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Performance of China's securitization transactions regains foothold: report

TIME:2020-12-17 10:19   SOURCE:    WRITER:

BEIJING, Dec. 6 (Xinhua) -- The performance of securitization transactions in China continues to improve as indicated by lowering delinquencies and rebounding prepayments, Fitch said in a report.

The rating agency has attributed the improvement to the country's healthy economic recovery.

Auto asset-backed securities (ABS) appeared to have shrugged off pandemic stresses as key indicators return to pre-pandemic levels, Fitch said.

Supported by falling unemployment and rising incomes, the annualized gross loss (AGL) index for auto ABS edged down, and the 31-60 and 61-90 days past due stayed low at 0.1 percent and 0.07 percent in September.

The AGL for residential mortgage-backed securities (RMBS) fell to 0.36 percent in September, after seeing unusual twin peaks of 0.5 percent and 0.54 percent in August and May mainly due to transactions defaults after delinquency.

The conditional prepayment rate for RMBS and consumer loan ABS rose above the normal level in the third quarter of the year supported by active property transaction volume and rising income, said the report.

Securitization is the process of transforming illiquid assets, including outstanding loans and receivables, into securities, which frees up idle assets in the banking system.

The Chinese government has placed increasing emphasis on such deals to improve the efficiency of capital use and stimulate lending to the real economy.

Infrastructure projects funded by public-private partnerships have been allowed to raise funds through securitization, and pilots have been expanded for banks to securitize bad loans.

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