Beijing/Hong Kong Fitch Ratings for November 2022:
Vehicle sales fell in 2Q22, which was followed by a slowdown in auto loan ABS issuance in 3Q22. Nine transactions were issued during the quarter, compared to 14 during the same period in 2021, and the overall volume of issuance decreased by 20.5% year over year to CNY47.0 billion. As a result of the 3Q22 rebound in vehicle sales, Fitch Ratings anticipates a manageable pace of issuance through early 2023.
The annualized gross loss of China's vehicle ABS index slightly decreased from 0.42% in June to 0.39% in September 2022, but it was still higher than 0.34% in September of the previous year. Loans that are 31 to 60 days past due are now at 0.11%, up from 0.09% in June, while those that are 61 to 90 days past due are still at 0.06%.
Prepayment rates decreased somewhat from 7.6% to 7.0% over the past two years but remained between 6% and 8%. Recovery rates increased to about 30%, which is far higher than the pre-pandemic norm of 20%.
Fitch examined a global pool of data, including deals involving Chinese vehicle ABS, and found no seasoning advantages if the securitization took place within the first year of origination. According to the investigation, the primary factor influencing seasoning was default distribution. By front-loading defaults, the seasoning benefit is realized. Under its Consumer ABS Rating Criteria, Fitch does not explicitly modify seasoning.
A link to the entire report, "China Auto ABS Index - 3Q22," can be obtained in this press release or at www.fitchratings.com.
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