Latest from press on CCT and ICBC Trust Failure

No big developments, but here are three of the latest stories (all Google Translated) in the Chinese press.

China Credit Trust Crisis: Investors Want Answers From ICBC Private Banking Unit中诚信托兑付危机:投资者拟向工行私人银行讨说法

I highlighted a passage in this article, here it is in case you skip this article:
However, most industry insiders interviewed still relatively optimistic. They believe that although this year is cashing peak, but overall risk is not great, mainly due to the maturity of the project is the highest proportion of real estate investment trust, as long as house prices and land prices does not appear obvious decline, it will not dispose of assets will be very difficult. Even if the risk appears cashing, just liquidity risk.

Article in full:
January 31, 2014, is China's first lunar month, but for the CCT is concerned, it is destined to be a sad mark. A 3 billion yuan of the company's mineral trust scheme expires on this day, and the related trust account balance is only 5.6694 million yuan, the company's actual controller of the financing behind bars, scheduled debt almost impossible. There is no doubt that this event will test the "rigid honor" unwritten convention Chinese trust industry has always been.

Securities Times reporter was informed that some investors to buy these products is considering rushed ICBC Private Banking and Credit Trust headquarters, communication payment issues. At the same time, they express their anger on the horizon, such as online forums.

As CCT channel side, is full to avoid becoming rigid honor those who break and items recommended side and agency side ICBC will have been very calm, which caused the impasse continues to ferment.

This is not a rigid rule for the first time tested payment, it is difficult to be the last. After Hurricane Mengjin trust industry over the past two years, and crossed the threshold of 10 trillion, the rapid growth of sequelae gradually.

Prudential sounding the alarm event

CCT did not think, as a channel fee three years ago to make their own cash into the storm, but did not expect this honor this year's financial crisis even be considered a default "first shot" insiders.

January 31, 2010, Credit Trust launched the "honest to open the 1st set of gold trust scheme" management for a period of 36 months. After twice raising, raising the total size of the product was 30.3 billion yuan, mainly used for coal prices in Shanxi Energy Group Limited amplitudes equity investment.

However, in the May 11, 2012, on suspicion of amplitudes Group Vice Chairman Wang Pingyan crime of illegal deposits from the public, in filing the same day jingfangxingju. CCT immediately released an interim report, and caused an uproar.

Late last year, announced that the Credit Trust to investors, these plans can not be cashed current income trust based on the expected value. And its latest management report admitted that the product of the trust property realized there is uncertainty before the liquidation, does not rule out walking proceedings.

According to informed sources, China Credit Trust and funding of this project are from ICBC, China Credit Trust which played only "channel" effect, the money the bank is about to detour into its selected projects, thereby helping it to avoid the credit control . Thus, only a few channels to earn fees Credit Trust think they should not be held to settle the obligation.

However, from a legal perspective, ICBC as the consignment of the product line is not liable for losses; CCT Although there is no legal obligation to honor rigidity, but it does not want to be the destroyer of industry rules, both sides caught in the game deadlock.

"This event has attracted regulatory attention, the regulatory authorities have been involved in the coordination, the final result should be treated not break the rigidity of payment, is likely to be funded both sides to reveal all the details, but disclosed may be another way." An Sources close to the regulators, said the incident clarify responsibility for collective trust channel business model stakeholders have meaning.

Prudential predicament event also reflects the aftermath of the Trust channel business. Over the past few years, the trust industry by virtue of a license contract a lot of the advantages of channel-type business. McKinsey has estimated that the channel business model contributed 39% of 2012 total revenues of the trust industry.

More than ten thousand one hundred million yuan coming due

In fact, the event also sincere trust industry will usher in the year of payment tide raised the alarm.

In general, the term trust products between 1.5 years to 2 years, that the issue of the amount of trust a lag of about seven quarters will be converted to the amount due. Haitong Securities series of case studies of credit risk report shows the trust expires in 2014 corresponds to the 2012 second quarter - the first quarter of 2013, the Trust issued 5.3 trillion in volume. This means that the amount of the trust expires in 2014 compared with 2013 growth of more than 50% in May is the peak of maturity, up to 1.7 trillion yuan.

In fact, these 5.3 trillion trust fund as a single product in the majority of the trust. Since a single counterparty as a major trust banks or institutional investors, trust does not need to be rigid payment, the more the market is worried about the rigidity of payment are mostly related to the collection of trust.

Reporter According to statistics disclosed Trust Industry Association, which has 5.3 trillion trust products Capital Trust 5782 models, involving funding of up to 1.05 trillion yuan.

