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    There are several investment opportunities in the trust market in 2019.

    2019-02-03 11:21:40

    Puyi Standard Yuan Jiwei

    Looking forward to 2019, the downward pressure on the macro economy will increase, financial conditions will continue to improve, liquidity will be more abundant, and asset shortages may reappear.

    Wen Hao Yuan Jiwei source 丨 trust Baixie

    Original title 丨 New Year Business Guide | 2019 Trust Market has these investment opportunities

    In 2018, the scale of product offerings in the trust market showed a downward trend, but the expected rate of return continued to rise, and some trust products were subject to redemption risks. Looking forward to 2019, the downward pressure on the macro economy will increase, financial conditions will continue to improve, liquidity will be more abundant, and asset shortages may reappear. 2019 is a crucial year for the transition period of the new regulations, and it is possible for trust companies to issue net worth products, which is another step towards breaking the deal. In this regard, investors need to gradually adapt to the investment environment of trust products under the new situation.

    2018 Trust Market Investment Review

    (1) Asset management new regulations to reshape trust products

    In 2018, the new regulations on asset management were formally promulgated, and the following requirements were imposed on asset management products: breaking the transaction, realizing net worth management, limiting multi-level nesting, prohibiting the provision of channels around supervision, restricting non-standard investment, and constraining leverage levels. . The new regulations on asset management have strengthened the unified supervision of the asset management industry and opened up a new era of asset management. In the future, each asset management product will compete on the same starting line, so active management capability and professional level will become the key to success. Under the new regulations, the trust products will face transformation and the business model will be reshaped, including: exploring the valuation methods applicable to non-standard trust products and promoting net worth management; strengthening the transparent operation of trust products, targeting individual investors Funding and combination management to effectively diversify risks and gradually break the gap; to fully assess the risk attributes of products, understand investor risk appetite and risk tolerance, and achieve investor risk appetite matching with trust products. In short, the new asset management regulations will promote the accelerated transformation of trust products and get rid of the credit-like business model to better protect consumer rights.

    (2) Wealth management business is valued

    More and more trust companies have placed wealth management construction in a more important position, accelerating the layout of first- and second-tier cities with dense economic development and high net worth. The wealth management business is inseparable from the construction of the wealth management team. Some trust companies have set a very large goal of building a wealth management team. In 2018, the trust company attached great importance to the recruitment of wealth management managers. In addition to the flow of personnel between trust companies, it also actively attracted talents from banks and brokerage firms.

    The transformation of the trust company's wealth management business is not only related to factors such as the difficulty of product collection caused by changes in monetary policy, but also closely related to the changes in some long-term factors of the capital side. On the one hand, the existence of a large amount of institutional funds in the past can solve the problem of fundraising difficulties to varying degrees. After the new regulations, bank financing is facing rectification, and the demand for long-term trust products is greatly reduced. On the other hand, banks are strictly regulated. The funds investment trust products in the table are subject to more constraints. For example, the rural commercial banks have more geographical regulatory restrictions on the use of funds, and the financial companies' interest in investing in trust products is also decreasing.

    (3) The yield of trust products continues to rise

    In 2018, under the influence of strict supervision and de-leverage policies, the financing costs of entities have further increased. Especially in the areas where real estate and local financing platforms are strictly regulated, the financing costs are on average more than 10%. On the other hand, the majority of trust product investors are individual investors. In order to strengthen the market competitiveness of trust products and effectively attract individual customers, high-price competition measures are more common. The expected yield of 1-2 year financing trust products showed a volatility, which is about 8.13%, which is about 84 BP higher than the same period of last year. Among them, real estate trust products still have the highest rate of return, which has reached 8.50%, and the expected yield of such products issued by some trust companies even exceeds 10%. This is very rare in recent years. After a large-scale violent thunderstorm in P2P, under the guidance of loose monetary policy, bank financial yields and Internet wealth management yields are falling faster; in contrast, trust products have higher product yields and security, providing investors with A cost-effective investment opportunity.

    (4) The risk of trust products has increased

    The deleveraging policy implemented since 2017 has accelerated the tightening of financing channels for enterprises. The non-standard asset management contracted, corporate financing was difficult to appear, and private enterprises and small and micro enterprises were more affected. After the stock market was adjusted sharply, the risk of stock pledge appeared. Some enterprises continued to operate with high leverage or focus on capital operation, which reduced the risk resilience after the capital chain was tight, and the corporate credit risk increased significantly. Affected by this, since 2018, the scale of trust risk projects has continued to rise: at the end of the third quarter, the scale of surviving trust risk projects was 215.973 billion yuan, the first time exceeded 200 billion yuan; the growth rate was 55.11%, the fastest since statistics. The growth rate far exceeds the growth rate of trust assets. Among them, the collective trust risk project accounted for 64.22%, with a growth rate of 117.56%, which is the main driving force for the current growth of trust risk projects. In general, collective trusts are actively managed by trust companies, and the risk of such businesses will increase the pressure on redemption of trust companies. From the perspective of defaulting entities, private enterprises with listed companies are the largest in default, especially for individual large financing entities such as Kaidi, Huaxin and Zhonghong.

