China Banks

http://www.businesstimes.com.sg/governme...ancial-hub

APEC SUMMIT
It'll take time for Shanghai to become financial hub
City's legal system remains key bugbear compared with HK which has the rule of law in place: PM Lee

By
Lynette Khoolynkhoo@sph.com.sg@LynetteKhooBT
sgchina121114.JPG Shanghai is primed to become a financial hub given the scale of China's economy and capital-raising needs of domestic companies but this will take some time, says Singapore Prime Minister Lee Hsien Loong. PHOTO: AFP
12 Nov5:50 AM
Beijing

SHANGHAI is primed to become a financial hub given the scale of China's economy and capital-raising needs of domestic companies but this will take some time, says Singapore Prime Minister Lee Hsien Loong.

Its legal system remains the key bugbear, given that the rule of law

Shanghai will take some time, as comparable hub to HK. HK will remain as important hub in north Asia, but the importance might reducing over time...

(12-11-2014, 07:28 AM)greengiraffe Wrote: http://www.businesstimes.com.sg/governme...ancial-hub

APEC SUMMIT
It'll take time for Shanghai to become financial hub
City's legal system remains key bugbear compared with HK which has the rule of law in place: PM Lee

By
Lynette Khoolynkhoo@sph.com.sg@LynetteKhooBT
sgchina121114.JPG Shanghai is primed to become a financial hub given the scale of China's economy and capital-raising needs of domestic companies but this will take some time, says Singapore Prime Minister Lee Hsien Loong. PHOTO: AFP
12 Nov5:50 AM
Beijing

SHANGHAI is primed to become a financial hub given the scale of China's economy and capital-raising needs of domestic companies but this will take some time, says Singapore Prime Minister Lee Hsien Loong.

Its legal system remains the key bugbear, given that the rule of law

China Bad Loans Jump Most Since 2005 as Economy Cools

China’s bad loans jumped by the most since 2005 in the third quarter, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks.

Nonperforming loans rose by 72.5 billion yuan ($11.8 billion) from the previous quarter to 766.9 billion yuan, the China Banking Regulatory Commission said in a statement on Nov. 15. Soured credit accounted for 1.16 percent of lending, up from 1.08 percent three months earlier.

As China heads for the weakest economic expansion since 1990, Communist Party leaders have discussed lowering the nation’s growth target for 2015, according to a person with knowledge of their talks. Bankers’ low appetite for risk and their rising concerns about asset quality are leading to a “sluggish” expansion in credit, according to UBS AG.

China banks' NIM will be further squeezed by the policy. Together with the raising of NPL ratio, slower economy growth, China banks' outlook is not promising...

(not vested in China banks)

China's rate-cut likely to hurt banks, curb new loans to small borrowers

SHANGHAI (Nov 22): China's latest interest rate cut is set to dent the profitability of domestic lenders, especially mid-sized banks, which are already suffering from higher bad loans and a slowdown in profit growth.

The central bank unexpectedly cut rates late on Friday, stepping up efforts to support small and medium-sized enterprises (SMEs) which are struggling to repay loans and access credit, as the economy slides to its slowest growth in nearly a quarter of a century.

It slashed the one-year benchmark lending rate by 40 basis points to 5.6 percent while lowering the one-year benchmark deposit rate by 25 basis points to 2.75 percent.

The narrowing of interest rate margins will eat into lenders' profitability, with Cinda Securities' chief strategist, Jiahe Chen, predicting it will cut profits by up to 5 percent.
...
http://www.theedgemarkets.com/sg/article...-borrowers

Funny leh... US investment banks happily selling since last year and Temasek has been comfortably accumulating...

Not Vested
GG

(24-11-2014, 09:27 AM)CityFarmer Wrote: China banks' NIM will be further squeezed by the policy. Together with the raising of NPL ratio, slower economy growth, China banks' outlook is not promising...

(not vested in China banks)

China's rate-cut likely to hurt banks, curb new loans to small borrowers

SHANGHAI (Nov 22): China's latest interest rate cut is set to dent the profitability of domestic lenders, especially mid-sized banks, which are already suffering from higher bad loans and a slowdown in profit growth.

The central bank unexpectedly cut rates late on Friday, stepping up efforts to support small and medium-sized enterprises (SMEs) which are struggling to repay loans and access credit, as the economy slides to its slowest growth in nearly a quarter of a century.

It slashed the one-year benchmark lending rate by 40 basis points to 5.6 percent while lowering the one-year benchmark deposit rate by 25 basis points to 2.75 percent.

