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Asia banks
Tiny US asset exposure
Event
S&P downgraded the US credit rating to AA+ from AAA. We estimate Asian
banks’ US asset exposure.
Impact
There is little granularity on banks’ exposure to US assets, specifically, US
Treasuries, as countries differ in terms of the extent that they disclose the
breakdown along asset class, geographies, etc. Hence, our inferences are
based on available disclosures, and we may supplement these data with a
call to the respective companies (where possible).
HK appears to have the biggest US asset exposure among banks across the
region, at 3.5%. Within HK, Dah Sing Financial could potentially be the most
exposed in terms of US assets to total assets (at 7.7%), although in absolute
amount, Hang Seng Bank and Bank of China (HK) clearly lead, given their
market size.
Many Asian banks have little or no exposure to US assets. This should not be
altogether surprising, given the lack of complexity in a bank’s investment
approach and/or possible restrictions on investing outside its country. We find
that the Philippines, India and Thailand have the lowest potential exposure to
US assets.
Outlook
Asian banks have relatively low exposure to US assets. Banks in developed
markets typically are more inclined to investing in US assets, although as a
proportion of total assets, these are not very large.
With yields dropping on the notion of ‘risk-off’ event, US Treasuries have
rallied. This creates an opportunity to lock in potential windfall gains. HK
banks would theoretically benefit the most, followed by Singapore.
We are not anticipating an increase in risk weightings for risk-based capital
calculations on the back of the US credit rating downgrade. We hold that the
rating agencies merely formalise what the market has already been mulling,
and that the ratings drop to AA+ by a single rating agency will not warrant an
increase in risk weights that could potentially weigh on a bank’s capital
standing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia banks
Tiny US asset exposure
Event
S&P downgraded the US credit rating to AA+ from AAA. We estimate Asian
banks’ US asset exposure.
Impact
There is little granularity on banks’ exposure to US assets, specifically, US
Treasuries, as countries differ in terms of the extent that they disclose the
breakdown along asset class, geographies, etc. Hence, our inferences are
based on available disclosures, and we may supplement these data with a
call to the respective companies (where possible).
HK appears to have the biggest US asset exposure among banks across the
region, at 3.5%. Within HK, Dah Sing Financial could potentially be the most
exposed in terms of US assets to total assets (at 7.7%), although in absolute
amount, Hang Seng Bank and Bank of China (HK) clearly lead, given their
market size.
Many Asian banks have little or no exposure to US assets. This should not be
altogether surprising, given the lack of complexity in a bank’s investment
approach and/or possible restrictions on investing outside its country. We find
that the Philippines, India and Thailand have the lowest potential exposure to
US assets.
Outlook
Asian banks have relatively low exposure to US assets. Banks in developed
markets typically are more inclined to investing in US assets, although as a
proportion of total assets, these are not very large.
With yields dropping on the notion of ‘risk-off’ event, US Treasuries have
rallied. This creates an opportunity to lock in potential windfall gains. HK
banks would theoretically benefit the most, followed by Singapore.
We are not anticipating an increase in risk weightings for risk-based capital
calculations on the back of the US credit rating downgrade. We hold that the
rating agencies merely formalise what the market has already been mulling,
and that the ratings drop to AA+ by a single rating agency will not warrant an
increase in risk weights that could potentially weigh on a bank’s capital
standing.
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