Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

<ul>
<li>The unfolding crisis is unlikely to have far-reaching impacts on Asia financial names, given their more robust deposit franchises and sector diversification.</li>
<li>That said, the Taiwanese financial holdcos do seem to be substantially more exposed than their peers in other markets owing to the USD fixed-income exposures at their life insurance units.</li>
<li>In a flight-to-quality scenario, we expect Fubon FHC to outperform the more geared Shin Kong FHC.</li>
</ul>


The unfolding crisis is unlikely to have far-reaching impacts on Asia financial names, given their more robust deposit franchises and sector diversification.
That said, the Taiwanese financial holdcos do seem to be substantially more exposed than their peers in other markets owing to the USD fixed-income exposures at their life insurance units.
In a flight-to-quality scenario, we expect Fubon FHC to outperform the more geared Shin Kong FHC.


Asia Financials: The Fallout from SVB and Silvergate | Where's the Biggest Asset/Liability Mismatch?

<ul>
<li>We welcome the regulators' formalization of financial asset classifications. This will gradually remove regulatory arbitrage and pave the way for further bank reintermediation.</li>
<li>The new rules will likely have limited impacts on bond holdings that have active secondary markets, but illiquid debt investment plans will come under more intense regulatory and auditor scrutiny.</li>
<li>We see an impact of 10-15bp on the listed banks' reported NPL ratios. That said, a handful of banks may be at risk of capital shortages if the environment worsens. </li>
</ul>


We welcome the regulators' formalization of financial asset classifications. This will gradually remove regulatory arbitrage and pave the way for further bank reintermediation.
The new rules will likely have limited impacts on bond holdings that have active secondary markets, but illiquid debt investment plans will come under more intense regulatory and auditor scrutiny.
We see an impact of 10-15bp on the listed banks' reported NPL ratios. That said, a handful of banks may be at risk of capital shortages if the environment worsens. 


Chinese Banks: New Asset Classification Rules | You Can Run but You Can't Hide

Macroeconomics

<ul>
<li>Markets will likely look at Jan's TSF data in a favorable light. The record loan growth was particularly encouraging, despite being boosted by a degree of bank credit reintermediation.</li>
<li>Corporate lending was robust, driven concurrently by a surge in long-term loans and working capital financing. However, the outlook for mortgages remains grim. Consumers appear unmoved by falling home prices.</li>
<li>We believe the PBOC's easing bias will continue. A cut in the 5-year LPR may be the next sensible move. RRR cuts, while possible in 2023, may cause longer-term pain.</li>
</ul>


Markets will likely look at Jan's TSF data in a favorable light. The record loan growth was particularly encouraging, despite being boosted by a degree of bank credit reintermediation.
Corporate lending was robust, driven concurrently by a surge in long-term loans and working capital financing. However, the outlook for mortgages remains grim. Consumers appear unmoved by falling home prices.
We believe the PBOC's easing bias will continue. A cut in the 5-year LPR may be the next sensible move. RRR cuts, while possible in 2023, may cause longer-term pain.


China Macro: A Blowout Month for New Loans, but Consumers Remain Timid

<ul>
<li>The slightly weaker-than-expected inflation numbers for Jan represent a delay and not a detour from the broader reopening story. Investors will likely benefit from improved visibility in the months ahead. </li>
<li>The recovery in the PPI has been dragged by upward sticky factory gate prices for smaller producers downstream. This is consistent with our analysis of the Jan PMI.</li>
<li>A sustained improvement in consumer activity will likely drive PPI up to 0% and CPI to 2.5% by March.</li>
</ul>


The slightly weaker-than-expected inflation numbers for Jan represent a delay and not a detour from the broader reopening story. Investors will likely benefit from improved visibility in the months ahead. 
The recovery in the PPI has been dragged by upward sticky factory gate prices for smaller producers downstream. This is consistent with our analysis of the Jan PMI.
A sustained improvement in consumer activity will likely drive PPI up to 0% and CPI to 2.5% by March.


China Macro: Jan CPI / PPI | Much Better Visibility Ahead

Equity Bottom-Up

People's Insurance (PICC) / Equity Bottom-Up

The People's Insurance Company (Group) of China Limited, through its subsidiaries, offers a range of property and casualty insurance products. The Company also offers asset management services for a variety of customers throughout China.

<ul>
<li>To build on our earlier work on the insurance space -- and as we search for beta-neutral relative value plays -- we look at PICC Group-H's SOTP valuation.</li>
<li>The group's life and health business has historically traded at a steep implicit discount to China Life-H, perhaps deservedly so. But price dislocations do occur from time to time.</li>
<li>We share our cheat sheet on how we approach these opportunities, which are often good for a quick 10% trade. As usual, we highlight the potential risks as well.</li>
</ul>


To build on our earlier work on the insurance space -- and as we search for beta-neutral relative value plays -- we look at PICC Group-H's SOTP valuation.
The group's life and health business has historically traded at a steep implicit discount to China Life-H, perhaps deservedly so. But price dislocations do occur from time to time.
We share our cheat sheet on how we approach these opportunities, which are often good for a quick 10% trade. As usual, we highlight the potential risks as well.


PICC Group / PICC P&C Pair: A Cheat Sheet to Improve Your Batting Average

Stanley has over 20 years of capital markets experience on the buy side and sell side and as a credit analyst. He is the founder of Antler Capital, the culmination of his efforts to deliver differentiated solutions to global investors since 2021.

From 2017 to 2021, he was a Managing Director at CSPI Ratings, a credit rating agency servicing the USD bond market. He also led the firm’s efforts in sustainable finance.

Prior to that, he held various roles at Keefe, Bruyette & Woods, Nighthawk Capital, CLSA and Fitch Ratings. He was also an advisor at WWF, supporting the organization’s bankable nature solutions program.

Stanley has an honors degree in Finance from the University of British Columbia. He has been a CFA charterholder since 2004.