Thursday, July 30, 2015

RAM Ratings has reaffirmed the corporate credit ratings of Genting Malaysia Berhad (Genting Malaysia or the Group) at AAA/Stable/P1, as well as the AAA(s)/Stable rating of its proposed RM5.0 billion MTN Programme (2015/2035), to be issued by Genting Malaysia’s wholly-owned subsidiary, GENM Capital Berhad.

Published on 30 July 2015

Genting Malaysia’s credit profile is supported by its position as the only casino operator in Malaysia via Resorts World Genting (RWG). RWG contributes a respective 70% and 80-90% of Genting Malaysia’s yearly revenue and operating profit before depreciation, interest and tax, and is key to the Group’s strong and stable cashflow. RWG’s strong domestic operations and predominantly mass-market customers minimise earnings volatility. Further, the Group has an established operating track record overseas. It is one of the leading casino operators in the UK and its slot operation in New York is the highest-grossing in the US Northeast.
Backed by its gaming business, Genting Malaysia generates strong operating cashflow. The Group has remained in a net-cash position for the last 5 years, supported by operating cashflow that has generally stayed above RM1.5 billion during the same period. For FY Dec 2014, its funds from operations (FFO) debt cover remained solid at 0.92 times (FY Dec 2013: 1.04 times). However, its free operating cashflow (FOCF) dipped into deficit, given major capex incurred mostly for the Genting Integrated Tourism Plan. “Moving forward, we anticipate Genting Malaysia’s financial profile to remain strong, despite expected significant increases in debt load. Net gearing is expected to rise to about 0.15 times next year while FFO debt coverage may weaken to below 0.50 times this year and improve thereafter. However, significant capex is likely to keep the Group’s FOCF in deficit for this year and next,” says Kevin Lim, RAM’s Head of Consumer and Industrial Ratings.
The ratings, meanwhile, are moderated by the Group’s exposure to regulatory risk, its aggressive expansion strategy and the execution risks that its expansion entails. The gaming industry, owing to its sensitive nature, faces regulatory controls that may evolve over time.
The Group is continuously on the lookout for opportunities to expand. Genting Malaysia may develop an integrated resort in Miami, the US, in the event of a favourable legislative outcome on casino gaming in the state. We also do not discount future expansions in the US by Genting Malaysia. The overseas expansion may expose the Group to significant execution risks, including challenging operating landscape in new markets and considerable demand on resources. The Group’s current strong financial metrics could change in the event of an aggressive expansion.
Genting Malaysia is a 49.3%-owned subsidiary of Genting Berhad (Genting). Besides businesses held via Genting Malaysia, the larger Genting group is one of the only 2 casino resort operators in Singapore and has interests in oil-palm plantations, power generation, property development and oil and gas assets. Given that we view Genting Malaysia and Genting as having a very close relationship under our Parent-Subsidiary Rating Links methodology the ratings of the 2 entities are closely linked. Meanwhile, as the proposed debt programme is backed by a full, unconditional and irrevocable corporate guarantee from Genting Malaysia, its enhanced rating is based on the credit profile of the Group.

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RHB | US | Hike-On, Hike-Off

Economic Research
         30 July 2015

Economic Highlights

Unsurprisingly, the July 28-29 Federal Open Market Committee (FOMC) meeting ended without much fanfare, with no explicit indication on the proximity of liftoff in the post-meeting statement. Indeed, given the “data dependent” mantra, the recent communication flow--from Chair Yellen’s remarks and highlighted discussions in the FOMC minutes--suggests that “most” Fed policymakers believe that a “meeting-by-meeting” approach to determining the timing of liftoff is more appropriate. One of the surprises from the July meeting, however, is that the FOMC again voted unanimously despite indications that one of the Committee members--most likely Lacker--was keen to consider hiking rates in June (in any case, barring unforeseen developments, we expect Lacker to vote for a rate hike in Sep).

