Asia Credit Monday Morning Ideas: OW GRNCH’29; UW Cathay Lifer tier 2 bonds

Research evidence excerpt

Asia Credit Monday Morning Ideas: OW GRNCH’29; UW Cathay Lifer tier 2 bonds

and further tightening by the Chinese government. Upside risks to our recommendation

are prudent land acquisition, timely & material asset disposals, strong sales growth/ cash

collection, and significant policy easing.

Nan Shan Life Ins (NSINTW)

Nan Shan Life Insurance Co., Ltd (ticker: NSINTW) is the second largest lifer in Taiwan. It

is not listed in the equity market, thus has weaker transparencies and fundamentals than

CATLIF. We believe those risks have been partially priced in vs. Cathay Life Insurance

Co., Ltd (ticker: CATLIF). We are MW NSINTW 5.875 2041 c. 2035 and NSINTW 5.45 34.

The spread level was wider than peers, but the transparency is generally lower than

other listed life insurance companies. We also expect to see negative implications from

the geopolitical risk with higher currency hedging costs expected. The downside risks

include 1) unexpected TWD appreciation against the US dollar or other financial market

volatility in the US could lead to a huge FX loss and the insurer reported solvency ratio

below the regulatory threshold, 2) the new generation solvency system for Taiwan

insurance industry leads to a substantial deduction on the insurers solvency position,

while the upside risks are 1) substantial capital injection from the parent, 2) the equity

and bond market rally in US financial market boosts earnings and capital base of the

insurer.

Shin Kong Life Ins (SHIKON)

Shin Kong Life Insurance Co., Ltd (ticker: SHIKON) is the fourth-largest life insurer in

Taiwan with a market share of c.8%. We assign a Marketweight to SHIKON 5.29 '35 as

we think its valuation is fair.

Downside risks to our call: 1) unexpected TWD appreciation against the US dollar or