The traditional non-performing asset package we often talk about generally refers to asset packages acquired from banks or licensed AMCs. The first-hand sources include: asset packages divested by banks and asset packages transferred by licensed AMCs themselves.

Author: kangins

The traditional non-performing asset package we often talk about generally refers to asset packages acquired from banks or licensed AMCs. The first-hand sources include: asset packages divested by banks and asset packages transferred by licensed AMCh self-operated part (non-financial investment). This type of asset package has a significant feature, one is that the total amount is large (currently including the non-divorcement of banks, the divestitures of banks held by AMC, and the non-financial investments held by AMC). The cumulative asset scale of this part is about 8-10 trillion yuan.

1. What is a traditional non-performing asset package?

A prominent feature of this type of non-performing asset package is its openness and transparency throughout the process and its numerous players. Because after more than 20 years of cultivation, there are many players on the market at present. How to stand out among the many players is the point that every player present is thinking. More importantly, the top private players (such as Wensheng Asset, etc.) basically account for a small proportion. The largest private players account for no more than 1% of the total. Compared with the real estate industry, just like the real estate industry during the Baowan dispute in 2016, the largest player at that time, the market share of Vanke was only about 2%. The total market share of the top 10 players does not exceed 10%. After four years of fighting (i.e. 2020), the top player Evergrande has reached 6%, and the total market share of the top 10 players has exceeded 30%. Therefore, it is necessary to think about how to expand the territory in this blue ocean of traditional asset packages in 3-5 years in the future.

2. The source of this round of traditional asset package

The transfer order of traditional asset package: Bank-licensed AMC-Level 2 player-N-level player--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- More than 80% of the non-performing asset packages transferred by banks are concentrated in the hands of 59 licensed AMCs (including 5 national AMCs + 54 local licensed AMCs).

2. For 59 licensed AMCs, their asset stock scale reached its peak in 2021 (because the bad debts in the major banking systems have basically been cleared), but starting from the second half of 2021, with the country's suppression of the real estate market, the leading real estate companies continued to storm, which not only triggered large-scale defaults in the real estate industry, the three major mortgaged asset categories of bank loans (before, in the three major mortgaged asset categories of bank loans, industry and commerce accounted for the majority of the traditional non-performing assets under the base assets, and residential are the only bank mortgaged assets that have not exploded in large areas), thus triggering a new round of opportunity period for short-term non-performing assets, but also the current period of 2022-2023.

3. The source of the current non-performing asset package: the scale of the non-performing assets in the stock of 59 licensed AMCs (the assets acquired from the banking department, the core underlying assets are: industry and commercial, the scale has increased since 2014, and this part has reached the largest scale by the end of 2021) + the real estate bad debt generated by the banking real estate industry itself + 59 licensed AMC non-financial non-investment (self-operated part)

3. What money does traditional asset package make?

To answer this question, we must first clarify what points: Where is the current opportunity? What money does traditional asset packages make?

1. Where is the current opportunity?

The current opportunity background for non-performing asset investment in 2022 is: real estate downturn + epidemic. That is, real estate began with the "three red lines" that the China Banking and Insurance Regulatory Commission suppressed real estate in the second half of 2021, which began to lead to the storm of a large number of leading private enterprises, thus leading to the storm of the upstream and downstream real estate industry chains of brought about by the downward trend in the real estate industry, and the opportunities arising from the impact of the epidemic.

(1) Real estate industry

There is no specific analysis here. As the saying goes, the stock market is the barometer of the economy. Similarly, the stock market is also a leading indicator of industry recovery.Judging from the window period for investment of new non-performing assets brought about by the real estate industry that is in crisis, analyzing the trend of real estate recovery will help to seize the best opportunity to intervene in non-performing assets.

feedback from the stock price of the two leading real estate private enterprises.

Country Garden : Hong Kong stock reached a historical low at the end of November, with an annual sales of one trillion yuan, with a market value falling by 94% from the peak (from a market value of 400 billion to a market value of 20 billion yuan). In just one week, Country Garden has nearly doubled. On November 11, after the country relaxed the epidemic control, it soared directly by 34.94% on the same day. This market can be said to be comparable to the stock market reaction before and after the 4 trillion yuan investment in 2008. This shows that at the top (or ruling class and some elite class), the market had learned that the country was about to relax the epidemic control a week ago.

Picture source: Tonghuashun

Xuhui: Similarly, after reaching the historical lowest stock price in early November (the cumulative decline of the highest stock price reached 95%), it soared nearly 400% in one week, especially on the day when the country announced the relaxation of epidemic control, it directly pulled 72.22%. The logic is the same as Country Garden.

Picture source: Tonghuashun

Therefore, in terms of this round of non-performing assets window period based on the real estate industry, the current time point is the best investment window period for this round.