Economist:  Thomas Lam  | +65 6533 0389

To access our recent reports please click on the links below:
18 June 2015: Yellen and the Dots
11 June 2015: Improving but Uneasy?
30 April 2015: Dancing Gingerly…

RHB | Vietnam | Economic Activities Still Exhibit Resilience in July

Economic Research
30 July 2015


Economic Highlights

Vietnam’s industrial production growth accelerated to 11.3% y-o-y in July, from +11.1% in June and +7.5% in May, driven by a pick-up in mining & quarrying, utilities and water supply output but these were offset partly by softer activities in the manufacturing sector.

Economist:  Vincent Loo  | +603 9280 2172

To access our recent reports please click on the links below:

Maybank GM Daily - 30 Jul 2015

*      Some Much-awaited FOMC was largely a non-event, as widely expected. Statement was largely balanced. It noted improvements in labour market - “solid” job gains, declining unemployment, “diminished” labour market slack but partially countered the hawkish take on labour market with inflation, which remains below the FOMC’s longer-term objective of 2%, partly attributing this to falling energy prices. The statement remains consistent with our long-held view for Fed to begin its first rate hike of 25bps in Sep, followed by a gradual pace of tightening. With FOMC out of the way, focus is now back of data and earnings reports.
*      Equities closed in positive territories despite disappointing US pending home sales. USTs declined. Crude oil prices jumped on much bigger than expected decline in US crude oil inventories. USD was firmer against JPY (back above 124-handle) and EUR (below 1.10-handle). Overnight, AUD/NZD reversed fortunes as rebound in hard commodities/ CRB index saw AUD on a rebound (despite disappointing ToT, building approvals data)  while NZD was softer on disappointing building permits data.
*      For the day ahead focus is on US 2Q GDP (Cons. +2.5% q/q ann.) later this evening (830pm SGT).  Other data we are watching today includes GE Jul unemployment, CPI; EC Jul confidence. In Asia, Thailand onshore market is closed for holidays. On FX, buying USD on dips remains the flavour of the day.

