Credit Market Watch: Summary for week ending 31-Jul

Credit Market Watch: Summary for week ending 31-Jul

·         MYR Credit:

Ø  MGS got sold off as the MYR weakened, in part due to the political risks, and yields widened 9-15bps WoW. PDS credit spreads, however, tightened as the market was resilient and even saw some tightening in yields. The AA3 curve saw strong interest, especially on power bonds.

Ø  Rating update: 1) Tenaga Rapi's outlook was revised to stable from positive by RAM, citing thinner cash buffers after an unexpected MYR13m investment in a sukuk and trimmed debt coverage. 2) Mercuro Properties' Senior Class B & C bonds were upgraded to AAA by RAM on stronger credit support after the redemption of Senior Class A1 bonds.

Ø  Relative value: Market is still volatile so we think it is better to stay with high grade and liquid names for the time being. YTL Power 18 still seem to offer value, last traded 12bps above our fitted line.

·         Asian USD Credit:

Ø  Brent crude price fell further to USD51.7/bbl from previous week's USD54.6/bbl. UST curve bull-flattened, with the 10y UST yield closing 8bps lower for the week at 2.18%. Asian credit spreads in general was about 2bps wider with overall sentiment tilted toward selling to reduce risks and shorten duration toward month end.

Ø  Sovereign spreads widened across INDON, KOREA, MALAYS and PHILIP. Malaysian names experienced some selloff due to the escalation of political risks. MALAYS'25 saw yield 14bps higher WoW, OGIMK'23 40bps higher and PETMKs were also under pressure due to low oil price.

Ø  China property performance was mixed. Greenland traded wider on negative outlook; in contrast Shimao's rating was upgraded by S&P, fuelling buying interest to other names like COGARD and LNGFOR.

Ø  Credit rating: Among others, Greenland's rating outlook was revised to negative from stable by Moody's, citing concerns over high debt leverage. Oceanwide's outlook was revised to negative by S&P, citing diminished expectation of improvement in leverage with EBITDA interest cover still below downgrade trigger.

·         CDS: EM Asia CDS spreads was wider amidst broad weakening of regional currencies, with Malaysia’s 5y CDS underperforming peers wider by 11bps WoW to 148bps.