Asiamoney China Securitization Awards

Many ABS deals in China caught Asiamoney’s attention this year, whether from new issuers and asset classes or because they came with structural innovations.

Among China’s securities houses, China International Capital Corp impressed Asiamoney the most with its ability to innovate.

Bank of Communications has led or jointly led many landmark deals in China since it received its first ABS underwriting licence in 2013, and its peers, including foreign firms, have noticed.

When it comes to international banks operating in China’s securitization market, HSBC is an outlier – not because of its market dominance, but because of its strategy for the asset class.

Since setting up the ABS department in 2006, Citic Securities has become an indisputable leader in the market.

Bank of China continues to lead the way in asset-backed securitization in mainland China, making it a clear choice for the best domestic bank for securitization award.

Since the People’s Bank of China (PBoC) reformed the country’s benchmark rate system in August 2019, many banks have linked their RMBS trades to the new five-year loan prime rate (LPR). But the underlying mortgages of their RMBS deals were still linked to the old benchmark rate. As a result, linking their RMBS to the new five-year LPR created a rate mismatch between the asset side and the securities side.

The legal landscape in China around the securitization industry is often hard to navigate. But King & Wood Mallesons (KWM) stands out from its peers. The law firm provided legal services for 254 securitization transactions with a total value of Rmb296.2 billion ($45.4 billion) during the awards period, according to Wind data.

China Chengxin International Credit Rating (CCXI) dominated ABS ratings during the awards period with a market share of more than 55%, well ahead of its closest competitor, which had a 27% share.

Citic Securities has an enviable position in China’s ABS market: it boasts a structuring team with the ability to innovate and a large enough client base to test out those new ideas. The firm has notched up several landmark deals, each opening new ground for others to follow.

Bank of China is the leader in the asset-backed note market. Led by Zhu Dan, vice general manager of the investment banking and asset management department, Bank of China’s team had another good year, taking the top spot in the league table again. The bank underwrote 49 ABNs worth Rmb48.4 billion ($7.4 billion) during the awards period, according to Wind data – up 58.2% from its previous record Rmb30.6 billion of ABNs in the last awards period.

The Chinese account receivables securitization market has expanded dramatically over the years. In 2017, there were 141 deals with a total value of Rmb158.6 billion ($24.3 billion). By 2019, there were 569 new deals worth Rmb428.5 billion. In the first 11 months of 2020, 739 deals with a total value of Rmb653.1 billion were sold, Wind data shows.

For the third year in a row, China Merchants Securities (CMS) has stood out from the crowd in China’s residential mortgage-backed securities (RMBS) market.

CICC underwrote six commercial mortgage-backed securities (CMBS) deals with a total value of Rmb16.52 billion ($2.53 billion) during the awards period, representing a market share of 27.67%. In terms of CMBS issuance deal numbers and volumes, the securities house ranked first and second respectively.

It was an easy decision to give the auto ABS house award to Citic Securities. The advantage the securities house has in the market is impossible to overlook.

Competition for this year’s best house for securitization was fierce. Despite the Covid-19 pandemic, new issuance in China’s ABS market still rose 16.1% to Rmb2.585 trillion ($396 billion) during Asiamoney’s awards period, between October 2019 and the end of September 2020, Wind data shows.

The Chinese asset-backed securities market saw a boom in 2019, marked by relentless innovation and cutthroat competition. The winners of Asiamoney’s second China ABS awards have driven this growth

Securities Originator: Beijing Jingdong Century Trade Co., Ltd

Fangda Partners, founded in 1993, prides itself on having more senior securitization lawyers than any of its peers. The firm specializes in corporate asset securitization, credit ABS and ABN. Wu Dong and Yan Yan are the two partners leading the firm’s securitization market coverage.

China Chengxin International Credit Rating (CCXI) is the largest credit rating agency in China and the fourth largest in the world. A joint venture between China Chengxin Credit Management Co and Moody’s, CCXI claims to have rated every single ‘first’ deal in the ABS market.

Although the Chinese ABS market is still relatively young compared with those in more developed markets, domestic banks and securities houses have innovated relentlessly. From structuring supply-chain asset-backed securitization to securitizing a parking-lot’s future income, the market has an insatiable appetite for new asset types.

The asset-backed notes (ABN) market allows non-financial enterprises to issue securitization deals in the interbank market. Bank of China, more than any other firm, has led market developments.

Account-receivables asset-back securitization is unique to China. The underlying assets of account-receivables ABS can be roughly divided into two categories: enterprises’ account-receivables obligatory rights and factoring agents’ obligatory rights. Based on these two types of underlying assets, account-receivables ABS can be divided into general and reverse factoring or, as bankers call it, supply-chain ABS.

CSC was one of the first securities houses in mainland China to tap into the commercial mortgage-backed securities industry. Since 2014, it has arranged eight CMBS deals with a total value of Rmb22.4 billion ($3.2 billion), ranking number one in the market both in terms of number and volume of deals. The team was led by managing director Xie Changgang.

It was an easy decision to give China Merchants Securities (CMS) the award for best for residential mortgage-backed securities in China. The securities house, part of China Merchants Group, deserves the title in every possible way.