PingAn Trust?

A coin has two sides.

A balance sheet has two side.

If there is a hit on the asset side, there must be a hit somewhere else.

When properties are not selling, the property linked trust products would take a hit.

PingAn Trust is not responsible for those products’ underlying assets, which are troubled developers; it’s like an investment bank that packages products and sells those to “retail investors”.

Maybe many of those “retail investors” are not sophisticated enough.

In China, anyone with 500k rmb annual income can become a “qualified investor”, vs. $200k in the US, only ~1/3.

In China, if you have 5mn rmb financial assets (not net assets), or 3mn rmb net financial assets, you could become a “qualified investor”, vs. $1mn net worth (not counting primary residence) in the US.

Someone can borrow against the house and buys financial assets? Sure. He/she may get a >5mn loan from a tier-one city home (a 100+sqm home can be easily over 10mn rmb during good times).

It’s such a perfect designed chain of problems when property prices are coming down.

  • Underlying assets of trusts are worsening.
  • Trust investors can’t pay mortgages or home equity loans (or banks lower the est. value so can only take out less loan).
  • Fire sale from developers (trust products) & home owners (trust investors) shall further put pressure on the property market.