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Silver Point

Thomas J. Monaco

Independent Insight Provider

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

China Huarong Asset Management / Equity Bottom-Up

*Legacy Risks Strangling China Huarong: The issue appears to be China Huarong Asset Management’s (Huarong) legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed. Since our last note, Huarong still continues to teeter on the edge of insolvency and ongoing silence from Beijing has materially impacted funding costs. Huarong has until August 2021 to finally release its 2020 financial statements; and *Too Big Too Fail:  None of what is occurring should come as a surprise given mainland China's rapidly increasing debt position since the financial crisis - along with the same at its SOEs which are perceived to be too-big-to-fail and wield enormous political clout. A funding backstop from state-owned banks has been ordered by the China Banking and Insurance Regulatory Commission (CBIRC), and the mainland Chinese government is likely to again blink and make good on Huarong's significant debt obligations. Distressed investors should consider picking away at Huarong’s debt; we’ll believe it when see Beijing imposing losses on investors in SOEs.

*Legacy Risks Strangling China Huarong: The issue appears to be China Huarong Asset Management’s (Huarong) legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed. Since our last note, Huarong still continues to teeter on the edge of insolvency and ongoing silence from Beijing has materially impacted funding costs. Huarong has until August 2021 to finally release its 2020 financial statements; and *Too Big Too Fail:  None of what is occurring should come as a surprise given mainland China's rapidly increasing debt position since the financial crisis - along with the same at its SOEs which are perceived to be too-big-to-fail and wield enormous political clout. A funding backstop from state-owned banks has been ordered by the China Banking and Insurance Regulatory Commission (CBIRC), and the mainland Chinese government is likely to again blink and make good on Huarong's significant debt obligations. Distressed investors should consider picking away at Huarong’s debt; we’ll believe it when see Beijing imposing losses on investors in SOEs.

China Huarong Asset Management – Silence Is Golden