    Analysis of Trust Market Environment in 2019

    (1) Analysis of macroeconomic trends

    Looking forward to 2019, the situation facing the macro economy is more complicated.

    From a global perspective, the downward pressure on the economy will increase, the US economic growth will face an inflection point, and the growth rate of emerging markets will slow down significantly. At the same time, the monetary policy of developed countries will gradually return to normal. Although the US interest rate hike has a slowing trend, the Fed is gradually shrinking. And the cessation of bond purchases in Europe will still make global liquidity inflection point, and the volatility of financial markets in emerging countries may increase. Sino-US trade frictions are still continuing, and it is more difficult to reach a settlement in the future.

    From the domestic perspective, the decline in income growth has led to a decline in the growth rate of consumer spending, and investment is also subject to excessive leverage. The efficiency of resource allocation still needs to be improved, and structural contradictions are more prominent. Generally speaking, in 2019, economic growth has a tendency to fall back in inertia, and it is necessary to continue to rely on countercyclical macroeconomic regulation and control policies. On the one hand, it is necessary to strengthen demand side management, maintain a relatively loose monetary environment, expand the scale of tax reduction and fee reduction, continue to tap domestic demand and market, and stabilize investment and consumption; on the other hand, it is necessary to continue to deepen supply-side reform and accelerate reform and opening up. Promote technological innovation and efficiency improvement, comprehensively improve total factor productivity, and promote economic restructuring and conversion of old and new kinetic energy. The annual GDP growth rate is expected to be around 6.3%.

    (II) Analysis of the trend of assets and funds

    In 2019, monetary policy will remain relatively loose, and financial conditions are expected to continue to improve, which is conducive to social mobility and capital, and reduce the cost of debt. However, enterprises will continue to reduce their financing needs in the down phase, and there may be certain obstacles in the future allocation of financial institutions' assets. For example, real estate regulation may improve margins and infrastructure construction needs to fill shortcomings, but it will not be at the cost of continuing to increase hidden debts. Therefore, these traditional asset allocation areas will be difficult to deploy. In other areas, while supporting private enterprises and small and micro enterprises, it is necessary to take the risk control standards as the premise; under the traditional requirements of wind control, large-scale deployment is not easy.

    In 2019, there is a high probability of an asset shortage. In this case, regulators will also control the expansion of the asset bubble problem and avoid crowding transactions such as the 2016 leveraged concentration of investment bonds. The financial institution's cracking of asset shortages may require lengthening the asset allocation period, sinking customer qualifications or deploying emerging areas such as consumer finance under risk controllable conditions.

    (III) Analysis of the trend of regulatory policies

    In 2018, strict supervision and implementation, the regulatory authorities increased the on-site inspection and off-site inspection of trust companies, and increased compliance supervision and punishment. As of the end of November, the number of administrative penalties imposed by the regulatory authorities on trust companies was 21 single. As some administrative penalties have not been disclosed, it is expected to be basically the same as 2017. At the same time, the regulatory authorities have strengthened the requirements for the trust company to perform their duties. For example, the Trust Industry Association issued the “Guidelines for the Trustee's Fiduciary Duty”, and the regulatory authorities also strengthened the supervision and guidance on the Internet sales of trust products.

    In 2019, strict financial supervision will continue, and will not lose the bottom line due to the economic downturn. This is also an inevitable requirement for preventing major financial risks. Of course, financial supervision, macro-prudential policies, and monetary policies need to strengthen coordination and coordination to avoid multiple policy resonances and have an excessive impact on the industry. In this context, new regulatory policies will continue to be introduced, financial institutions need to strengthen their compliance awareness, and financial industry practitioners need to improve their adaptability. Compliance risk is one of the major risks faced by trust companies. Only by avoiding luck and compliance, can we achieve steady and sustainable development.

    Trust Market Investment Outlook for 2019

    In 2019, the trust market as a whole will continue to show a trend of shrinking prices, and investment will still focus on real estate and infrastructure construction; however, it is necessary to pay attention to the credit risk trends in the two major areas, while continuing to pay attention to mergers and acquisitions, restructuring trusts and securities investment trusts. Part of a good investment opportunity.

    (1) Scale

    In 2018, under the influence of factors such as strict supervision and de-channeling, the scale of the increase in the scale of trust assets and the increase in the size of new trusts have led to the first negative growth since the statistics. The growth rate is about -10%. Although the regulatory authorities have signs of marginal relaxation of the passage, it is difficult to reverse the trend of the passage. In 2019, the growth rate of trust maturity has slowed down, but the absolute scale is still relatively high. The trust maturity in the first three quarters reached about 4 trillion yuan, of which the proportion of collective trusts was 45.9%. As the new scale will remain at a low level, the size of the trust assets may still decline in 2019. The decline is expected to increase, possibly to about 18 trillion yuan.

