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

<p>Often it is the smaller, less known banks that flare up first in a banking crises or an NPL cycle.</p><p>In China, it may be no different.</p><p>We can analyze <em>ad nauseum</em> the large banks that most focus on. But the risk is that we miss the big picture; what is happening beneath the surface.</p><p>What is clear is the China economy is in trouble. The PBOC is cutting rates and lowering reserve requirements. That&rsquo;s a rare, desperate combination. New data on exports only reinforces the economy&rsquo;s weakness.</p><p>In this note we examine the reaction of&nbsp;some of China's Mid-Tier banks - The Canary in the Coal Mine ?</p><p>More below the fold.....</p>

Often it is the smaller, less known banks that flare up first in a banking crises or an NPL cycle.In China, it may be no different.We can analyze ad nauseum the large banks that most focus on. But the risk is that we miss the big picture; what is happening beneath the surface.What is clear is the China economy is in trouble. The PBOC is cutting rates and lowering reserve requirements. That&rsquo;s a rare, desperate combination. New data on exports only reinforces the economy&rsquo;s weakness.In this note we examine the reaction of&nbsp;some of China's Mid-Tier banks - The Canary in the Coal Mine ?More below the fold.....

Fringe Banks in China are Telling Us Something

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.
​
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

<p><em><strong>&lsquo;Pay no attention to that man behind the curtain&rsquo;</strong>&nbsp;</em><em>- Wizard of Oz</em></p><p>The nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.</p><p>The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to <strong>illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.</strong></p>

&lsquo;Pay no attention to that man behind the curtain&rsquo;&nbsp;- Wizard of OzThe nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.

CHINA: Reform & Omnipotence Myths Dispelled

<div><div><div>Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche Bank towards the end of 2010 and the start of 2011, at a time when the consensus outlook for EM economies and equities was almost unanimously bullish.</div><div>&nbsp;</div><div>I made a number of tentative predictions and recommendations, which were generally greeted with a combination of indifference and skepticism and on occasion outright hostility among most, though not quite all of the bank&rsquo;s clients.</div><div>&nbsp;</div></div></div><div><div><strong>It seems that we may now be entering the final stage of EM relative underperformance, in line with our expectations in our initiation last year where we posited the relative trade was 2/3rds through.</strong></div></div>

Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche Bank towards the end of 2010 and the start of 2011, at a time when the consensus outlook for EM economies and equities was almost unanimously bullish.&nbsp;I made a number of tentative predictions and recommendations, which were generally greeted with a combination of indifference and skepticism and on occasion outright hostility among most, though not quite all of the bank&rsquo;s clients.&nbsp;It seems that we may now be entering the final stage of EM relative underperformance, in line with our expectations in our initiation last year where we posited the relative trade was 2/3rds through.

A Roadmap of the EM Bear Market and Three Myths about the China Bull Market

Chairman, sgtradex

Tan Chin-Hwee

Chairman

Thematic (Sector/Industry)

<p>Two years ago I recalled during May/June period, put premiums were at double digits for the biggest china financial stocks. It was dirt cheap at low valuation pricing (3x p/e; 0.8x p/b) pricing in worse cases scenario. Clear Buy.<br/><br/>In the last two months, US$1.7 trillion having been added to China&rsquo;s stock market capitalization with some Chinese valuations now look excessive (according to CLSA, <em>China&rsquo;s nine largest listed stock brokers have a combined market cap US$319bn</em>). Market is indeed hot, as an investor in a start-up P2P china financial portal-an additional 1 million new subscribers signed up in last 3 months! &nbsp;</p><p>Overall, the influx of foreign money will be a great time for the SOE sector to deleverage and the banks to recapitalize and write down their debt.</p>

Two years ago I recalled during May/June period, put premiums were at double digits for the biggest china financial stocks. It was dirt cheap at low valuation pricing (3x p/e; 0.8x p/b) pricing in worse cases scenario. Clear Buy.  In the last two months, US$1.7 trillion having been added to China&rsquo;s stock market capitalization with some Chinese valuations now look excessive (according to CLSA, China&rsquo;s nine largest listed stock brokers have a combined market cap US$319bn). Market is indeed hot, as an investor in a start-up P2P china financial portal-an additional 1 million new subscribers signed up in last 3 months! &nbsp;Overall, the influx of foreign money will be a great time for the SOE sector to deleverage and the banks to recapitalize and write down their debt.

A herd of fine horses are starting to head back to their home market

Macro Strategist, Saxo Capital Markets

Kay Van-Petersen

Macro Strategist

Saxo Capital Markets

<p>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.</p><p>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.</p><p>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.</p>

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?

China

Bank of China Limited provides banking services. The Company offers deposits, loans, foreign currency transaction, fund settlement, and other services. Bank of China provides its services to individuals, enterprises, and other clients.

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Bank of China (601988 CH)

Fringe Banks in China are Telling Us Something

Often it is the smaller, less known banks that flare up first in a banking crises or an NPL cycle.In China, it may be no different.We can analyze...

Daniel Tabbush

CHINA: Reform & Omnipotence Myths Dispelled

‘Pay no attention to that man behind the curtain’ - Wizard of OzThe nature and scale of Beijing’s reaction to the bursting of the China equity...

John-Paul Smith

A Roadmap of the EM Bear Market and Three Myths about the China Bull Market

Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche...

John-Paul Smith

A herd of fine horses are starting to head back to their home market

Two years ago I recalled during May/June period, put premiums were at double digits for the biggest china financial stocks. It was dirt cheap at...

Tan Chin-Hwee

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)