*      DXY – Focus on GDP data. USD firmed post FOMC meeting as a balanced statement continues to suggest a Sep lift-off remains possible. Much-awaited FOMC was largely a non-event, as widely expected. Statement was largely balanced. It noted improvements in labour market - “solid” job gains, declining unemployment, “diminished” labour market slack but partially countered the hawkish take on labour market with inflation, which remains below the FOMC’s longer-term objective of 2%, partly attributing this to falling energy prices. The statement remains consistent with our long-held view for Fed to begin its first rate hike of 25bps in Sep, followed by a gradual pace of tightening as Fed will take into consideration domestic growth and external environment – China rebalancing risk, Greek development and USD strength. DXY was last at 97.28 levels this morning, above its 21 DMA of 96.90 levels. Could see DXY stay supported into US GDP release later this evening. Bearish momentum/ stochastics indicators are showing tentative signs of waning. Next target on the topside at 98.20 (previous high in Jul); support remains at 96.50 (100 DMA). Remain better buyers on dip. Week ahead brings 2Q GDP; initial jobless claims (Thu); Jul Chicago Purchasing Manager, university of Michigan Sentiment (Fri).
*      EUR/USD – Consolidation. EUR eased below 1.10-handle as post-FOMC saw a resurgence of USD strength.  We continue to reiterate that EUR remains a funding currency play - the pattern we have been highlighting where risk-on sees EUR lower while risk-off sees EUR higher continues to pan out well. This relationship is expected to persist for as long as ECB is on unconventional monetary easing. EUR was last at 1.0970 levels this morning. Expect EUR to consolidate in the range of 1.0860 – 1.1090 (50 DMA) (Mon high). Daily momentum and stochastics are not indicating a clear bias. Week remaining brings GE Jul unemployment, CPI; EC Jul confidence (Thu); EC Jul CPI estimate; EC Jun unemployment rate; FR Jun consumer spending (Fri).
*      GBP/USD Downside Risk. GBP reversed earlier gains, from 1.5690 to 1.56 lows amid broad USD strength. Medium term we remain positive in UK outlook and still favor buying GBP on dips amid ongoing economic recovery setting the stage for BoE to hike possibly as soon as 1Q 2016 (our base line view which is earlier than market expectation in 2Q). That said we continue to reiterate that GBP remains vulnerable to the downside, given that many positives have been priced in including some BoE members adopting a slight tinge of hawkish stance at recent speeches while FOMC meeting looms. Last sighted at 1.56 levels this morning. Yesterday’s prices action resembles a bearish doji star, we look for further price action to confirm if a reversal takes hold.  Key support at 1.5550 (21 and 50 DMAs), if broken can re-visit 1.54 levels (200 DMA). Resistance at 1.5690 (Wed high). Daily stochastics and MACD are not indicating a clear bias at this point. Week remaining brings Jul GfK consumer confidence (Fri).
*      USD/JPY – Bullish. USD/JPY is back above the 124-handle following the resurgence in the dollar as thea Fed fund rate hike lift-off remains on track. Pair is now peeking out of the intraday ichimoku cloud that it has been trapped in for the past few sessions, and intraday MACD is showing bullish momentum and stochastics is fast approaching overbought levels. These suggested that potential for further upside ahead. We await a cleaner break-out from the cloud to confirm a bullish extension towards 124.50 with the interim barrier at 124.15. Any reversals could see the pair head back towards 123.80 and then to 123.50. We remain better buyers on dips as our base line scenario remains for a BOJ move in Oct. Industrial production print for Jun came in better than expected (cons.: +0.3%), rising by 0.8% m/m from May’s -2.1%.
*      AUD/USD – Lean Against Strength. AUD traded softer into FOMC, before rebounding this morning, mirroring the moves in CRB index and risk sentiment. Last sighted at 0.7305 levels on disappointing 2Q ToT, Jun building approval data. Day ahead could see further follow-through, daily stochastics and MACD are exhibiting tentative signs of mild upside bias. We continue to reiterate that the AUD outlook remains challenging on multiple fronts. Weak investments in mining and resource sectors as well as the lack of traction in non-mining business investments are expected to weigh on growth. Falling commodity prices (iron ore, copper) as Chinese demand slows could weigh on Aussie terms of trade. Taken together, there is little to be positive in the AUD especially against an environment of monetary policy divergence (whereby Fed is likely to tighten in coming months while RBA remains on an easing bias with slight risk to a cut).  Medium-term we continue to see further downside on AUD. AUD weekly momentum remains bearish. Break below 0.73-handle puts next support at 0.7150 in focus. Meantime we look for rallies towards 0.74 (21 DMA) to fade into. Week remaining brings RBA Stevens speaks (Thu); Jun private sector credit (Fri).
*      USD/CAD Buy on Dips. USDCAD continued to stay below the 1.30-handle as oil price gains offset USD gains. Last sighted at 1.2950 levels this morning. Daily momentum/ stochastics are indicating a mild bearish bias but 4-hourly momentum indicators are suggesting possible near-term upswing. US GDP data tonight could provide the impetus for USD strength. Ssupport at 1.2850/70 (21 DMA, 23.6% fibo retracement of Jun low to Jul high). Resistance remains at 1.31 (Fri high). Week remaining brings May GDP (Fri).
*      NZD/USD – Sell on Rallies. NZD fell on disappointing building permits data this morning amid broad USD strength. We continue to reiterate our bearish bias for NZD on a combination of drivers including widest trade deficit in 6 years, dairy prices at 12 years low and likely to remain low for longer, weak wage inflation, CPI inflation, etc., but favor a sell only on rallies.