The report directed at small and medium real estate investment trust, or will become a high default risk areas. According to incomplete statistics, since August 2012, at least 16 projects are under pressure into the trust, of which 10 projects related to real estate, small scale enterprises someone's private enterprises, mainly in the Bohai Sea and the long Triangle.

Real estate loans have been risk areas need attention in the trust industry, 2013 was the peak of the real estate trust payment has been exposed in the event of payment risk, real estate trust account for the majority, not including disk access is by way of trust "rigid payment" problem products.

"Trust in the past has been the product of rigid honor the unspoken rules, but in recent years a large expansion of the industry, asset size has the ability to trust management beyond the rigid payment." Jiang Chao, chief macroeconomic analyst at Haitong Securities case considered.

But the reality is often more brutal. Once there is a single occurrence of a material breach of trust products, is likely to lead to a chain reaction. Moment, each Trust are keen to avoid becoming rigid honor those who break the unspoken rules.

"A lot of trust coming due on the trust is indeed a big challenge, do not rule out the excess trust affordable range which could have a ripple effect, resulting in investors' perception of trust changes, Regulators may also impose more stringent regulatory standards. "said Lee Trust with interest, principal analyst Yang.

Trust against payment

Many trust company executives confirmed to reporters that the regulatory authorities have repeatedly stressed in internal speech, 2014 will usher in a wave of cashing peak, trust Always prepare for in advance.

According to the reporter, some trust requires trust manager "keep an eye" on historical items, beware of flaws; Meanwhile, trust companies also pay more attention to education and disclosure of information to investors.

"Now some trust managers do all day staring at the last big project for fear of an accident, did not have time to read the new project." Beijing Trust senior manager of a large trust company admits.

It seems that in the middle of a trust company executives, trust must make a choice between future earnings and reputation. Under the status quo, more trust will still choose reveal all the details, to fill a hole through a variety of channels, but if too much money involved, trust companies also consider fallback costs.

However, most industry insiders interviewed still relatively optimistic. They believe that although this year is cashing peak, but overall risk is not great, mainly due to the maturity of the project is the highest proportion of real estate investment trust, as long as house prices and land prices does not appear obvious decline, it will not dispose of assets will be very difficult. Even if the risk appears cashing, just liquidity risk.

"And in this case Prudential Mineral Trust is different, the ultimate real estate projects through financial maneuvers and trust asset disposal, basically can cover the principal and interest, so in the unlikely event of mass detonate Cheng risk unless there is systemic risk, it is not just is the trust industry, I am afraid that all financial institutions could not carry. "Trust in the prefix of a trust manager, said.

Who does not want to be the last disk access. After a series of events to honor the frequent occurrence, whether regulators, or trust company itself, are more focused on risk control and information disclosure, and strive to avoid the products in question from the source.

North of a trust to sources, the company significantly increased the risk control requirements, such as due diligence requirements while trust managers and risk control manager to the scene. In addition, the company financing parties involved in the case of private lending and more attention, usually with the financing of financial institutions domiciled repeatedly verified.

At the same time, some companies have realized the importance of timely disclosure of project risks. Li Yang believes that trust should inform the sales of products in investor risk, product risk should also be subject to timely disclosure, but not always clutching, until only allow investors aware of the crisis, so investors will have an acceptable process .

More importantly, through the Prudential event, some industry insiders began to reflect on the system of regulation and credit risk throughout the financial system.

"We should not focus only on this project can be cashed in sincerity, but should focus on the credit risk of the entire financial system, not just against the risk of pressure in the trust only him, honesty and trust in this industry is not fair." Foregoing North consider the case of a trust company executives.

Many respondents trust industry executives said that in the era of large information management, although various financial institutions business liberalized, but the scale of regulation, but there is a big difference. Many projects do even trust, brokerage fund subsidiary also dare to take, just flower drum pass of the game, the risk can only be pressed gourd dipper float, the proposed introduction of a unified regulatory agency regulatory standards.

This next article discusses the central bank's actions and the impact on the market. It led to a drop in short positions on gold.

央行“放水”缓和期指“悲情” Central bank "rescue" eases the "sadness"
Four index futures contract rose 21 across the board, mainly by central bank liquidity drain brought positive boost. Budding main contract closed at 2206.4 points IF1402, the previous day's settlement price rose 22.2 points, or 1.02 percent, and the remaining three contracts rose more in the vicinity of 0.9%. The CSI 300 stock index rose considerably, up 0.99% to close at 2187.41 points. Total open interest fell to 117,073 contracts four hands. Market participants pointed out that although the central bank is difficult to facilitate drainage of disposable means to reverse the weak, but the market pessimism eased short-term or limited downside.

