Yangzijiang Shipbuilding (Holdings)

(27-09-2013, 10:18 AM)CityFarmer Wrote:

(26-09-2013, 10:38 PM)Greenrookie Wrote: Yangzijiang applies to enter private banking sector

Shanghai: As China has loosened the regulations on private banking sector and relevant policies are about to be introduced, many private companies are planning to enter the sector.
According to Jiangsu Provincial Government, it has received applications from six local private companies including Shagang Group and Yangzijiang Shipbuilding to set up their own banks.
Yangzijiang Shipbuilding reported a net profit of RMB1.52bn in the first half of this year. [25/09/13]

http://www.sinoshipnews.com/news_content...d=3w3c1855
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I really hope they succeed in their application

Although there is no guaranteed of profitability, at least it will mean they are stepping out of the shadows to the open, any rules to clamp down on shadow banking will not affect them as much.

The HTM investment has been operated by partnering financial intermediaries e.g. local banks. So strictly speaking, it is open, and operates within the banking ecosystem in China.

May be you refer to micro-credit business. Yes, YZJ is trimming down the micro financing business. One of the two micro financing subsidiaries, was disposed in FY2012, and the asset has been scaled down quite a bit in FY2013. Is it preparing for the private license?

From what I understand from reading about shadow banking, The HTM could be classified under "wealth management products", even though they partner the banks, as with other wealth mangement products, it is still considered as "shadow banking".

This is just my understanding, I might be wrong.

They have already submit application for private bank.

(27-09-2013, 11:03 AM)Greenrookie Wrote:

(27-09-2013, 10:18 AM)CityFarmer Wrote:

(26-09-2013, 10:38 PM)Greenrookie Wrote: Yangzijiang applies to enter private banking sector

Shanghai: As China has loosened the regulations on private banking sector and relevant policies are about to be introduced, many private companies are planning to enter the sector.
According to Jiangsu Provincial Government, it has received applications from six local private companies including Shagang Group and Yangzijiang Shipbuilding to set up their own banks.
Yangzijiang Shipbuilding reported a net profit of RMB1.52bn in the first half of this year. [25/09/13]

http://www.sinoshipnews.com/news_content...d=3w3c1855
-----------------------------------------------------------------

I really hope they succeed in their application

Although there is no guaranteed of profitability, at least it will mean they are stepping out of the shadows to the open, any rules to clamp down on shadow banking will not affect them as much.

The HTM investment has been operated by partnering financial intermediaries e.g. local banks. So strictly speaking, it is open, and operates within the banking ecosystem in China.

May be you refer to micro-credit business. Yes, YZJ is trimming down the micro financing business. One of the two micro financing subsidiaries, was disposed in FY2012, and the asset has been scaled down quite a bit in FY2013. Is it preparing for the private license?

From what I understand from reading about shadow banking, The HTM could be classified under "wealth management products", even though they partner the banks, as with other wealth mangement products, it is still considered as "shadow banking".

This is just my understanding, I might be wrong.

They have already submit application for private bank.

In fact, i was troubled by the definition of shadow banking term too. It is a term frequently tagged with the company. Without a good understanding of the term, the analysis of the company is incomplete

Base on the definitions below. Two keywords, non-banking financial intermediaries, and not subject to regulatory oversight. So it is more of a concern on unregulated risk.

I will not labelled HTM as shadow banking, for the analysis of the company, but the micro financing is.

I agree that there might be grey area, I respect your view on the general definition of shadow banking.

Wiki
The shadow banking system is a pejorative term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks.

Reference: http://en.wikipedia.org/wiki/Shadow_banking_system

Investopedia
The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions.

Reference: http://www.investopedia.com/terms/s/shad...system.asp

your interpretation of shadow banking is exactly the opposite of shadow banking at least speaking of Yangzijiang.

Micro financing is not shadow banking, it is legitimate financial institutions licensed and regulated, much like the finance companies in Singapore such as Hong Leong Finance, Singapura Finance & Sing Finance.

HTM is the real shadow banking, much like most money market funds. Essentially, it is that private investors (non-banking) are providing finance to certain companies/projects. They are not tight regulated because banks don't hold the loans.