The narrowing of interest rate margins will eat into lenders' profitability, with Cinda Securities' chief strategist, Jiahe Chen, predicting it will cut profits by up to 5 percent.
...
http://www.theedgemarkets.com/sg/article...-borrowers

(24-11-2014, 10:13 AM)greengiraffe Wrote: Funny leh... US investment banks happily selling since last year and Temasek has been comfortably accumulating...

Not Vested
GG

(24-11-2014, 09:27 AM)CityFarmer Wrote: China banks' NIM will be further squeezed by the policy. Together with the raising of NPL ratio, slower economy growth, China banks' outlook is not promising...

(not vested in China banks)

China's rate-cut likely to hurt banks, curb new loans to small borrowers

SHANGHAI (Nov 22): China's latest interest rate cut is set to dent the profitability of domestic lenders, especially mid-sized banks, which are already suffering from higher bad loans and a slowdown in profit growth.

The central bank unexpectedly cut rates late on Friday, stepping up efforts to support small and medium-sized enterprises (SMEs) which are struggling to repay loans and access credit, as the economy slides to its slowest growth in nearly a quarter of a century.

It slashed the one-year benchmark lending rate by 40 basis points to 5.6 percent while lowering the one-year benchmark deposit rate by 25 basis points to 2.75 percent.

The narrowing of interest rate margins will eat into lenders' profitability, with Cinda Securities' chief strategist, Jiahe Chen, predicting it will cut profits by up to 5 percent.
...
http://www.theedgemarkets.com/sg/article...-borrowers

Temasek has a much longer term perspective than investment banks
Even if china growth drops drastically to 6%, compared to other mature economies, even to sg, 6% is still way way ahead
On top of that valuations are very attractive. Of course this is only if u take a long term view.

If one has been following the Chinese Govt's rhetorics on banks, one would have been very clear on their views of banks' positioning and margins, especially in this period of their financial big bang

Rather than the banks, the Chinese insurers will stand to benefit more. Though the major banks like ICBC, CCB and BOC will fare better than the regional banks.

http://www.aastocks.com/tc/stocks/news/a...W.639599/1

《大行報告》花旗：內地減息對中資保險股估值正面
2014/11/24 11:11


《大行報告》花旗：內地減息對中資保險股估值正面
2014/11/24 11:11

花旗發表報告指，人行意外宣布將一年期貸款基准利率下調40基點，以及將一年期存款基準利率下調25個基點，存款利率浮動上限由1.1倍擴大到1.2倍。該行認為，減息將有助緩解外界對資產質素及宏觀經濟的憂慮，因此對中資保險股估值正面。

該行指，內地貸款基准利率下調的幅度較預期大，顯示中央決心維護經濟擴張，未來或進入流動性寬鬆周期，相信此有助改善投資者情緒及支撐保險股估值。仍看好內險業，偏好國壽(02628.HK)、新華保險(01336.HK)、平保(02318.HK)。

花旗指，減息對資產構成複雜的影響，負面而言，下調存款基準利率將令保險業的利息收入減少。由於貸款基准利率顯著下調40基點，加上市場預期人行將進一步降息，債券收益率與其他市場收益率很可能下跌，因此新投資的固定收益工具利息收入亦會隨之下降。正面而言，現有債券市值將上升。

(24-11-2014, 10:17 AM)GFG Wrote: Temasek has a much longer term perspective than investment banks
Even if china growth drops drastically to 6%, compared to other mature economies, even to sg, 6% is still way way ahead
On top of that valuations are very attractive. Of course this is only if u take a long term view.

Sometimes, i become quite wary when people start using words like 'long term' as the main selling point/justification for their deals.

Let's see what happened before the start of GFC2008:
In a news release, GIC's deputy chairman and executive director, Tony Tan, said the company looks for returns on a long-term basis. He believes GIC's latest Citigroup investment will meet that objective. Dr Tan said: "GIC is a financial investor seeking commercial returns on a long-term basis ... We believe that the investment in Citigroup will meet our long-term investment objective in terms of risk and return."

But, speaking at a news conference, Dr Tan, who is also Singapore Press Holdings' chairman, said GIC has confidence in UBS' wealth management business - which mainly serves global wealthy figures. He said GIC believes in the long-term prospects of the Swiss bank. Dr Tan added that GIC is very satisfied that UBS, which had asked GIC to subscribe to the issue of new capital, has taken a 'very conservative view' of its investments exposed to US sub-prime problems. GIC has no direct exposure to investment products packaged from risky US mortgages.