Pessimism eased

Compared to affect the IPO IPO restart tide, the central bank released significantly positive liquidity prevailed yesterday, the index rose across the board.

21 is the new shares after the IPO resumption intensive market day. In this regard, Shanghai interim senior analyst Tao Qin Ying respect, the recent stock stumble endlessly fuse is issuing new shares, in addition to the pressure diversion of funds outside the IPO occurred during the fight against the larger issue of market confidence.

However, yesterday the listing does not affect a large influx of new shares, and the market reacted positively to the central bank's actions. Guotai Junan Futures senior researcher Jiang to Hu pointed out, the term refers to quantify the probability-weighted index signal big bull pointing direction of the central bank's reverse repo scale than expected pushing the stock up. On the trend of the day, despite the bulls still somewhat cautious, but undoubtedly the market pessimism can be soothing.

Tao Qin Ying further analysis, refer to Changes in the position of the House yesterday, there are two inspirations: one bull enthusiasm to do more limited upside in the vicinity of the main contract and 10-day moving average, positions gradually decline, accompanied by the index trend callback, indicating that the bulls the firm does not do more confident, less alone a massive drain the central bank to reverse the pattern of the index vulnerable possibility; Second, the 2200-point line fierce, the afternoon of the main contract refers basically run around the 2200 shock, positions fluctuation is small, and more The two sides did not appear empty one obvious advantage, indicating that the point near the market more cautious attitude.

It is noteworthy that, the index closing of positions have come down, pulled slightly increased during the late period refers to premium rate. Tao Qin Ying opinion, this display is extremely pessimistic market sentiment after easing. GF Futures researcher Hu shore also consider the futures market pessimism eased.

Short-term downside is limited

21 on the position data published by China Gold, shorts are to be cautious, with a drop in net shorts. Market participants expect the short-term downside is limited.

Positions on the main seat of the data published in the gold, the front month contract IF1402 20 seats more than 732 hand single reduction, reduction of 1209 empty one hand, the front month contract IF1403 20 seats more than a single reduction of 437 hands, empty single reduction 822 hand held. Summary three positions before the contract before the main contract IF1402 20 847 members to reduce the clearance one hand to hand 7157, 20 members of the first three contracts net short positions to reduce the 1343 hand to hand as 14,628.

GF Futures researcher shore Hu pointed out that the positions change, the long and short sides yesterday, mostly small-scale operation of the main holdings, including the reduction of the intensity of the short side on the strong side. Three cumulative net short contracts despite somewhat lower but still at a high level, which seats short main card, Huatai Great Wall were reduced pay more space to display short power continued to accumulate. In her view, the bulls Gangster Guotai Junan three seats in total holdings of more than a single contract 7 hand, indicating that the bull market confidence is insufficient, limited upside momentum. Hu shore is expected to continue to fall sharply in the index space is very limited.

However, Jiang to Hu is more cautious. He pointed out that although single clearance decreased, but still remained at a high level, in the short-term funding pressures ease premise, short hedging positions choose to wait and see. He warned that financial pressures facing the index or only short-term relief

Countdown to Maturity Final Games For China Cerdit and ICBC (诚至金开1号兑付倒计时 工行与中诚信托最后博弈)

This article translates very badly in Google and goes into legal issues. Here's my summary mixed with my own commentary:

The fund plans to pay out 600 million yuan in profits on January 31. Obviously this is far short of expectations. One insider explained how it might unfold. The most gentle approach (for investors) will be for CCT and ICBC to use their own funds and advance pay the principal and interest to investors, then use assets held by CCT, such as the 49% stock in Zhenfu, to get back the money. But an insider of CCT pointed out that getting back the funds will not be easy due to the complicated case (and there are other creditors of Zhenfu) and the amount of money they'd have to front would not be small. Another person speculated they could create a new trust with a third party and use the funds to payback investors, in essence a third party bailout. Another would be to sell the creditor's rights at a discount, but coming so close to the end the discount would need to be huge and CCT and ICBC may still need to kick in some funds to get a deal done.

Finally, if there's no third party deal and they refuse to use their own capital, they can delay the payout. However, CCT's rights are for stock in the companies, not mining rights, so their value is very small.

I have no inside knowledge of what is happening, but given that more trust failures are likely, CCT and ICBC are unlikely to step in with cash. Some experts say a default would be a good thing as well.

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