(27-09-2013, 11:58 AM)freedom Wrote: your interpretation of shadow banking is exactly the opposite of shadow banking at least speaking of Yangzijiang.

Micro financing is not shadow banking, it is legitimate financial institutions licensed and regulated, much like the finance companies in Singapore such as Hong Leong Finance, Singapura Finance & Sing Finance.

HTM is the real shadow banking, much like most money market funds. Essentially, it is that private investors (non-banking) are providing finance to certain companies/projects. They are not tight regulated because banks don't hold the loans.

The company's partners, the banks hold the credit (loan) of the HTM, not the company. The company only has counter-party risk. The credit is regulated, since it is within banking eco-system in China. In the other hand, I wouldn't said the arrangement is similar as regulated deposit account, since there are contractual agreements between them.

It is flaw to quote examples in Singapore, as comparison to a micro-financing companies in China, due to difference in term of regulation.

I am more looking at the risks, rather than as academic exercises, on the "shadow banking", in the analysis.

Simplistically speaking

-Shadow banking is lending by non financial entities. For eg Tontin and 大耳窿

-Micro financing are banks doing very small loans on huge scale ie population has to be large. Bank Rakyat in Indonesia is one example.

-Wealth Managment Product (WMP) are innovations from the banks when Chinese govt curbed the banks' lending. The normal banking model is that depositors earn 1% interest giving money to the bank, bank acts as intermediary lends 2% to corporates and pockets 1% in intererst income. In WMP the investors earn say 2% investing in the product which the banks sell, and the proceeds goes to the corporates which pays 4% and the bank pockets 2% in non interest income ie service/ selling fee. Effectively these 2 are the same in outcome but the legal implications differs in terms of credit risk which technically the banks don't bear, and the source of income. But as per Lehman crisis, we would think the Chinese government would force the banks to bear part of the cost if crap do happen. That is the moral hazard and why the govt had to clamp down on WMP even though theoretically there is no credit rsik to banks.

-Trust Loans can be marketed through banks as WMP but also OTC. Basically it is companies with too much cash lending out money. I think this is where YZJ operates.

(27-09-2013, 12:13 PM)CityFarmer Wrote:

(27-09-2013, 11:58 AM)freedom Wrote: your interpretation of shadow banking is exactly the opposite of shadow banking at least speaking of Yangzijiang.

Micro financing is not shadow banking, it is legitimate financial institutions licensed and regulated, much like the finance companies in Singapore such as Hong Leong Finance, Singapura Finance & Sing Finance.

HTM is the real shadow banking, much like most money market funds. Essentially, it is that private investors (non-banking) are providing finance to certain companies/projects. They are not tight regulated because banks don't hold the loans.

The company's partners, the banks hold the credit (loan) of the HTM, not the company. The company only has counter-party risk. The credit is regulated, since it is within banking eco-system in China. In the other hand, I wouldn't said the arrangement is similar as regulated deposit account, since there are contractual agreement between them.

It is flaw to quota examples in Singapore, as comparison to a micro-financing companies in China, due to difference in term of regulation.

I am more looking at the risks, rather than as academic exercises, on the "shadow banking", in the analysis.

Correct me if I am wrong.

Banks are co-investing on the HTM assets much like Citi group retained some part of its CDOs. Citi did not bear all the risk of its CDOs, only a small portion, though still gets it lots of trouble, that's a different story.

Banks' exposure to HTM is limited.

Regulations in China is only tighter than Singapore, rather than looser.

(27-09-2013, 01:02 PM)specuvestor Wrote: -Wealth Managment Product (WMP) are innovations from the banks when Chinese govt curbed the banks' lending. The normal banking model is that depositors earn 1% interest giving money to the bank, bank acts as intermediary lends 2% to corporates and pockets 1% in intererst income. In WMP the investors earn say 2% investing in the product which the banks sell, and the proceeds goes to the corporates which pays 4% and the bank pockets 2% in non interest income ie service/ selling fee. Effectively these 2 are the same in outcome but the legal implications differs in terms of credit risk which technically the banks don't bear, and the source of income. But as per Lehman crisis, we would think the Chinese government would force the banks to bear part of the cost if crap do happen. That is the moral hazard and why the govt had to clamp down on WMP even though theoretically there is no credit rsik to banks.

