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>
Better, But Off A Low Base: AIA Group's (1299.HK) [AIA] limited set of 3Q21 results, where VONB declined 3.5% on a linked quarter basis due weaker new sales volume; </li>
<li>
Many Deal Distractions:AIA has gone on a deal-making spree in 2021, announcing six separate transactions to date; and  </li>
<li>
Suffocating Hong Kong Business: AIA’s core Hong Kong business has been an unmitigated disaster during COVID-19, struggling with mainland Chinese visitors. Further, there is limited clarity on AIA’s legacy agents. </li>
</ul>



Better, But Off A Low Base: AIA Group's (1299.HK) [AIA] limited set of 3Q21 results, where VONB declined 3.5% on a linked quarter basis due weaker new sales volume; 

Many Deal Distractions:AIA has gone on a deal-making spree in 2021, announcing six separate transactions to date; and  

Suffocating Hong Kong Business: AIA’s core Hong Kong business has been an unmitigated disaster during COVID-19, struggling with mainland Chinese visitors. Further, there is limited clarity on AIA’s legacy agents. 


AIA Group – No Word On Massive Deal Risk

<ul>
<li>
USD Bond Payments Continue:  China Evergrande Group (3333.HK) [Evergrande] magically made another set of 11th hour interest payments of USD 148 mn to bondholders on Wednesday, November 10, 2021;</li>
<li>
Trial Balloon Not a Panacea: Mainland Chinese authorities hinted a readiness to loosen their grip on the issuance of CNY-denominated bonds by real estate companies; and</li>
<li>
Watch Your Bank Risk: Evergrande has already been in contact with lenders for loan extensions. Main bank, Shenjang Bank is on the verge of announcing 20% plus NPLs. </li>
</ul>



USD Bond Payments Continue:  China Evergrande Group (3333.HK) [Evergrande] magically made another set of 11th hour interest payments of USD 148 mn to bondholders on Wednesday, November 10, 2021;

Trial Balloon Not a Panacea: Mainland Chinese authorities hinted a readiness to loosen their grip on the issuance of CNY-denominated bonds by real estate companies; and

Watch Your Bank Risk: Evergrande has already been in contact with lenders for loan extensions. Main bank, Shenjang Bank is on the verge of announcing 20% plus NPLs. 


China Evergrande Group – Making Those Payments

<ul>
<li>
Results Weaker: Tencent Holdings’ (700.HK) [Tencent] 3Q21 GAAP net income declined another CNY 5.2 bn (6.7%) on a linked quarter basis. </li>
<li>
Challenges: Results were challenged by a cost of revenue increase; operating expense increase; increased losses in associates; higher impairment charges; a higher tax rate and weaker online advertising; and    </li>
<li>
Elephant In Room: China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". Tencent is following Alibaba in its formation of a financial holding company. </li>
</ul>



Results Weaker: Tencent Holdings’ (700.HK) [Tencent] 3Q21 GAAP net income declined another CNY 5.2 bn (6.7%) on a linked quarter basis. 

Challenges: Results were challenged by a cost of revenue increase; operating expense increase; increased losses in associates; higher impairment charges; a higher tax rate and weaker online advertising; and    

Elephant In Room: China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". Tencent is following Alibaba in its formation of a financial holding company. 


* New Transaction In Australia: On November 7, 2021, Link REIT (823.HK) [Link] announced a proposed acquisition of a 50% stake three shopping malls in Sydney for AUD 538 mn or HKD 3.3 bn, in a deal where it has no control of the properties;  * Limited Disclosure Raises Eyebrows: Link did not disclose the annual income on the properties, nor the projected tenant lease expiry and changes in foot traffic between pre and post COVID-19; and  *Hong Kong Pressures Are Very Apparent: This transaction so far away from Link REIT’s core competency that it speaks volumes as to where it believes its core Hong Kong retail business is heading. This doesn’t seem like smart diversification and smells more of panic leverage when one considers the thre price and location of this deal.

 * New Transaction In Australia: On November 7, 2021, Link REIT (823.HK) [Link] announced a proposed acquisition of a 50% stake three shopping malls in Sydney for AUD 538 mn or HKD 3.3 bn, in a deal where it has no control of the properties;  * Limited Disclosure Raises Eyebrows: Link did not disclose the annual income on the properties, nor the projected tenant lease expiry and changes in foot traffic between pre and post COVID-19; and  *Hong Kong Pressures Are Very Apparent: This transaction so far away from Link REIT’s core competency that it speaks volumes as to where it believes its core Hong Kong retail business is heading. This doesn’t seem like smart diversification and smells more of panic leverage when one considers the thre price and location of this deal. 

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.   

Hong Kong

iShares MSCI Hong Kong ETF is an exchange-traded fund incorporated in the USA. The ETF's objective seeks to provide investment results that correspond to the performance of publicly traded securities in the Hong Kong market, as measured by the MSCI Hong Kong Index. The ETF invests in a representative sample of index stocks using a "portfolio sampling" technique.

iShares MSCI Hong Kong ETF (EWH US)

AIA Group – No Word On Massive Deal Risk

AIA: AIA reported a limited set of 3Q21 results, where VONB declined 3.5% on a linked quarter basis due weaker new sales volume. No word on AIA's...

Thomas J. Monaco

China Evergrande Group – Making Those Payments

EVERGRANDE: Evergrande magically made another set of 11th hour interest payments of USD 148 mn to bondholders on Wednesday, November 10, 2021 -...

Thomas J. Monaco

Tencent Holdings – Increasing Risk

TENCENT: Tencent's 3Q21 GAAP net income declined 6.7% QOQ, and were challenged by increases in cost of revenue, operating expenses, losses in...

Thomas J. Monaco

Link REIT – Another Odd Deal

LINK REIT: Link announced a proposed acquisition of a 50% stake three shopping malls in Sydney for HKD 3.3 bn, in a deal where it has no control of...

Thomas J. Monaco

China Evergrande Group – Kaisa Rolled

EVERGRANDE: Kaisa missed a bond payment, and has the second largest level of short-term debt due. We await official word Evergrande’s Scenery...

Thomas J. Monaco