(2) Epidemic control measures

also uses the stock market as a leading indicator to analyze. Since the outbreak of the epidemic in 2020, global stock markets have experienced a plunge without exception. However, since May 2020, with the relaxation of epidemic control measures by the end of 2020, European and American stock markets have directly emerged from a bull market (stock index doubles, and most of the individual stocks have risen by about 5-10 times). As the main source of the national manufacturing industry, due to the epidemic control reasons, the stock index has even started a negative decline mode without rising. As a more market-oriented Hong Kong Hang Seng Index has directly emerged from a halving market (the corresponding individual stocks have fallen by more than 60-90%). On November 11, the more market-oriented Hang Seng Index directly pulled 7.74%, with an increase of up to 25% in one week. Similarly, the market that can be compared in history is the 4 trillion yuan market in 2008.

2. What money does traditional asset package make?

The money earned by traditional asset packages is divided into three parts: information asymmetry money, industrial investors' money, and industry cycle money. Among the three, the total profit of is: information asymmetry money <>

(1) Money with information asymmetry

The traditional asset package market has been cultivated for nearly 20 years. Compared with other new bad products, the competition in the traditional asset package market is the most complete, the rules are the most transparent, and the most players. If you can make money with information asymmetry in the early stage, although the possibility of making this dollar now is not ruled out, the opportunity is very small, and the scale account for a very small proportion.

(2) Money for industrial investors

Transfer order of traditional asset packages: Bank-licensed AMC-second-level player-N-level player------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Because in asset package quotation, for rational investors, as long as they are not the final industrial investor, their exit path will definitely be transferred to industrial investors through layer by layer transfer, and investors in all intermediate links will not price the assets beyond the industrial investor's pricing.

(3) Money in the industry cycle

The basic theory of making money from non-performing assets, that is, the biggest profit comes from the duration value of time. According to Marx's economic theory, the value of assets remains unchanged, but the price of assets will change with the economic cycle. When buying assets at the low part of the economic cycle and selling assets at the peak of the economic cycle, this is the main source of profits of non-performing assets, and it is also what foreign giant players such as Blackstone and Oak Capital are keen on and insist on. According to a cycle of 10 years, the shortest investment cycle of is 5 years (i.e. from trough to peak).

If the aforementioned economic cycle forecast is established, the annual contract volume this year will be the largest in history, 2023/2022=80%, 2024/2024=30%. Therefore, from a cyclical perspective, in the big year of contracting, it is also the time when the price of non-performing assets deviates from the asset value. In the small year of contracting, the competition is fierce, and its price will gradually return to the asset value. When the economy enters a formal upward period, the price of assets will exceed the value of assets. According to experience, the price of assets at peaks and the price at low peaks is about 200-400% (estimated: the asset package of 100 yuan debt claims, the corresponding bank appraisal value when the economy is hot is 140-180 yuan, and the price of transfer at low economic tide is 40-60 yuan). The investment cycle is calculated based on 5 years. If you buy from the trough and sell from the trough, the annualized profit margin is 40%-80%.

(4) Current status of domestic non-performing assets

For domestic private non-performing assets players, due to the cost of funds, most investment cycles are around 1-2 years, so it is mainly to earn money from the first two: information asymmetric money\the difference between the price of the industry investors in the process of beating the drums and passing the money, and few investors can earn money from the industry cycle. The era of the first type of information asymmetric money has long passed. The mainstream way of playing is to strive to buy bags and sell bags. When the final asset package is transferred to the hands of industry investors, the more or less the price difference, it depends on the cost of investment funds, and on the other hand, it depends on the number of links that investors can bypass the intermediaries (that is, the closer the intermediaries to the industrial investors, the higher the quotation, and on the contrary, the farther away from the intermediaries from the industrial investors, the lower the quotation).

4. How to win in the competition of traditional non-performing asset packages

Based on the above analysis, a company will become bigger and stronger in the non-performing asset market in the future. Profits come from two aspects: 1. Master the ability to be as close as possible to the terminal industry investors; 2. Earn money from the price difference caused by the duration value of the assets.

1, medium- and short-term money (1-3 years): master the ability to get as close to the terminal industry investors as possible

The final player in this link, the world's first investment scale , the only player Blackstone, and the first few players Oak Capital, are all masters of various terminal industries. They purchase traditional asset packages and repair the defects of the asset package to the final industry investors, thereby making profits. Most domestic players, because they basically do not have or have very few of this ability, can only make extremely poor profits by constantly passing on the drum and passing on flowers, and the level of profit depends on the distance they can reach from industrial investors.

2. Medium and long-term money (3-5 years): large package + low capital cost + long-term funds + strong disposal and promotion capabilities