Asia ex Japan Currencies
*      The SGD NEER trades 0.28% below the implied mid-point of 1.3662. The top end is estimated at 1.3388 and the floor at 1.3936.
*      USD/SGD – Back On The Climb. USD/SGD is back above the 1.37-handle following the dollar resurgence overnight. Pair hit an intraday high of 1.3713 before easing to hover around 1.3698 currently. Both intraday MACD and stochasticcs are bullish bias. With the US Fed fund rate still on track for a lift-off in Sep, further upside pressure on the pair remains. Further upside moves today should meet resistance at 1.3725 ahead of the next at 1.3755. Any dips should find 1.3670 supportive.
*      AUD/SGD – Holding Ground. AUDSGD continues to hold ground around parity, last sighted around 1.0010 levels. We continue to reiterate that a further rebound towards 1.0080 cannot be ruled out. Favor selling rallies; continue to see further downside towards 0.9870. We will re-consider bearish bias on another abrupt move and close above the 50 DMA at 1.0290.
*      SGD/MYR – Risk of Upside Squeeze. SGDMYR gapped lower in the open, following renewed SGD weakness on USD strength (post-FOMC) while oil gains mitigated Ringgit’s losses. Last sighted around 2.7840 levels (slightly below the 21 DMA) this morning.  Risk of upside squeeze towards 2.80 levels cannot be ruled out as daily stochastics has risen from oversold levels.
*      USD/MYR – Upside Risk. USDMYR continues to hover near multi-year highs; last sighted at of 3.8140 levels at time of writing. The move higher came off the back of USD strength and combination of external and domestic concerns while oil price gains partially mitigated MYR weakness. We continue to reiterate our technical view that the 21 DMA continues to keep the pair supported. Next technical support at 3.8020 levels. We note that bearish momentum appears to be gradually waning on the daily chart while stochastics is suggesting further upside. That could put resistance 3.8250 vulnerable.
*      1s KRW NDF – Buy on Dips. The pair turned higher towards 1166 levels this morning amid broad USD strength. Still see the pair supported on as we head into possible Fed tightening in coming months. We continue to reiterate our bearish view for KRW - on concerns over growth/domestic consumption/ tourism/ foreign investment against a backdrop of subdued inflation, weak activity data, soft exports, and rising household debt (165% of annual household disposable income). USD strength on Fed rate lift-off in Sep (house view) could further provide further support for the pair.  Day ahead risk-on sentiment could cap the pair from rallying. Expect range of 1160 – 1170; favour buying on dips.
*      USD/CNH – Bearish Bias. USD/CNH is back on the climb, underpinned by the firmer dollar tone overnight. Pair was last sighted around 6.2178, which is still well-within its current 6.2145-6.2210 range. The CNH continues to trade at a discount to CNY. Pair has lost most of its bearish momentum while stochastics is bullish bias, suggesting further upmoves are possible ahead. Topside should remain capped by 6.2240, while dips should find support around 6.2140. We continue to hold the view that the central bank wants to ensure a steady yuan. USD/CNY was fixed 15 pips higher at 6.1165 (vs. previous 6.1150). CNYMYR was unchanged at 0.6147.
*      SGD/CNYDownticks. SGD/CNY is on the retreat this morning with the cross sighted around 4.5329, dragged lower by SGD weakness. Cross has broken out below the intraday ichimoku cloud with both intraday MACD and stochastics bearish bias. With our support at 4.5460 taken out overnight, look for further reversals to be limited by 4.5220 before the next at 4.5135. Any rebound should be capped by 4.5460, our resistance-turned-support level.
*        USD/INR – Capped. USD/INR continued to trade below 64-handle yesterday to close at 63.9050. Pair is likely to trade higher today in line with the rest of USD/AXJs broad upmoves today. Further upmoves are likely to remain capped as both intraday MACD and stochastics are bearish bias. Any dips remain an opportunity to buy for move towards 64.50 (rising wedge resistance).
*      USD/IDR – Consolidating Higher.  The USD/IDR appears to be in consolidative mode with the pair edging higher to 13472 this morning but still well-within its current trading range of 13400-13500. Rangy moves so far could be the result of BI moves in the markets to smooth volatility. Both MACD and stochastics are showing no strong bias in either direction, suggesting that range-bound trades are likely ahead. Still, pair is likely to remain elevated as upside pressure remains given external (namely US Fed tightening and China growth concerns) and domestic concerns (persistent current account deficit, anaemic economic growth, stalled reforms). Moreover, month-end dollar demand should also be supportive of the pair. In the absence of fresh catalyst, pair is likely to track dollar moves for the rest of the week and we continue to expect the pair consolidate higher within 13400-13500 intraday. The JISDOR was fixed lower at 13444 on Wed after a new high of 13460 was achieved on Tue. 1-month NDF remains in consolidative mode this morning, hovering below the 13600-region, with intraday MACD showing bearish momentum and stochastics bullish bias, suggesting rangy trades are likely.  Risk appetite improved, and they continued to remove a net IDR01.65tn from their outstanding holding of government debt on 28 Jul (latest data available).
*      USD/PHP – Upticks. USD/PHP is back on the uptick back to the 45.60-handle, underpinned by the firmer dollar tone overnight. Last sighted around 45.603 with momentum indicators showing bullish bias though oscillators are at overbought levels. With our barrier at 45.600 taken out this morning, new resistance is seen around 45.665 (30 Jul 2010 high). Any dips is likely to find support around 45.485 1-month NDF is on the climb this morning back above the 45.60-handle with intraday MACD showing tentative bullish momentum indicators and stochastics bullish bias. There was still no let-off in the foreign investor sell-off with foreign funds selling a net USD8.36mn of equities yesterday.
*      USD/THB – Bullish Bias.  Onshore markets are closed today for a public holiday and will re-open tomorrow. USD/THB climbed to 35.068, a new multi-year high, on the back of dollar strength. Pair has eased slightly back below the 35-figure since then but remains elevated. With onshore markets closed, trades should be quiet but a re-test of the 35-figure cannot be ruled out as domestic growth concerns and the government’s weak THB policy amid Fed tightening and China grow concerns remains. Pair has lost most of its bearish momentum while stochastics is still bullish bias. A daily close above this morning’s high of 35.068 could see the pair head towards 35.230. Dips should continue to find support around 35.870. Foreign funds continued their sell-off of Thai assets, selling a net THB1.35bn and THB0.18bn in equities government debt yesterday. The Finance Minister commented yesterday that further rate cuts were unlikely to help the economy. This suggested that the government could look at other engines to drive growth, namely government spending and investment. In the works are plans to accelerate more than THB350bn in spending that is left this fiscal year. He also said that the THB weakness has been the result of dollar strength and not because of any action from the central bank.

