Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia: Financial Services
Equity Research
Parting thoughts, predictions, secularly better-placed sectors/names
Parting thoughts
The lead writer has had the privilege of covering Asia financials since 1994,
a 17-year journey through recessions, long-tailed deflations, two banking
crises, and several M&A waves and share listings, culminating in the rise,
and rise, of China’s financial sector as now the world’s largest, in size, mkt
cap, and perhaps contentious debates and read-across impacts too.
Lessons learnt
Through all these, much of Asia has been marked by better resilience and
underlying growth amidst reforms and restructurings, punctuated however by
often painful lessons. We cite four: (1) massive scale of book value
destruction, often taking years to recoup, when NPLs surge (e.g. Thai/Indo
banks in 1998); (2) the self-defeating nature of excessive loan growth when
combined with already high credit/GDP ratios (leading to China bk recaps in
2010, continued P/E de-rating since then); (3) the importance of higher
ROAs/ROEs to sustain growth, given rising CARs; (4) the increasing procyclicality of bank earnings, fundamentals, valuations given changes in capital
markets, CAR and accounting regimes, i.e. cyclical often trumps secular, as
investors in India banks are seeing. There is also the enigmatic “rule of 15%”
as an early indicator of banking crisis risk – well worth watching for China.
Some predictions
1. The “banks as mirrors of their economies” investing theme still works,
albeit more effectively for commercially driven but still under-sized, underlevered banking markets in promising economies such as Indonesia, India.
2. China banks & the BRIC wall: We look not for re-rating (more reforms
needed) but rather c.5 more years of 15%+ growth. It may get more complex
beyond then if the end of “catch-up economics” starts for China and if still
unreformed credit practices start creating more macro/micro tail risks then.
3. Better-placed HK and Taiwan banks may be fundamentally good proxies/
alternative plays on China banking growth, the former as the RMB and China
firms internationalize, the latter as two-way cross-straits flows flourish.
The search for a potential double: AIA on a 2-3 year view
Asia life insurers ride several structural trends, including ageing, rising L/T
savings/pension and health care needs and capital market build-outs. AIA enjoys
these across 15+ Asian markets plus robust underlying growth, restructuring,
optionalities, re-rating scope on still-undemanding consensus, P/EVs
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia: Financial Services
Equity Research
Parting thoughts, predictions, secularly better-placed sectors/names
Parting thoughts
The lead writer has had the privilege of covering Asia financials since 1994,
a 17-year journey through recessions, long-tailed deflations, two banking
crises, and several M&A waves and share listings, culminating in the rise,
and rise, of China’s financial sector as now the world’s largest, in size, mkt
cap, and perhaps contentious debates and read-across impacts too.
Lessons learnt
Through all these, much of Asia has been marked by better resilience and
underlying growth amidst reforms and restructurings, punctuated however by
often painful lessons. We cite four: (1) massive scale of book value
destruction, often taking years to recoup, when NPLs surge (e.g. Thai/Indo
banks in 1998); (2) the self-defeating nature of excessive loan growth when
combined with already high credit/GDP ratios (leading to China bk recaps in
2010, continued P/E de-rating since then); (3) the importance of higher
ROAs/ROEs to sustain growth, given rising CARs; (4) the increasing procyclicality of bank earnings, fundamentals, valuations given changes in capital
markets, CAR and accounting regimes, i.e. cyclical often trumps secular, as
investors in India banks are seeing. There is also the enigmatic “rule of 15%”
as an early indicator of banking crisis risk – well worth watching for China.
Some predictions
1. The “banks as mirrors of their economies” investing theme still works,
albeit more effectively for commercially driven but still under-sized, underlevered banking markets in promising economies such as Indonesia, India.
2. China banks & the BRIC wall: We look not for re-rating (more reforms
needed) but rather c.5 more years of 15%+ growth. It may get more complex
beyond then if the end of “catch-up economics” starts for China and if still
unreformed credit practices start creating more macro/micro tail risks then.
3. Better-placed HK and Taiwan banks may be fundamentally good proxies/
alternative plays on China banking growth, the former as the RMB and China
firms internationalize, the latter as two-way cross-straits flows flourish.
The search for a potential double: AIA on a 2-3 year view
Asia life insurers ride several structural trends, including ageing, rising L/T
savings/pension and health care needs and capital market build-outs. AIA enjoys
these across 15+ Asian markets plus robust underlying growth, restructuring,
optionalities, re-rating scope on still-undemanding consensus, P/EVs
No comments:
Post a Comment