    At present, the proportion of trust channels has reached 60%-70%, and most of the commissions are bank funds. Therefore, before the bank financial transformation is completed, the entire channel-going process will continue to weaken the driving force of scale growth. It is expected that this trend will be difficult to achieve substantial mitigation by 2020. After 2020, the scale of active management business may be further affected by the net value management and the impact of the recent exchange rate, and the transaction management category may maintain steady growth. In view of this, trust companies can strengthen asset securitization, private equity services, shareholding and other transaction management trusts, as well as real property rights trust business, to alleviate the problem of insufficient growth momentum of existing businesses. However, in order to improve fundamentally, it is necessary to improve the ability of active management and abandon the simple and extensive method of scale-up growth.

    (2) Investment

    As of the end of the third quarter of 2018, the scale of surviving collective trusts was 9.24 trillion yuan, a growth rate of 1.52%; the scale of new collective trusts in the year was 1.56 trillion yuan, a year-on-year growth rate of -41.84%, a significant drop. From the perspective of the new collection trust, real estate and industrial and commercial enterprises accounted for the highest proportion of 28.23% and 25.11% respectively, followed by financial institutions, securities investment and basic industries, which were 14.39%, 10.21% and 7.21% respectively. In other words, real estate investment and industrial and commercial enterprises are still the most important asset allocation direction of the collective trust, accounting for more than half of the total.

    The relatively high investment in real estate reflects that under the control of real estate, the financing channels of housing enterprises are limited, and the trust financing channels are more dependent; and the trust transaction structure design is more flexible and diverse, which is conducive to meeting the various financing needs of housing enterprises. For trust companies, real estate is a traditional industry with high risk control, and generally has sufficient collateral and sufficient credit enhancement measures. Looking forward to 2019, new collection trust products may still be built around real estate, infrastructure and business. The financing needs of real estate enterprises are still relatively strong, but we must pay attention to the risks of controlling small and medium-sized housing enterprises and real estate projects in third- and fourth-tier cities; the infrastructure has contracted in the past two years in the case of local debt governance, but with the PPP clearance After the rectification is completed and the infrastructure is complemented, the trust company will continue to accelerate its involvement in the infrastructure investment field and build investment and financing models that meet the central requirements, such as infrastructure industry funds, PPP, and infrastructure securitization. The industrial and commercial sector can serve private enterprises. Supply chain finance, mergers and acquisitions and other areas of force.

    (3) Price

    In 2019, monetary policy will remain relatively loose. The gradual smooth flow of the wide credit transmission mechanism is conducive to the smooth flow of financing channels. At the same time, corporate financing demand has a further downward trend, which will promote the downward pricing of financing to a certain extent, thus promoting the downward cost of financing. In this context, there is a downward trend in the overall cost of trust financing, which will lead to a decline in the expected rate of return on trust products. In 2018, the yields of asset management products such as bank wealth management and P2P have declined to a certain extent, and trust products, as medium- and long-term fixed-income products, still have cost-effective advantages.

    At the same time, with the transformation and development of trust products, net worth products may be launched in 2019. Trust products will no longer set expected yields and may be more focused on benchmarks or historical performance. Of course, some trust products may adopt TOT, trust fund portfolio management or fund-based models, and further consider the investment strategy and active management capabilities of trust products. With the gradual increase in net worth products, investors need to adapt to products that have no expected rate of return and make more professional decisions when investing in products.

    (4) Risk

    In 2019, the downward pressure on the macro economy increased, the internal and external environment was more complicated, and the business performance was under pressure. On the other hand, macroeconomic regulation and control policies, such as the broad credit policy, were conducive to partially diverting the operating pressure of enterprises and improving marginally. credit risk. However, in view of the fact that the risks of industrial and commercial trust projects in 2018 may be cleared, the risks of platform and real estate projects still need attention.

    In 2019, the Central Economic Work Conference still stressed that solving the problem of local government debt lies in blocking the door, opening the main entrance, and increasing bond issuance, but it also limits other financing. At present, many local platforms have very tight capital chains and high financing costs. This is also a warning sign. Although the local financing platform has government endorsements, it does not rule out the possibility of liquidity risks at individual time points.

    In 2019, there is a possibility of marginal relaxation in real estate regulation. Since this round of real estate regulation is mainly a city and a policy, it is difficult to have a spur of real estate regulation in the future. Moreover, under the high leverage of residents, large-scale stimulation of real estate can solve the investment problem in the short term, but it may lead to the problem of de-leveraging of residents in the long run. Financial risks and consumption landslide risks may follow. In 2019, the maturity of real estate debt is still large, and it is also an important area that is prone to credit risk. Therefore, it is still necessary to pay attention to the risks of small and medium-sized housing enterprises and real estate projects in third- and fourth-tier cities.

    Author unit: Research Institute of a trust company

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