-Trust Loans can be marketed through banks as WMP but also OTC. Basically it is companies with too much cash lending out money. I think this is where YZJ operates.

The description is generally true, but not entirely true, within the context of YZJ. The "WMP" of YZJ, the credit risk is with the banks, rather than with YZJ

In general, the description is aligned with my understanding on banking system in China.

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(27-09-2013, 01:52 PM)freedom Wrote: Correct me if I am wrong.

Banks are co-investing on the HTM assets much like Citi group retained some part of its CDOs. Citi did not bear all the risk of its CDOs, only a small portion, though still gets it lots of trouble, that's a different story.

Banks' exposure to HTM is limited.

Regulations in China is only tighter than Singapore, rather than looser.

The "大耳窿" are so common and popular in China, with interest 20-40%. People are taking it as life-long career in China. The "business" volume is reduced due to slower growth in China, but it is still sizable.

I reckon 大耳窿 in Singapore doesn't have the similar "tighter regulation".

55,176,000 married deal at $1.12......

What is this about?

(27-09-2013, 02:00 PM)CityFarmer Wrote:

(27-09-2013, 01:02 PM)specuvestor Wrote: -Wealth Managment Product (WMP) are innovations from the banks when Chinese govt curbed the banks' lending. The normal banking model is that depositors earn 1% interest giving money to the bank, bank acts as intermediary lends 2% to corporates and pockets 1% in intererst income. In WMP the investors earn say 2% investing in the product which the banks sell, and the proceeds goes to the corporates which pays 4% and the bank pockets 2% in non interest income ie service/ selling fee. Effectively these 2 are the same in outcome but the legal implications differs in terms of credit risk which technically the banks don't bear, and the source of income. But as per Lehman crisis, we would think the Chinese government would force the banks to bear part of the cost if crap do happen. That is the moral hazard and why the govt had to clamp down on WMP even though theoretically there is no credit rsik to banks.

-Trust Loans can be marketed through banks as WMP but also OTC. Basically it is companies with too much cash lending out money. I think this is where YZJ operates.

The description is generally true, but not entirely true, within the context of YZJ. The "WMP" of YZJ, the credit risk is with the banks, rather than with YZJ

In general, the description is aligned with my understanding on banking system in China.

I don't quite understand why the credit risk is with the banks on these WMP? The banks are just agents and sometimes they take principal risk so as to facilitate sales. My understanding is roughly aligned with what freedom said as well.

(30-09-2013, 01:46 PM)specuvestor Wrote:

(27-09-2013, 02:00 PM)CityFarmer Wrote:

(27-09-2013, 01:02 PM)specuvestor Wrote: -Wealth Managment Product (WMP) are innovations from the banks when Chinese govt curbed the banks' lending. The normal banking model is that depositors earn 1% interest giving money to the bank, bank acts as intermediary lends 2% to corporates and pockets 1% in intererst income. In WMP the investors earn say 2% investing in the product which the banks sell, and the proceeds goes to the corporates which pays 4% and the bank pockets 2% in non interest income ie service/ selling fee. Effectively these 2 are the same in outcome but the legal implications differs in terms of credit risk which technically the banks don't bear, and the source of income. But as per Lehman crisis, we would think the Chinese government would force the banks to bear part of the cost if crap do happen. That is the moral hazard and why the govt had to clamp down on WMP even though theoretically there is no credit rsik to banks.

-Trust Loans can be marketed through banks as WMP but also OTC. Basically it is companies with too much cash lending out money. I think this is where YZJ operates.

The description is generally true, but not entirely true, within the context of YZJ. The "WMP" of YZJ, the credit risk is with the banks, rather than with YZJ

In general, the description is aligned with my understanding on banking system in China.

I don't quite understand why the credit risk is with the banks on these WMP? The banks are just agents and sometimes they take principal risk so as to facilitate sales. My understanding is roughly aligned with what freedom said as well.

In other words, the HTM's risk exposure is only the counter-parties risk. Please refer to Note 37 (b) (v) of AR 2012.

Excerpt:
The Group’s held-to-maturity financial assets pertains to fixed interest investments through intermediary financial institutions for specific borrowings arranged by these intermediaries.

Collaterals provided by the ultimate borrowers are held by the intermediaries as guarantee for the repayment of principal and interests.