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China Securitization: ABS And RMBS Tracker January 2024

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China Securitization: ABS And RMBS Tracker January 2024

China ABS And RMBS Tracker is a monthly report that tracks the performance of the China ABS and RMBS rated by S&P Global Ratings.

Auto ABS

Performance remains stable while delinquency ratios continue to diverge
  • The weighted-average 30-plus-day delinquency ratio of auto ABS transactions that we rate increased slightly to 0.29% for January 2024 from 0.26% during December 2023. This was mainly because deals with distinct pool attributes continued to accumulate severely delinquent loans, which usually need more time to work out.
  • The severe delinquency rate (90 plus days) has been stable at 0.12% for the past two months.
  • Delinquencies continued to diverge as transactions with unique pool features accumulated arrears in our rated portfolio. For example, the range for 30-plus-day delinquencies for our rated pools widened from 0.01%-2.91% during December to 0.02%-3.80% for January.
  • When transactions with broader customer bases are excluded, the weighted-average 30-plus-day and 90-plus-day delinquency ratios have been stable and hover around 0.13% and 0.04%, respectively, for the past eight months.
  • Delinquencies will likely continue to diverge in the coming months. For transactions with distinct pool attributes and rising arrear ratios, the issuers provided higher credit enhancement at deal close to address foreseen credit risks. We expect the overall performance of our rated transactions to remain stable.

Table 1

30-plus-day and 90-plus-day delinquency rate composite
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 12-month moving average Average in 2023
30+ DPD (%) 0.47 0.46 0.40 0.31 0.34 0.33 0.23 0.26 0.24 0.27 0.29 0.26 0.29 0.31 0.32
90+ DPD (%) 0.25 0.26 0.26 0.18 0.20 0.20 0.11 0.12 0.12 0.13 0.14 0.12 0.12 0.16 0.17
DPD--Days past due.

Chart 1

image

Auto ABS coupon rates to trend downward following rate cuts
  • The People's Bank of China (PBOC) started 2024 with several monetary easing measures. On Feb. 20, 2024, the five-year loan prime rate (LPR) was lowered to 3.95% from 4.20%. The 25 basis-point (bps) cut was the largest reduction in the benchmark rate since the launch of the LPR mechanism in 2019. Besides, effective Feb. 5, 2024, PBOC cut the reserve requirement ratio for financial institutions by 50bps. We expect the aforementioned moves to unleash substantial medium to long-term liquidity into the market and to further lower funding costs for both business and household mortgage loans.
  • Following the rate cuts, the medium-term Shanghai interbank offered rate (SHIBOR) has been on a declining trend, with six-month SHIBOR declining to 2.3% in mid-February 2024 from 2.6% in late-December 2023. We expect auto-loan ABS coupon rates to follow a similar trend, albeit with time lag.
  • The three-month median of coupons on the most senior tranches rose to 2.55% for November 2023-January 2024, from 2.49% for October-December 2023. However, based on a transaction newly priced in late-January 2024, the coupon on the senior-most tranche has declined by about 20bps when compared with the last deal issued by the same originator and priced in late November 2023.

Chart 2

image

RMBS

Volatility in delinquency ratios after recent transactions pay down
  • The weighted-average of 30-plus-day delinquency ratios for RMBS transactions that we rate fluctuated between 2.6% and 2.9% since September 2023.
  • The weighted average 90-plus-day delinquency ratio hovered between 2.3% and 2.6% over the same period.
  • The recent dip in the previous months was mainly due to the paying down of some seasoned transactions, which had accumulated more severely delinquent loans. The subsequent delinquency increase is because these arrear ratios generally tend to trend upward gradually over time if no new transaction is included. This is largely because the underlying pools continue to pay down, while severe delinquent loans take time to work out.
  • Delinquency ratios will remain higher than they were before August 2023, given a shrunken underlying asset base after the recent prepayment spike (see "China Securitization Performance Watch 4Q 2023: Slow Issuance Should Linger; Asset Performance Remains Stable" published Feb. 8, 2024, on RatingsDirect). Nonetheless, we believe that the asset performance of our rated RMBS deals is largely stable, considering that the rise in severe delinquency rates in January was driven more by the paydown of underlying pools than the increase in severe delinquency, per our estimate.

Table 2

Delinquency rate composite
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 12-month moving average Average in 2023
61-90 DPD (%) 0.08 0.05 0.06 0.06 0.06 0.06 0.06 0.08 0.11 0.14 0.13 0.10 0.11 0.08 0.08
30+ DPD (%) 1.15 1.20 1.23 1.28 1.34 1.39 1.47 1.51 2.65 2.87 2.62 2.75 2.80 1.93 1.79
90+ DPD (%) 0.99 1.03 1.07 1.12 1.17 1.21 1.28 1.34 2.34 2.49 2.32 2.45 2.54 1.70 1.57
DPD--Days past due.

Chart 3

image

Annual Review* From November 2023 To January 2024

Zhong Ying Wan Jia 2021-5 Residential Mortgage Backed Securities 11/29/2023
Jianyuan 2019-10 Residential Mortgage Backed Securities 12/21/2023
Bavarian Sky China 2022-1 1/30/2024
*In an annual review, S&P Global Ratings reviews current credit ratings against the latest issuers/issues performance data as well as any recent market developments. Annual reviews may, depending on their outcome, result in a referral of a credit rating for a committee review, which may result in a credit rating action. The above list is not an indication of whether or not a credit rating action is likely in the near future.

The key elements underlying the credit rating can be found in the issuer's latest related publication. Additionally, for each issuer/issues listed above, S&P Global Rating's regulatory disclosures (PCRs) can be accessed on the relevant page on www.spglobal.com/ratings by clicking on Regulatory Disclosures underneath the current credit ratings.

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Melanie Tsui, Hong Kong +852 2532 8087;
melanie.tsui@spglobal.com
Patrick Chan, Hong Kong + 852 2533 3528;
patrick.chan@spglobal.com
Yilin Lou, Hong Kong +852 2533 3524;
yilin.lou@spglobal.com
Secondary Contacts:Jerry Fang, Hong Kong + 852 2533 3518;
jerry.fang@spglobal.com
Carol Hu, Hong Kong + 852-2912-3066;
carol.hu@spglobal.com

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