Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Shenzhen Stock Exchange Composite Index / Technical Analysis

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus as it is one of the few global indexes that is not yet breaking down. Lastly, Turkey (ISE National 100) appears to offer an attractive pullback opportunity. Within EM, we highlight attractive opportunities across the technology, consumer discretionary, health care and communications sectors.

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus as it is one of the few global indexes that is not yet breaking down. Lastly, Turkey (ISE National 100) appears to offer an attractive pullback opportunity. Within EM, we highlight attractive opportunities across the technology, consumer discretionary, health care and communications sectors.

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.

Thematic (Sector/Industry)

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this is the first bank closure in 20 years, which is also telling.  Perhaps the reddest of red flags for this bank was its missing financials for the past two years. We find several other China banks without financial statements, suggesting that this bank may not be alone. Beijing has since highlighted its concerns about high levels of special mention loans (SML) which flatter NPLs. We see many banks in China where SML loans are well over 100% of loss NPLs. The risk to higher credit costs is meaningful.  The negative profit growth shown by six of China’s banks during the latest quarter is another sign of how this can play out.

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this is the first bank closure in 20 years, which is also telling.  Perhaps the reddest of red flags for this bank was its missing financials for the past two years. We find several other China banks without financial statements, suggesting that this bank may not be alone. Beijing has since highlighted its concerns about high levels of special mention loans (SML) which flatter NPLs. We see many banks in China where SML loans are well over 100% of loss NPLs. The risk to higher credit costs is meaningful.  The negative profit growth shown by six of China’s banks during the latest quarter is another sign of how this can play out.

China Banks – Missing Financials, Negative Growth, High Special Mention Loans

For the most part, China bank’s 1H18 profit growth YoY (and 2Q18 YoY) is from realized and unrealized trading gains, investment gains and fair value gains. The largest four banks are the only major exceptions due to significant low-cost deposits and expansive sticky customer base. From the commentary that we have heard on China banks’ 1H18 earnings, we do not believe the focus is on the underlying reality.  There are negative implications where earnings quality is worsening considerably, while at the same time, it is likely that 2H18 is fundamentally worse, thereby making putting further pressure on core income and profit growth.

For the most part, China bank’s 1H18 profit growth YoY (and 2Q18 YoY) is from realized and unrealized trading gains, investment gains and fair value gains. The largest four banks are the only major exceptions due to significant low-cost deposits and expansive sticky customer base. From the commentary that we have heard on China banks’ 1H18 earnings, we do not believe the focus is on the underlying reality.  There are negative implications where earnings quality is worsening considerably, while at the same time, it is likely that 2H18 is fundamentally worse, thereby making putting further pressure on core income and profit growth.

China Banks – Profit Growth Is Only From Securities Gains

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

It has been almost a year since I wrote my piece on <a href="https://www.smartkarma.com/insights/wmp-exposure-in-smaller-banks-in-china-who-are-the-banks-shareholders" target="_blank" data-smartkarma-citation="insights:11430">WMP Exposure in Smaller Banks in China &amp; Who Are The Banks' Shareholders</a> that discussed how much of Wealth Management Products exposure that the rural banks carry in their balance sheet. Concerned about the size of the wealth management products issued in the past years and its influence on the banking system, the regulators have issued  <a href="http://www.chinabankingnews.com/2018/04/30/five-key-points-understanding-chinas-new-asset-management-rules/" target="_blank">new guidance</a> as follows:<ol><li>The transition period for the new regulation has been extended to the end of 2020 <ul><li>…</li></ul>
</li></ol>

It has been almost a year since I wrote my piece on WMP Exposure in Smaller Banks in China &amp; Who Are The Banks' Shareholders that discussed how much of Wealth Management Products exposure that the rural banks carry in their balance sheet. Concerned about the size of the wealth management products issued in the past years and its influence on the banking system, the regulators have issued  new guidance as follows:The transition period for the new regulation has been extended to the end of 2020 …


(Less) Wealth(Y) Management Products: New Rules

Equity Bottom-Up

Shengjing Bank Co Ltd H / Equity Bottom-Up

Small regional bank <a href="https://www.smartkarma.com/entities/96" target="_blank" data-smartkarma-citation="entities:96:1">Shengjing Bank Co Ltd H (2066 HK)</a>, primarily operating in the north and north east of China, shows the severity of funding pressure. We <a href="https://www.smartkarma.com/insights/china-banks-ping-an-bank-not-likely-to-be-alone-in-surging-funding-operating-costs" target="_blank">saw</a> this with <a href="https://www.smartkarma.com/entities/681" target="_blank" data-smartkarma-citation="entities:681:1">Ping An Bank Co Ltd A (000001 CH)</a> as well, where interest income growth is not keeping up with interest expense growth. SBC is now reporting net interest margins at just 1.50% for last year, down from 1.75% in 2016 and from 2.14% in 2015.  While credit costs and credit quality remains a critical focus for us, we must not lose…

Small regional bank Shengjing Bank Co Ltd H (2066 HK), primarily operating in the north and north east of China, shows the severity of funding pressure. We saw this with Ping An Bank Co Ltd A (000001 CH) as well, where interest income growth is not keeping up with interest expense growth. SBC is now reporting net interest margins at just 1.50% for last year, down from 1.75% in 2016 and from 2.14% in 2015.  While credit costs and credit quality remains a critical focus for us, we must not lose…

China Banks – Severe Yield Pressure at Shengjing Bank

China

Shengjing Bank Co. Ltd. provides banking services. The Company offers various financial services, funds business, international business, and investment services for individuals and small and medium enterprises.

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Shengjing Bank Co Ltd H (2066 HK)

EM Outperforming; Favor EM over EAFE

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus...

Vermilion Research

China Banks – Missing Financials, Negative Growth, High Special Mention Loans

The takeover of Baoshang Bank by the government of China is as good a signal as any. All is not well in China banking. Press reports suggest this...

Daniel Tabbush

China Banks – Profit Growth Is Only From Securities Gains

For the most part, China bank’s 1H18 profit growth YoY (and 2Q18 YoY) is from realized and unrealized trading gains, investment gains and fair...

Daniel Tabbush

(Less) Wealth(Y) Management Products: New Rules

It has been almost a year since I wrote my piece on WMP Exposure in Smaller Banks in China & Who Are The Banks' Shareholders that discussed how...

Henry Soediarko

China Banks – Severe Yield Pressure at Shengjing Bank

Small regional bank Shengjing Bank Co Ltd H (2066 HK), primarily operating in the north and north east of China, shows the severity of funding...

Daniel Tabbush

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