Senior Managing Director of Temasek, Frank Tang said, "We are pleased to have this opportunity to invest in Barclays. We look forward to supporting them in their strategy to create opportunities for a higher level of sustainable growth. This investment fits well with our interest for long-term exposure to strong players in the financial services sector."

Of course, there is a high degree of hindsight bias in my postings here. I can imagine hypothetically someone in their ivory tower will be arguing 'you need to judge our past decisions based on the proper context and information available at that point of time'. My personal opinion is that these purchases looked like great timing to outsiders (including myself in 2007/8), but unknown to those folks in their ivory towers, the insiders already knew. So the hard questions are, besides trying to raise/recycle capital for the tier1 ratio/meet new rules, are there anything else that those US banks know (and want to sell at such 'attractive' valuations) but most probably the outsiders do not? I think this is really what we can learn from history.

IIRC, the valuations at that point of time on UBS/Barclays/Citigroup purchases were also 'attractive'. The current investments in these Chinese banks are also attractive...but on what? On price/book or price/earnings? Past valuations can rapidly change to look expensive because mathematically, the denominator (book/earnings) has a greater impact on such multiples.

(24-11-2014, 03:16 PM)weijian Wrote:

(24-11-2014, 10:17 AM)GFG Wrote: Temasek has a much longer term perspective than investment banks
Even if china growth drops drastically to 6%, compared to other mature economies, even to sg, 6% is still way way ahead
On top of that valuations are very attractive. Of course this is only if u take a long term view.

Sometimes, i become quite wary when people start using words like 'long term' as the main selling point/justification for their deals.

Let's see what happened before the start of GFC2008:
In a news release, GIC's deputy chairman and executive director, Tony Tan, said the company looks for returns on a long-term basis. He believes GIC's latest Citigroup investment will meet that objective. Dr Tan said: "GIC is a financial investor seeking commercial returns on a long-term basis ... We believe that the investment in Citigroup will meet our long-term investment objective in terms of risk and return."

But, speaking at a news conference, Dr Tan, who is also Singapore Press Holdings' chairman, said GIC has confidence in UBS' wealth management business - which mainly serves global wealthy figures. He said GIC believes in the long-term prospects of the Swiss bank. Dr Tan added that GIC is very satisfied that UBS, which had asked GIC to subscribe to the issue of new capital, has taken a 'very conservative view' of its investments exposed to US sub-prime problems. GIC has no direct exposure to investment products packaged from risky US mortgages.

Senior Managing Director of Temasek, Frank Tang said, "We are pleased to have this opportunity to invest in Barclays. We look forward to supporting them in their strategy to create opportunities for a higher level of sustainable growth. This investment fits well with our interest for long-term exposure to strong players in the financial services sector."

Of course, there is a high degree of hindsight bias in my postings here. I can imagine hypothetically someone in their ivory tower will be arguing 'you need to judge our past decisions based on the proper context and information available at that point of time'. My personal opinion is that these purchases looked like great timing to outsiders (including myself in 2007/8), but unknown to those folks in their ivory towers, the insiders already knew. So the hard questions are, besides trying to raise/recycle capital for the tier1 ratio/meet new rules, are there anything else that those US banks know (and want to sell at such 'attractive' valuations) but most probably the outsiders do not? I think this is really what we can learn from history.

IIRC, the valuations at that point of time on UBS/Barclays/Citigroup purchases were also 'attractive'. The current investments in these Chinese banks are also attractive...but on what? On price/book or price/earnings? Past valuations can rapidly change to look expensive because mathematically, the denominator (book/earnings) has a greater impact on such multiples.

Sure, agreed with most of what you wrote.
But to be objective, we should look at overall returns instead of a single incident of whether GIC/temasek is right or wrong. Nobody is always right, or always wrong for that matter.
Even warren Buffett made a huge mistake with Tesco (he recently admitted and divested at a huge loss)
Bill Ackman made huge losses with JC Penny too
So UBS / citi may be their equivalent of buffett's tesco or ackman's JC penny
But nobody will argue with their long term returns.
Same with these banks.
GIC /temasek may find that 5yrs from now, these Chinese banks blow up in their faces like in the GFC. But if their methodology works in the long run based on past track record, it is LIKELY (not certain) that more often than not, their similar investments whether it is in Chinese banks or other companies, will give a very good return AS A WHOLE. In the words of ackman, sure there are mistakes and there will be more mistakes in future, but "my batting average is pretty high"

Not vested in any Chinese banks, just my objective view
I was vested in ICBC but sold out for a nice 25% profit in a yr as I was worried that the valuations between the HKex n Shanghai ex shares will narrow with the linkage.