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

Event-Driven

Semirara Mining And Power Corp / Event-Driven

<ul>
<li>With just over a month to go in the review period for the August rebalance of the <a href="https://www.smartkarma.com/entities/philippines-stock-exchange-psei-index" target="_blank" data-smartkarma-citation="entities:22912:1" rel="noopener">Philippines Stock Exchange PSEi Index (PCOMP INDEX)</a>, we expect one potential change. </li>
<li>
<a href="https://www.smartkarma.com/entities/security-bank-corp" target="_blank" data-smartkarma-citation="entities:3929:1" rel="noopener">Security Bank (SECB PM)</a> is a potential deletion. <a href="https://www.smartkarma.com/entities/semirara-mining-and-power-corporation" target="_blank" data-smartkarma-citation="entities:18925:1" rel="noopener">Semirara Mining And Power Corp (SCC PM)</a> has a higher inclusion probability as compared to <a href="https://www.smartkarma.com/entities/unionbank-of-the-philippines" target="_blank" data-smartkarma-citation="entities:23192:1" rel="noopener">UnionBank of the Philippines (UBP PM)</a>. </li>
<li>Passive funds will need to trade quite a few days of ADV on the stocks. Historically, the adds have outperformed the deletes in the last leg of the review period.</li>
</ul>


With just over a month to go in the review period for the August rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX), we expect one potential change. 

Security Bank (SECB PM) is a potential deletion. Semirara Mining And Power Corp (SCC PM) has a higher inclusion probability as compared to UnionBank of the Philippines (UBP PM). 
Passive funds will need to trade quite a few days of ADV on the stocks. Historically, the adds have outperformed the deletes in the last leg of the review period.


PCOMP Index Rebalance Preview Aug 22: One Set of Potential Changes

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

<ul>
<li>* BDO Unibank (BDO.PM) [BDO] reported 4Q21net income of PHP 11.0 bn, a PHP 1.0 bn (10.0%) linked quarter increase, driven by surprisingly positive operating jaws; </li>
<li>The level of net new NPLs declined PHP 319 mn or 1.7% on an annualized basis which is a wonderful turn of events for BDO; and</li>
<li>By our calculation, BDO’s reserves appear fine where they are provided credit quality doesn’t reverse course -suggesting earnings strength on the horizon.</li>
</ul>


* BDO Unibank (BDO.PM) [BDO] reported 4Q21net income of PHP 11.0 bn, a PHP 1.0 bn (10.0%) linked quarter increase, driven by surprisingly positive operating jaws; 
The level of net new NPLs declined PHP 319 mn or 1.7% on an annualized basis which is a wonderful turn of events for BDO; and
By our calculation, BDO’s reserves appear fine where they are provided credit quality doesn’t reverse course -suggesting earnings strength on the horizon.


<ul>
<li>
<em><strong>Another Fraud In The Philippines:</strong></em> Nearly 700 BDO Unibank customers have reported unauthorized account transactions of between PHP 25,000-PHP 50,000 with accounts at UnionBank of the Philippines (UBP PM);</li>
<li>
<em><strong>Small Risk:</strong></em>Assuming that the affected customers are capped at 700, losses from this incident would amount to USD 700,000 – well under 1% of consensus forecasts for 2022; and</li>
<li>
<em><strong>Weak Fundamentals:</strong></em> Net new NPLs increased an alarming PHP 17.8 bn or 115.8% annualized.  BDO’s reserves are light in the neighborhood of PHP 66 bn or six quarters of results.</li>
</ul>



Another Fraud In The Philippines: Nearly 700 BDO Unibank customers have reported unauthorized account transactions of between PHP 25,000-PHP 50,000 with accounts at UnionBank of the Philippines (UBP PM);

Small Risk:Assuming that the affected customers are capped at 700, losses from this incident would amount to USD 700,000 – well under 1% of consensus forecasts for 2022; and

Weak Fundamentals: Net new NPLs increased an alarming PHP 17.8 bn or 115.8% annualized.  BDO’s reserves are light in the neighborhood of PHP 66 bn or six quarters of results.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Metropolitan Bank & Trust / Equity Bottom-Up

<div id="sports_article_writeup">
<p>On the <a href="https://www.phcc.gov.ph/press-releases/banks-mca-moa/" target="_blank" rel="noopener">5 November</a>, Bangko Sentral ng Pilipinas (BSP - the central bank of the Philippines), the Securities and Exchange Commission, Philippine Competition Commission (PCC), Philippine Deposit Insurance Corp, and the Cooperative Development Authority signed a multi-agency agreement to streamline the merger, consolidation, and acquisition (MCA) process to encourage consolidation in the banking sector.</p>
<p>BSP Governor Benjamin Diokno said the agreement "<em>aims to streamline processes, reduce processing time, and facilitate prompt action of applications for mergers, consolidations, and acquisitions</em>". PCC's Arsenio Balisacan added: "<em>We acknowledge that mergers, consolidations, and acquisitions can catalyse innovation in any industry, including banking, because of combined resources and expertise". </em></p>
<p>The agreement, in effect, harmonizes the paperwork across the various regulators, by reducing the number of documentary requirements to 30 from 58, which in turn lowers the total processing time to an expected 55 business days from an average of 160 business days currently.</p>
<p>According to the <a href="https://www.phcc.gov.ph/press-releases/banks-mca-moa/" target="_blank" rel="noopener">PCC</a>, the "<em>Implementing Guidelines on the procedures for MCA applications will subsequently be issued via a Joint Circular by the partner-agencies</em>".</p>
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<div id="gpt-ad-Instream_Video">For years, the various regulators have aimed to consolidate the Philippines' highly fragmented banking sector comprising mostly small rural lenders. Such inefficiencies have led to nine problematic banks being shut this year, including BSP's recent order to close United People’s Rural Bank Inc.</div>
<div></div>
<div>The accord was also promulgated after the BSP stopped accepting digital banking license applications from 1 September 2021, with the number of digital lenders expected to be capped at seven for the next three years.</div>
<div></div>
</div>
<div>The question is: who stands to benefit from this MCA streamlining?</div>
</div>
<p></p>
<hr>
<div id="sports_article_writeup">
<div><em>For more on M&amp;A in the Philippines, please see the <a href="https://www.smartkarma.com/insights/quiddity-philippines-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:31122" rel="noopener">Quiddity Philippines M&amp;A Guide 2019</a>. </em></div>
</div>
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</div>


