Key Takeaways
- The weighted-average 30-plus-day delinquency rate for auto asset-backed securities (ABS) that we rate crept up to 0.29% in January 2024 from 0.26% December 2023, while the severe delinquency rate remained stable at 0.12% over the same period.
- The three-month median of coupons on the most senior tranches of recently closed auto ABS rose to 2.55% during November 2023 to January 2024.
- The weighted-average 30-plus-day delinquency ratio of residential mortgage-backed securities (RMBS) that we rate inched up to 2.80% in January from 2.75% in December 2023.
- The performance of our rated auto ABS and RMBS transactions has been stable. Coupon rates of auto ABS are likely to fall in the following months after a series of monetary easing measures.
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
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
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
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
- China Securitization Performance Watch 4Q 2023: Slow Issuance Should Linger; Asset Performance Remains Stable, Feb. 8, 2024
- China Industrials Are Making Do With Less, Feb. 1, 2024
- China Retail Sales Will Likely Grow Slower Than GDP This Year, Jan. 23, 2024
- A Comparative Overview Of Select China Consumer Loan ABS, Jan. 22, 2024
- Credit Conditions Asia-Pacific Q1 2024 India, Southeast Asia Advance As China Slows, Dec. 5, 2023
- Economic Outlook Asia-Pacific Q1 2024: Emerging Markets Lead The Way, Nov. 27, 2023
- China Growth Could Fall Below 3% If The Property Crisis Worsens, Oct. 24, 2023
- China Property Watch: A Slow, Sequential Recovery In 2024, Oct. 16, 2023
- How We Rate China Leasing Securitizations, Oct. 12, 2023
- China Mortgage Rate Cuts Will Help Home Buyers And Won't Hurt Rated RMBS, Oct. 10, 2023
- Credit FAQ: What's Behind The First 'AAA (sf)' Rating Assigned To Chinese Consumer Finance ABS?, Aug. 24, 2023
- A Primer On China's Consumer Loan ABS Market, June 9, 2023
- A Primer On China's MSE Loan ABS Market, May 10, 2023
- A Primer On Hong Kong's RMBS Market, April 13, 2023
- A Primer On China's Equipment Lease ABS Market, March 2, 2023
- A Primer On Hong Kong's Consumer Finance Asset-Backed Securities Market, Sept. 22, 2022
- A Primer On China's Residential Mortgage-Backed Securities Market, May 24, 2022
- A Primer On China's Auto Loan Asset-Backed Securities Market, April 28, 2022
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 |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.