Fitch: Chinese Structured Finance Market Continues to Expand
A total of CNY193.4bn (USD29.8bn) of Chinese structured finance transactions were issued in 2Q16, representing a 96% yoy increase. The increase was principally driven by 242% growth in the Asset-Backed Specific Plan scheme, which is regulated by the China Securities Regulatory Commission. Issuance under the Credit Asset Securitization (CAS) scheme, which is regulated by the People's Bank of China and China Banking Regulatory Commission and is the leading structured finance market by size, increased 43% yoy. The increase was predominately due to residential mortgage-backed securities (RMBS) and auto-loan asset-backed securities (ABS) issuances, although limited by a significant fall in collateralised loan obligation issuance. Fitch expects both RMBS and ABS asset-classes to maintain the growth momentum in 2H16.
Highlights for 2H16 include the issuance of three non-performing loan (NPL) ABS and two asset-backed note (ABN) securitisation transactions. The three NPL ABS deals, originated by Bank of China Ltd. (A/Stable) and China Merchants Bank (BBB/Stable) were pilot transactions, as the regulators have restricted the market during the 2008 global financial crisis. Fitch expects more NPL ABS to be launched in the near-term, as the government has granted quotas of CNY50bn to six commercial banks to help them deal with rising NPL ratios.
The two ABN securitisation transactions adopted a special purpose trust structure similar to CAS scheme, the first time this asset-class has used this structure since inception in 2012. This type of instrument allows non-financial corporates to issue asset backed notes in China's interbank bond market. The opening up of the interbank securitisation market to non-financial corporates leads Fitch to expect a continued flow of ABN issuance, as it provides a deeper investor-base than the stock-exchange bond market. The current issue of the report provides data and commentary on the most recent developments in the Chinese structured finance market. In addition to commentary on the market outlook in 2H16, the report includes commentary on regulatory developments, a summary of Fitch's most recent structured finance counterparty criteria, a list of Chinese securitisations in the pipeline, as shown in the shelf registration data, and the performance of auto-loan ABS and RMBS in China.