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Securitization deals ‘rise in Q4 of 2017’

2018-03-01 3 ℃

MOODY’S Investors Service said yesterday that the issuance of Chinese securitization transactions for all asset classes rose in the 4th quarter of 2017 from a year ago, both in terms of number of deals and value, while loan performance was steady.

A total of 59 transactions with an aggregate volume of 324.5 billion yuan (US$ 51.25 billion) were issued between September 1, and December 31, 2017, under the credit asset securitization scheme managed by the China Banking Regulatory Commission and the People’s Bank of China, four deals and 92.7 billion yuan more than the same period in 2016.

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, auto loans or credit card debt obligations and selling their related cash flows to third party investors as securities.

Investors are repaid from the principal and interest cash flows collected from the underlying debt.

Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS).

Within this total, issuance for residential MBS exceeded all other asset classes, amounting to 96.4 billion yuan, it said.

Moody’s expects overall delinquencies to stabilize with continued economic growth, improving corporate profits and steady commodity prices.

In addition, the average 30+ days delinquency rate for outstanding auto loan ABS stood at 0.12 percent at the end of the 4th quarter, up from 0.10 percent for the previous quarter.