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)

China Commercial Credit is a specialty lender in China, although it is a listed entity in the US. What is interesting here is how its financials have deteriorated so dramatically. Where all are focused on the near zero profit growth of China’s banks, CCR shows how losses can mount to considerable levels. It is making big losses now for the past two years. It also reminds us of finance companies in Thailand in the late 1990’s and in the US subprime crisis more recently, which were the best…

China Commercial Credit is a specialty lender in China, although it is a listed entity in the US. What is interesting here is how its financials have deteriorated so dramatically. Where all are focused on the near zero profit growth of China’s banks, CCR shows how losses can mount to considerable levels. It is making big losses now for the past two years. It also reminds us of finance companies in Thailand in the late 1990’s and in the US subprime crisis more recently, which were the best…

Devastating Losses at Little Known China Specialty Lender Has Negative Implications for Bank Sector

Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main concerns for 2016 as the signs pointing to a "sudden stop" continue to grow.

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main concerns for 2016 as the signs pointing to a "sudden stop" continue to grow.

Macro Strategist, Saxo Capital Markets

Kay Van-Petersen

Macro Strategist

Saxo Capital Markets

Whilst a lot of people &ndash; internally here as well &ndash; are in the no CNY devaluation Camp on the renminbi, see a good piece on this from <a href="http://www.economist.com/news/finance-and-economics/21644205-devaluing-yuan-would-do-china-more-harm-good-currency-peace" target="_blank">The Economist.</a> I am surprised by Sunday&rsquo;s easing from the PBOC &ndash; not that they eased, but that it has come so quickly post the triple RRR cut.The most likely read from all this, is that the Chinese economy is not only in decline mode with no sign of improvement so far, but is in potentially worse shape than most officials perceived.And its not easy turning a ship much bigger than the Titanic, I would also be concerned if I was at the helm of that vessel.

Whilst a lot of people &ndash; internally here as well &ndash; are in the no CNY devaluation Camp on the renminbi, see a good piece on this from The Economist. I am surprised by Sunday&rsquo;s easing from the PBOC &ndash; not that they eased, but that it has come so quickly post the triple RRR cut.The most likely read from all this, is that the Chinese economy is not only in decline mode with no sign of improvement so far, but is in potentially worse shape than most officials perceived.And its not easy turning a ship much bigger than the Titanic, I would also be concerned if I was at the helm of that vessel.

MACRO: IS A CHINA RENMINBI DEVALUATION ON THE CARDS?

Portfolio Analyst, River Capital Growth Fund, River Capital

Vishal Hargovan

Portfolio Analyst, River Capital Growth Fund

River Capital

Initiating 1 year USDCNH Vanilla Call Option with Strike 7.0000. This trade is one way to take advantage of/hedge against potential currency devaluation in the Renminbi. It is effectively a call on the USD/put on the CNH. Admittedly, not my normal style of value based equity investing, but this trade aligns with how I tend to think about mis-priced securities in general. I think the premium on the above call option (~5.5 basis points, SaxoBank Webtrader, or much lower, &lt;2 basis points, if you are an Insto trading through an FX desk) is under-priced as it does not fully factor in the heightening tail risk of major capital flows out of China. Too much faith is being put in the Chinese government supporting the Renminbi when, in my view, it&rsquo;s in their long term interests to allow their currency to devalue.

Initiating 1 year USDCNH Vanilla Call Option with Strike 7.0000. This trade is one way to take advantage of/hedge against potential currency devaluation in the Renminbi. It is effectively a call on the USD/put on the CNH. Admittedly, not my normal style of value based equity investing, but this trade aligns with how I tend to think about mis-priced securities in general. I think the premium on the above call option (~5.5 basis points, SaxoBank Webtrader, or much lower, &lt;2 basis points, if you are an Insto trading through an FX desk) is under-priced as it does not fully factor in the heightening tail risk of major capital flows out of China. Too much faith is being put in the Chinese government supporting the Renminbi when, in my view, it&rsquo;s in their long term interests to allow their currency to devalue.

Systemic problems in China – Is the Renminbi set to tumble?

Head of China Research - Forsyth Barr Asia, Forsyth Barr Asia

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Macroeconomics

We are calling for another rate cut and 3 further 50 bps cuts of the reserve requirement ratio in the first half of 2015, with the next rate cut being an increasing chance of late March (vs our original expectations of late Q2). In addition to&nbsp; a cut in lending rates, we believe there is a growing need to cut deposit rates further, if the current deflationary pressures remain. The central bank will desperately want to avoid a period of negative real rates, due to the detrimental effect it could have on consumption and investment.

We are calling for another rate cut and 3 further 50 bps cuts of the reserve requirement ratio in the first half of 2015, with the next rate cut being an increasing chance of late March (vs our original expectations of late Q2). In addition to&nbsp; a cut in lending rates, we believe there is a growing need to cut deposit rates further, if the current deflationary pressures remain. The central bank will desperately want to avoid a period of negative real rates, due to the detrimental effect it could have on consumption and investment. 

CHINA MACRO: Brining forward our expectations of monetary easing

China

Zuoli Kechuang Micro-Finance Company Limited focuses on providing credit-based financing solutions to Deqing's fast-growing SME and microenterprise sector.

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Zuoli Kechuang Micro Finance (6866 HK)

Devastating Losses at Little Known China Specialty Lender Has Negative Implications for Bank Sector

China Commercial Credit is a specialty lender in China, although it is a listed entity in the US. What is interesting here is how its financials...

Daniel Tabbush

A "Sudden Stop" For China in 2016?

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main...

John-Paul Smith

MACRO: IS A CHINA RENMINBI DEVALUATION ON THE CARDS?

Whilst a lot of people – internally here as well – are in the no CNY devaluation Camp on the renminbi, see a good piece on this from The Economist....

Kay Van-Petersen

Systemic problems in China – Is the Renminbi set to tumble?

Initiating 1 year USDCNH Vanilla Call Option with Strike 7.0000. This trade is one way to take advantage of/hedge against potential currency...

Vishal Hargovan

CHINA MACRO: Brining forward our expectations of monetary easing

We are calling for another rate cut and 3 further 50 bps cuts of the reserve requirement ratio in the first half of 2015, with the next rate cut...

David Millhouse

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