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China Securitization: Auto ABS And RMBS Tracker January 2023

China Auto ABS And RMBS Tracker is a monthly report that tracks the performance of the China auto ABS and RMBS rated by S&P Global Ratings.

Auto ABS

Uptrend in delinquency ratios persists, performance volatilities could remain elevated
  • The weighted average 30-plus-day delinquency ratio of auto asset-backed securities (ABS) transactions that we rate rose to 0.47% in January from 0.39% in December 2022.
  • The severe delinquency rate (90 plus days) also increased to 0.25% in January from 0.23% in December--reaching another 12-month high.
  • We have observed a mild rising trend in the delinquency ratios since the second quarter of 2022, and these ratios edged up slightly faster in the final quarter of 2022. This was in part driven by amortizing pools underlying the securities, and it could also be a result of the difficulties stemming from the latest surge in COVID-19 cases after China relaxed pandemic-related controls near the end of 2022.
  • Delinquencies continued to diverge in the transaction portfolio that we rate, because we have included deals with broader customer bases. For example, the 30-plus-day delinquency ratio of our rated pools ranged from 0.06%-5.46% in January.
  • When the transactions with broader customer bases are excluded, the weighted average 30-plus-day and 90-plus-day delinquency ratios remained relatively low at 0.19% and 0.07%, respectively. These transactions with broader customer bases had higher credit enhancement provided at deal close to address foreseen credit risks.
  • As a temporary "carry over" from the COVID-19 resurgence in the fourth quarter of 2022, voluntary social distancing may limit economic activities and impede in-person collection of delinquent loans. Volatility in delinquency rates could remain elevated for at least another month or two, in our view.

Table 1

30-Plus-Day And 90-Plus-Day Delinquency Rate Composite
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 12-month moving average Average in 2022
30+ DPD (%) 0.17 0.21 0.21 0.25 0.30 0.24 0.26 0.29 0.29 0.33 0.34 0.39 0.47 0.30 0.27
90+ DPD (%) 0.06 0.08 0.09 0.11 0.14 0.12 0.14 0.16 0.16 0.18 0.20 0.23 0.25 0.15 0.14
DPD--Days past due.

Chart 1

image

Coupons striding up as financing demand resumes
  • The one-year and the five-year loan prime rates (LPR) have remained unchanged at 4.30% and 3.65%, respectively, since September 2022.
  • With China's accelerated reopening and pandemic policy shift come increased financing needs. In conjunction with seasonal factors, the coupon rates of auto-loan ABS have been rising since the final quarter of 2022.
  • The three-month median of the coupons rebounded to 2.45% for November-January, from 2.09% for October-December.

Chart 2

image

RMBS

Volatility in delinquency rates could remain elevated
  • The weighted average 30-plus-day delinquency ratio of residential mortgage-backed securities (RMBS) transactions that we rate increased to 1.15% in January, from 1.13% in December 2022.
  • The weighted average 90-plus-day delinquency ratio also continued rising to 0.99% from 0.95% over the same period.
  • In general, the aforementioned arrear ratios 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.
  • Early delinquency ratios have generally inched up in the past six months, but remain low in absolute terms, and are performing within our expectations. Although rated RMBS pools posted stable performance in general, the rise in the late delinquency ratio has accelerated.
  • In our view, volatility in delinquency rates could remain elevated in the first quarter of 2023 with COVID cases surging. The rates shall gradually improve as the impact of the pandemic diminishes.
  • The Chinese government has rolled out a number of supportive measures to ease liquidity pressure on property developers and to lift restrictions on home purchases. The actual effects of these measures remain to be seen amid weakened homebuyer confidence.

Table 2

Delinquency Rate Composite
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 12-month moving average Average in 2022
61-90 DPD (%) 0.05 0.03 0.04 0.06 0.05 0.06 0.04 0.05 0.05 0.05 0.07 0.06 0.08 0.05 0.05
30+ DPD (%) 0.62 0.65 0.70 0.74 0.80 0.83 0.85 0.90 0.94 1.01 1.07 1.13 1.15 0.90 0.85
90+ DPD (%) 0.52 0.55 0.57 0.60 0.65 0.68 0.73 0.77 0.80 0.85 0.88 0.95 0.99 0.75 0.71
DPD--Days past due.

Chart 3

image

Annual Review* November 2022 To January 2023

Transaction Name Date
Yi Teng 2021-4 Retail Auto Mortgage Loan Securitization 11/16/2022
Zhong Ying Wan Jia 2021-5 Residential Mortgage Backed Securities 11/25/2022
Generation 2021-4 Retail Auto Mortgage Loan Securitization 12/15/2022
Jianyuan 2019-7 Residential Mortgage Backed Securities 12/21/2022
Jianyuan 2019-10 Residential Mortgage Backed Securities 12/21/2022
Jianyuan 2018-11 Residential Mortgage Backed Securities 12/28/2022
Jianyuan 2018-21 Residential Mortgage Backed Securities 12/28/2022
Jianyuan 2019-2 Residential Mortgage Backed Securities 12/28/2022
Bavarian Sky China 2022-1 1/18/2023
Bavarian Sky China 2021-1 1/18/2023
*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

This report does not constitute a rating action.

Primary Credit Analysts:Melanie Tsui, Hong Kong +852 2532 8087;
melanie.tsui@spglobal.com
Carol Hu, Hong Kong + 852-2912-3066;
carol.hu@spglobal.com
Secondary Contacts:Jerry Fang, Hong Kong + 852 2533 3518;
jerry.fang@spglobal.com
Yilin Lou, Hong Kong +852 2533 3524;
yilin.lou@spglobal.com

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