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

*Continued Weak Great Eastern Core Returns: Great Eastern Holdings (GE.SP) [Great Eastern] reported 2H20 bottom-line results of SGD 688.5 mn, improving SGD 348.6 mn (102.5%) HOH. However, when we exclude 2H20’s net gains on sale of SGD 3.8 bn, core operating results were far from impressive at a loss of SGD 3.1 bn versus operating income SGD 217.3 mn in 1H20; and*Poor Readacross to Regional Insurers: Higher overall costs at Great Eastern during the half driven by claims and a change in contract liability increases would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers.

*Continued Weak Great Eastern Core Returns: Great Eastern Holdings (GE.SP) [Great Eastern] reported 2H20 bottom-line results of SGD 688.5 mn, improving SGD 348.6 mn (102.5%) HOH. However, when we exclude 2H20’s net gains on sale of SGD 3.8 bn, core operating results were far from impressive at a loss of SGD 3.1 bn versus operating income SGD 217.3 mn in 1H20; and*Poor Readacross to Regional Insurers: Higher overall costs at Great Eastern during the half driven by claims and a change in contract liability increases would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers. 

Oversea Chinese Banking Corp. – Great Eastern HOH Operating Results Flop

*Poor Results See No Signs Of Near-Term Abatement: Singapore Exchange (SGX.SP) [SGX] reported FY 1H21 results of SGD 240.4 mn, declining SGD 18.2 mn (7.0%) HOH. Excluding the SGD 15.6 mn in gains primarily attributed to non-cash fair value on its BidFX acquisition, SGX’core operating result would have declined SGD 33.9 mn (13.1%) over the period; and*Derivatives Challenges Led By Taiwan: The largest semi-annual results delta was attributed to derivatives, which declined SGD 33.6 mn or 12.2%. SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 with their move to the Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Until recently, 99.8% of the Taiwan index futures volumes has were held by SGX, but its dominant market share position is beginning to crack. As time passes, we will get an idea of how much volume of the Taiwan index futures will remain with MSCI indices and move to HKEx which has significant implications for SGX's lucrative A50 contract.

*Poor Results See No Signs Of Near-Term Abatement: Singapore Exchange (SGX.SP) [SGX] reported FY 1H21 results of SGD 240.4 mn, declining SGD 18.2 mn (7.0%) HOH. Excluding the SGD 15.6 mn in gains primarily attributed to non-cash fair value on its BidFX acquisition, SGX’core operating result would have declined SGD 33.9 mn (13.1%) over the period; and*Derivatives Challenges Led By Taiwan: The largest semi-annual results delta was attributed to derivatives, which declined SGD 33.6 mn or 12.2%. SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 with their move to the Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Until recently, 99.8% of the Taiwan index futures volumes has were held by SGX, but its dominant market share position is beginning to crack. As time passes, we will get an idea of how much volume of the Taiwan index futures will remain with MSCI indices and move to HKEx which has significant implications for SGX's lucrative A50 contract.

*November Market Stats Generally Positive: The Singapore Exchange (SGX.SP) [SGX] released its market statistics for November 2020. Unsurprisingly, the progress of the COVID-19 vaccine fuelled volume gains across the entire spectrum of SGX products; and*Taiwan Pressures: SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 as these contracts moved to Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Notional value traded market share of SGX - while usually volatile - has begun gradually declining to 90.4% in November from 92.4% in October. This will have significant implications over how much market share and fee pressure will be placed on SGX's lucrative A50 contract.

*November Market Stats Generally Positive: The Singapore Exchange (SGX.SP) [SGX] released its market statistics for November 2020. Unsurprisingly, the progress of the COVID-19 vaccine fuelled volume gains across the entire spectrum of SGX products; and*Taiwan Pressures: SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 as these contracts moved to Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Notional value traded market share of SGX - while usually volatile - has begun gradually declining to 90.4% in November from 92.4% in October. This will have significant implications over how much market share and fee pressure will be placed on SGX's lucrative A50 contract.  

