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China Securitization: Auto ABS And RMBS Tracker August 2022

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

Delinquency ratios continue to see divergence, performance volatilities could remain elevated
  • The weighted average 30-plus-day delinquency ratio of our rated auto ABS transactions rose to 0.29% in August from 0.26% in July.
  • The severe delinquency rate (90 plus days) also increased to 0.16% in August from 0.14% in July--reaching its highest level in 12 months.
  • The transactions in our rated portfolio continued to display divergence in delinquencies because we have included deals with broader customer bases. For example, the 30-plus-day delinquency ratio of our rated pools ranged from 0.03%-2.89% in August.
  • The weighted average 30-plus-day and 90-plus-day delinquency ratios remained relatively low at 0.16% and 0.05%, respectively, if the transactions with broader customer bases are excluded. However, we observed an uptick in the 30-plus-day delinquency ratio since the second quarter of this year.
  • We anticipate delinquency ratios will gradually level off after the transactions backed by pools with broader customer bases start to pay down. These transactions had higher credit enhancement provided at deal close to address foreseen credit risks.
  • In our view, the sporadic COVID-19 outbreaks and lockdowns to various degrees in some cities and towns in China this year could weigh on liquidity for some borrowers and constrain in-person collection efforts. Volatility in delinquency rates could remain elevated due to the uncertainty around the impact of COVID and macroeconomic conditions.

Table 1

30-Plus-Day And 90-Plus-Day Delinquency Rate Composite
Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 12-month moving average Average in 2021
30+ DPD (%) 0.13 0.14 0.15 0.14 0.15 0.17 0.21 0.21 0.25 0.30 0.24 0.26 0.29 0.21 0.12
90+ DPD (%) 0.03 0.04 0.04 0.04 0.06 0.06 0.08 0.09 0.11 0.14 0.12 0.14 0.16 0.09 0.04
DPD--Days past due.

Chart 1

image

Coupons continue to decline alongside a recent cut in the loan primer rate (LPR)
  • In August, the five-year LPR was lowered by 15 basis points (bps) to 4.30%, and the one-year LPR by 5 bps to 3.65%.
  • The lowering of benchmark lending rates continues to drive down financing costs. Coupon rates of auto ABS continued to hover at a relatively low level amid the low interest rate environment.
  • The three-month median of the coupons narrowed to 2.30% for June-August, from 2.40% for May-July.
  • We expect coupon rates to stay below 3% in the near term. This is mainly because of monetary easing measures and ample liquidity conditions, driven by central bank support amid weak economic conditions, and the fallout from the property sector.

Chart 2

image

RMBS

Volatility in late delinquency rate of our rated RMBS increased as expected
  • The weighted average 30-plus-day delinquency ratio of our rated RMBS transactions continued rising to 0.90% in August, from 0.85% in July.
  • The weighted average 90-plus-day delinquency ratio also rose to 0.77% from 0.73%.
  • In general, the foregoing 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.
  • The asset performance stayed within our expectation, as seen in the weighted average ratio of 61-90 days past due remaining relatively stable at 0.05% in August.
  • Although rated RMBS pools posted generally stable performance, the increase in the late delinquency ratio has slightly accelerated. Our view remains that volatility in late delinquency rates could remain elevated due to the uncertainty around the impact of COVID and macroeconomic conditions.
  • Our rated RMBS transactions are not exposed to risks from property developers strained from the recent mortgage boycott because the rated pools have no exposure to loans backed by forward delivery houses. However, ongoing mortgage strikes continue to cloud the mortgage loan sector.

Table 2

Delinquency Rate Composite
Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 12-month moving average Average in 2021
61-90 DPD (%) 0.04 0.03 0.04 0.04 0.02 0.05 0.03 0.04 0.06 0.05 0.06 0.04 0.05 0.04 0.04
30+ DPD (%) 0.65 0.69 0.61 0.62 0.59 0.62 0.65 0.70 0.74 0.80 0.83 0.85 0.90 0.72 0.62
90+ DPD (%) 0.55 0.57 0.50 0.52 0.50 0.52 0.55 0.57 0.60 0.65 0.68 0.73 0.77 0.60 0.51
DPD--Days past due

Chart 3

image

Annual Review* In August 2022

Transaction Name Date
Autopia China 2022-1 Retail Auto Mortgage Loan Securitization Trust 8/17/2022
VINZ 2021-2 Retail Auto Loan Asset-Backed Securities 8/17/2022
Autopia China 2021-2 Retail Auto Mortgage Loan Securitization Trust 8/26/2022
*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:KY Stephanie Wong, Hong Kong +852 2533 3529;
ky.stephanie.wong@spglobal.com
Yilin Lou, Hong Kong +852 2533 3524;
yilin.lou@spglobal.com
Secondary Contacts:Jerry Fang, Hong Kong + 852 2533 3518;
jerry.fang@spglobal.com
Carol Hu, Hong Kong + 852-2912-3066;
carol.hu@spglobal.com
Melanie Tsui, Hong Kong +852 2532 8087;
melanie.tsui@spglobal.com

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