On the 5 November, Bangko Sentral ng Pilipinas (BSP - the central bank of the Philippines), the Securities and Exchange Commission, Philippine Competition Commission (PCC), Philippine Deposit Insurance Corp, and the Cooperative Development Authority signed a multi-agency agreement to streamline the merger, consolidation, and acquisition (MCA) process to encourage consolidation in the banking sector.
BSP Governor Benjamin Diokno said the agreement "aims to streamline processes, reduce processing time, and facilitate prompt action of applications for mergers, consolidations, and acquisitions". PCC's Arsenio Balisacan added: "We acknowledge that mergers, consolidations, and acquisitions can catalyse innovation in any industry, including banking, because of combined resources and expertise". 
The agreement, in effect, harmonizes the paperwork across the various regulators, by reducing the number of documentary requirements to 30 from 58, which in turn lowers the total processing time to an expected 55 business days from an average of 160 business days currently.
According to the PCC, the "Implementing Guidelines on the procedures for MCA applications will subsequently be issued via a Joint Circular by the partner-agencies".

For years, the various regulators have aimed to consolidate the Philippines' highly fragmented banking sector comprising mostly small rural lenders. Such inefficiencies have led to nine problematic banks being shut this year, including BSP's recent order to close United People’s Rural Bank Inc.

The accord was also promulgated after the BSP stopped accepting digital banking license applications from 1 September 2021, with the number of digital lenders expected to be capped at seven for the next three years.


The question is: who stands to benefit from this MCA streamlining?




For more on M&amp;A in the Philippines, please see the Quiddity Philippines M&amp;A Guide 2019. 





Bank of the Philippine Islands / Equity Bottom-Up

<p><strong><em>*</em></strong><strong><em>Credit Leverage On Its Way: </em></strong>Bank of the Philippine Islands (BPI.PM) [BPI] reported 3Q21 results of PHP 5.7 bn, declining PHP 1.1 bn (16.6%) linked quarter. While results were down linked quarter, what impressed us most was how well controlled credit metrics appear to be; and</p><p><strong><em>*Significant Credit Improvement: </em></strong>Our net new NPL figure of PHP 152 mn or 1.5% annualized (65.4% at 4Q20) intimate that management may actually be on to something. Given where BPI and the Philippines are with credit, it would not surprise us in the least if BPI reverses loss reserves.</p>

*Credit Leverage On Its Way: Bank of the Philippine Islands (BPI.PM) [BPI] reported 3Q21 results of PHP 5.7 bn, declining PHP 1.1 bn (16.6%) linked quarter. While results were down linked quarter, what impressed us most was how well controlled credit metrics appear to be; and*Significant Credit Improvement: Our net new NPL figure of PHP 152 mn or 1.5% annualized (65.4% at 4Q20) intimate that management may actually be on to something. Given where BPI and the Philippines are with credit, it would not surprise us in the least if BPI reverses loss reserves.

Bank Of Philippine Islands – Asia’s Top Performer

Philippines

Bank of the Philippine Islands, through its subsidiaries, provides commercial banking services. The Company's products includes ATM, debit card system, credit card, electronic cash card, internet platform and other services.

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Bank of the Philippine Islands (BPI PM)

PCOMP Index Rebalance Preview Aug 22: One Set of Potential Changes

We expect SCC PM to be added to the PCOMP Index at the August rebalance replacing SECB PM. Historically, the adds outperform the deletes and there...

Brian Freitas

BDO Unibank – Ready to Run

BDO: BDO reported a QOQ 4Q21net income increase of 10.0%, driven by surprisingly positive operating jaws. Net new NPLs were negative, and reserves...

Thomas J. Monaco

BDO Unibank – Small Hit, Big Problem

BDO UNIBANK: Nearly 700 BDO customers have reported unauthorized account transactions. Losses are small, but reputational risk is high. Add this...

Thomas J. Monaco

Philippine Banks: Streamlining M&A

MBT PM's given its conservative approach during Covid has improved its overall asset quality, plus it has the highest NPL coverage among the top...

David Blennerhassett

Bank Of Philippine Islands – Asia’s Top Performer

BANK OF PHILIPPINE ISLANDS: BPI reported QOQ 3Q21 results declined 16.6%. What impressed us most was how well controlled credit metrics are. It...

Thomas J. Monaco

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