Fixed Income Daily Market Update

Investment Rating - The report maintains a "buy" rating on FRESHK 25-27s, indicating a positive outlook on the company's bonds despite lower profitability in 1H24 [6][10]. Core Insights - FRESHK reported stable asset quality but a 20% year-over-year decline in profit before tax to RMB4 billion in 1H24, attributed to decreased revenue and increased finance costs [8][10]. - The recovery of primary sales in the Chinese property market remains slow, with a 22.9% year-over-year decline in contracted sales for July 2024 [13][14]. - The report highlights that the cumulative contracted sales of 33 developers dropped 38.7% year-over-year in the first seven months of 2024, indicating ongoing challenges in the real estate sector [14][15]. Summary by Sections Fixed Income Market Overview - Asian investment-grade bonds showed stability, with flows skewed towards selling, particularly in the Chinese IG space [2]. - The report notes that LGFVs (Local Government Financing Vehicles) remained well bid, reflecting investor interest in this segment [2]. FRESHK Financial Performance - FRESHK's revenue slightly declined by 1.8% to RMB18 billion in 1H24, with interest income down 3.5% and fee income down 65.8% [12]. - The company's net interest margin improved by 5 basis points to 4.47%, but overall profitability metrics such as ROAA and ROAE decreased significantly [12]. Chinese Property Market Analysis - The report indicates that the recovery of primary sales in the Chinese property market is sluggish, with July 2024 sales reflecting a continued downward trend despite government support measures [13][15]. - Inventory levels in major cities have increased, suggesting a potential oversupply issue that could hinder recovery [15].