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

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.....

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

Macro Strategist, Saxo Capital Markets

Kay Van-Petersen

Macro Strategist

Saxo Capital Markets

Thematic (Sector/Industry)

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 barred brokerages from selling third-party financing products that help clients invest in stocks using borrowed money, such as umbrella trusts and those offered by peer-to-peer websites. Seeking to rein in the use of leverage to buy stocks, the China Securities Regulatory Commission also told brokerages they may not offer margin financing and securities lending to clients with less than 500,000 yuan of assets. Investors with assets of less than 500,000 yuan who opened margin-finance and securities lending accounts before Jan. 19 will not be forced to close their positions. Brokerages may not provide margin finance and securities lending to clients with a trading history of less than six months.

China barred brokerages from selling third-party financing products that help clients invest in stocks using borrowed money, such as umbrella trusts and those offered by peer-to-peer websites. Seeking to rein in the use of leverage to buy stocks, the China Securities Regulatory Commission also told brokerages they may not offer margin financing and securities lending to clients with less than 500,000 yuan of assets. Investors with assets of less than 500,000 yuan who opened margin-finance and securities lending accounts before Jan. 19 will not be forced to close their positions. Brokerages may not provide margin finance and securities lending to clients with a trading history of less than six months. 

CHINA MARKET: China barred brokerages from selling third-party financing products

China

Harbin Bank Co. Ltd. offers commercial banking services. The Company provides deposits, loans, credit cards, documentary collections, and exchange transactions for individuals and businesses. Harbin Bank also supplies financial products.

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Harbin Bank Co Ltd H (6138 HK)

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

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

CHINA MARKET: China barred brokerages from selling third-party financing products

China barred brokerages from selling third-party financing products that help clients invest in stocks using borrowed money, such as umbrella...

David Millhouse

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)