DISTRESS: LUFAX Semi-Annual 2023 (calendar) Report Part-III
📺 CONTEXT OF THE BOOM BUST CYCLE OF MICROLENDING IN CHINA
📺 LUFAX EPISODE: Microlending-China-Boom-Bust-Recovery
The financial de-intermediation skipped one step in China,
from no consumer lending to Fintech without the consumer lending step
from regular banks so to speak.
The property boom was addresssed starting in 2015 by the CCP.
I am showing the archives from the Reserve Bank of Australia
from 2017. One of the remedy discussed by the SSSR
and CCP to the real estate problem in 2015 was to create
a boom elsewhere, and namely in micro-lending.
So in a way microlending boom was a way to compensate the bust in
real estate in total credit flows. Avoid a net contraction.
In other words people are 2 trains late in boom bust cycles in China,
we are in the through of microlending bust, and the peak in
real estate was in 2017. I guess they love Schumpeter there, it seems
we have a boom bust right now in EV.
That’s the live “boom-busting”. The benefit will be a lot less Oil consumed.
(we will do an open link on that called Petro-Dollar vs EV-Yuan).
The reduction in Oil Consumption it’s creating is taking me by surprise.
Back to Lufax. So by the time Ant Group from Alibaba wanted to IPO the microlending in 2021,
the regulator said, “Wait a second here this is the wild wild East,
I can’t let you distribute money market funds without regulations,
and your practices on micro-lending need to be rectified. It’s shady.”
So that’s how we got ourselves a boom and bust in micro-lending,
with peak bust in Q4 2022.
Fitch is mentioning that some rationalization will have to happen,
so focus on the big Fintech ones with solid balance sheets and backers (that’s the
case in both criteria for LUFAX). There will be some consolidation.
The Link of this episode again with RBA documents and FITCH in DocuTalk
📺👉https://link.graphcall.com/Boom-Bust-Recovery
IF YOU MISSED THE PREVIOUS EPISODES:
👉https://link.graphcall.com/Lufax-06-2023-part_III
👉https://link.graphcall.com/Lufax-06-2023-part_II
👉https://link.graphcall.com/Lufax-06-2023-part_I
👉 https://link.graphcall.com/LU-Q1-2023-Review
👉 https://link.graphcall.com/Lufax-Valuation-Insights
👉 https://link.graphcall.com/Macro-Retail-China
👉 https://link.graphcall.com/F1-Lufax-Part-1
👉 https://link.graphcall.com/F-1-Lufax-Part-2
👉 https://link.graphcall.com/F-1-Lufax-Part-3
About the author
Geoffrey provides unique insights. As DM and EM start to switch places in fiscal dominance regimes, his experience from a firm that traded EM bonds in the early 2000s will prove crucial. He is also versed in pre-FX as reserve monetary systems ( prior to 1922) and it will prove handy to understand local ccy trading, and its impact in FX, bonds, PM and currencies.
Former portfolio manager of 15 years at York Asset Management, a US and UK based firm specialized in Global Risk Arbitrage & Special Situations, Geoffrey is now CEO of DocuTalk, a NY-based software company that pioneered a new visual format to interactively present documents in video format using patented technology (and featured in the ’30 year anniversary’ edition of the Investor Relations Magazine New York).