year), and capital requirements under Basel II being extremely difficult to attain/maintain without prospects of capital raise or shrinking their balance sheets, commercial banks are set to continue to struggle to grow. The draft amendments to a Decree for tax payment deferral and the SBV’s request not to pay a cash dividend confirms Basel II compliance pressures.

Techombank – Still Vietnam’s Best House In A Bad Neighborhood

Bank For Investment And Deve / Equity Bottom-Up

<ul>
<li>
One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting (AGM). In February 2020, BIDV became the 12th bank to clear its balance due to the VAMC, just as credit quality is likely to take a massive turn for the worse. No doubt it will be hitting up the VAMC for more bonds near-term. To that end, BIDV has already committed to expand its loan bailout to VND 120 tn. BIDV was unfortunately among the Basel II non-compliant despite the sale of a 15% stake to KEB Hana Bank (086790.KS). 2020 forecasts are in the stratosphere and need to come back to earth.</li>
<li>
Reality Check Needed For Vietnam: Fitch Ratings (Fitch) recently lowered Vietnam’s GDP growth to 6.3% from 6.8% in 2020. Given the symbiotic economic relationship between mainland China and Vietnam, we find the Fitch’s GDP growth forecast to be incredibly generous as crisis conditions typically suggest negative GDP growth. The IV Board survey revealed that nearly 30% surveyed had lost between 20-50% of revenues associated with the corona virus, while 60% had lost revenues by over half.  It also suggested that six months of this economic weakness could lead to 74% of surveyed companies to become bankrupt.</li>
<li>
Liquidity Wall: Vietnam is running into a liquidity wall. The sovereign has a high level of public debt (near its 65% debt/GDP cap) – and now growing - which constrains spending while the banking system (as it converts over to the more stringent Basel II capital regime) remains saddled with troubled debt which too has reversed its downward trend - resulting in systemic balance sheet and liquidity constraints.</li>
</ul>



One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting (AGM). In February 2020, BIDV became the 12th bank to clear its balance due to the VAMC, just as credit quality is likely to take a massive turn for the worse. No doubt it will be hitting up the VAMC for more bonds near-term. To that end, BIDV has already committed to expand its loan bailout to VND 120 tn. BIDV was unfortunately among the Basel II non-compliant despite the sale of a 15% stake to KEB Hana Bank (086790.KS). 2020 forecasts are in the stratosphere and need to come back to earth.

Reality Check Needed For Vietnam: Fitch Ratings (Fitch) recently lowered Vietnam’s GDP growth to 6.3% from 6.8% in 2020. Given the symbiotic economic relationship between mainland China and Vietnam, we find the Fitch’s GDP growth forecast to be incredibly generous as crisis conditions typically suggest negative GDP growth. The IV Board survey revealed that nearly 30% surveyed had lost between 20-50% of revenues associated with the corona virus, while 60% had lost revenues by over half.  It also suggested that six months of this economic weakness could lead to 74% of surveyed companies to become bankrupt.

Liquidity Wall: Vietnam is running into a liquidity wall. The sovereign has a high level of public debt (near its 65% debt/GDP cap) – and now growing - which constrains spending while the banking system (as it converts over to the more stringent Basel II capital regime) remains saddled with troubled debt which too has reversed its downward trend - resulting in systemic balance sheet and liquidity constraints.


BIDV – KEB Hana Has To Be Kicking Itself Now

Vietnam

Saigon - Hanoi Commercial Joint Stock Bank provides commercial and personal banking services.

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Saigon - Hanoi Commercial (SHB VN)

MVIS Vietnam Index Rebalance: Two Adds, One Delete, Capping & Float Changes

There are 2 adds, 1 delete, float and capping changes for the MVIS Vietnam Index to be implemented at the close on 17 June. One-way turnover is...

Brian Freitas

Asian Banks – Funding Costs Can Surprise

Many banks have high levels of fixed deposits. As these mature, they re-price at lower rates. The scope for margin expansion is considerable....

Daniel Tabbush

CTG: Vietnam Opportunities: Growth of Risk Rather than Risk of Growth

Vietnamese banks continue to perform well on the PH Score. This is a tailwind. Valuations of these featured lenders are not stretched given trends...

Paul Hollingworth

Techombank – Still Vietnam’s Best House In A Bad Neighborhood

* Head Start On Economic Return to Normalcy: Vietnam Technological and Commercial Bank (TCB.VN) [Techcombank] is a long-term winner in the...

Thomas J. Monaco

BIDV – KEB Hana Has To Be Kicking Itself Now

One For the Ages: The Bank for Investment and Development of Vietnam (BID.VN) [BIDV] held a somewhat delusional 2020 Annual General Meeting...

Thomas J. Monaco

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