Singapore Exchange – Strains Seen For TW Futures

*Solid Core Operating Result: CIMB Group (CIMB.MK) [CIMB] reported 3Q20 results of MYR 194 mn, declining MYR 83 mn (30.0%) linked quarter. However, when we exclude securities gains/losses, core operating results actually came in at MYR 293 mn  - exceeding 2Q20 operating losses of MYR 58 mn; and *Credit Risk Decelerating: CIMB’s NPLs declined MYR 999.9 mn (7.5%) to MYR 12.9 bn, and represent 3.38% of total loans – improving 24 bp linked quarter. With NCOs of MYR 1.2 bn, we find that net new NPLs increased MYR 187.5 mn or 5.6% on an annualized basis. Despite the improvement, we believe that reserve cover is too light by MYR 1.5 bn – which represents just over three quarters of profit before tax.

*Solid Core Operating Result: CIMB Group (CIMB.MK) [CIMB] reported 3Q20 results of MYR 194 mn, declining MYR 83 mn (30.0%) linked quarter. However, when we exclude securities gains/losses, core operating results actually came in at MYR 293 mn  - exceeding 2Q20 operating losses of MYR 58 mn; and *Credit Risk Decelerating: CIMB’s NPLs declined MYR 999.9 mn (7.5%) to MYR 12.9 bn, and represent 3.38% of total loans – improving 24 bp linked quarter. With NCOs of MYR 1.2 bn, we find that net new NPLs increased MYR 187.5 mn or 5.6% on an annualized basis. Despite the improvement, we believe that reserve cover is too light by MYR 1.5 bn – which represents just over three quarters of profit before tax. 

*Lakshmi Vilas Bank Problems Appear Bigger Than DBS Expects: By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent by the amount of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion; LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al;  and  *Cram-down Highlights That LVB’s Stated Numbers May Be Wrong:  Prior to the amalgamation, INR 318.2 bn (USD 43 mn) LVB Basel III-compliant Tier 2 bonds (Series VIII, Series IX, and Series X) were written down under the direction of the RBI. To the best of our knowledge, this would appear to be the first time that a cram-down procedure was applied in Asia. As a result, no investor should take any investment in a troubled Indian financial institution for granted. Ultimately, this will make the financial sector more efficient – but calls the sanctity of their audited results into questions as well.

*Lakshmi Vilas Bank Problems Appear Bigger Than DBS Expects: By our calculation and based on LVB’s FY 2Q21 results, the company would appear to be insolvent by the amount of INR 39 bn – nearly 56% greater than the DBS Bank India capital infusion; LVB loses money on an operating basis prior to loss provisions, as revenues (no clarity on what is recurring) of INR 15.4 bn are less than operating expenses of INR 16.0 bn – or by 3.7% at FY 2Q21; et al;  and  *Cram-down Highlights That LVB’s Stated Numbers May Be Wrong:  Prior to the amalgamation, INR 318.2 bn (USD 43 mn) LVB Basel III-compliant Tier 2 bonds (Series VIII, Series IX, and Series X) were written down under the direction of the RBI. To the best of our knowledge, this would appear to be the first time that a cram-down procedure was applied in Asia. As a result, no investor should take any investment in a troubled Indian financial institution for granted. Ultimately, this will make the financial sector more efficient – but calls the sanctity of their audited results into questions as well. 

United States

iShares MSCI Singapore 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 the Singaporean market, as measured by the MSCI Singapore 25/50 Index. The ETF invests in a representative sample of index stocks using a "portfolio sampling" technique. SGX Trading Name: IS MSCI SIN 100US$

iShares MSCI Singapore ETF (EWS US)

Oversea Chinese Banking Corp. – Great Eastern HOH Operating Results Flop

OVERSEA CHINESE BANKING CORP: Great Eastern reported hefty 2H20 core operating losses. Higher overall costs HOH imply a negative readacross to...

Thomas J. Monaco

Singapore Exchange - Going South

SINGAPORE EXCHANGE: SGX FY 1H21 results declined 7.0% HOH. Excluding the BidFX gain, SGX’ core operating result would have declined 13.1%. SGX...

Thomas J. Monaco

Singapore Exchange – Strains Seen For TW Futures

SINGAPORE EXCHANGE: November Stats Look Good Generally Across The Board; However, Taiwan Futures Slippage Could Impact A50.

Thomas J. Monaco

CIMB Group – Reserve Cover Light Still

CIMB GROUP: Operating results exhibited linked quarter improvement, although stated results declined. Reserve cover remains quite light despite...

Thomas J. Monaco

DBS Group Holdings – The LVB Cram Down

DBS GROUP HOLDINGS: The LVB Cram-down Raises Significant Questions Over Potential Cost For DBS, Raises Significant Concerns Over Audited Financial...

Thomas J. Monaco