*      Government bond curve ended 1-2bps higher ahead of the FOMC meeting. Trading was thin and mostly centered on the very short dated bonds. For the 10y GII 10/25 reopening, no trades were done on the WI last seen quoted at 4.12/06%. The auction will take place today and we expect decent demand from Islamic investors flushed with liquidity.
*      IRS market was lackluster with nothing being dealt. Rates did not move as well. 3M KLIBOR stayed the same at 3.69%.
*      PDS market had a slightly better trading session with AAA and GG names at the belly and long end of the curve well bid. Plus 8-10y papers were snapped up 1-2bps tighter. GG 10y papers continued to tighten which makes the 9y curve rather attractive as it is only 2-4bps lower than the former. Demand for AA names was generally muted. Newly issued Putrajaya 24s continued its rally from WI trading, tightening 3bps on the bid side from its print of 4.48%.

*      SGS market was again very quiet as traders generally sidelined. Some intermittent buying of shorter dated papers in the morning but activity slowed to a trickle later in the day. Yields closed marginally lower at the front end and almost unchanged for the rest of the curve.
*      Asian credit space picked up after a rebound in global equities. Chinese IGs and HYs traded better with buying seen on AMCs and property names and good two way flows on HRAM, Dalwan and Chioli. O&G names also saw more action. But Chinese tech names were affected by the onshore equity selloff overnight as Baidu opened 5bps wider, though retraced slightly with bottom fishers, and some selling seen on Tencnt and Baba. INDONs traded up again with the long end bonds being taken and the new EUR 2025 moved up close to reoffer level. Korean names were active with more selling seen on KDB and Hyundai Motors. We prefer short Korean names such as KDB because its USD paper offer better yield compared to its CNH papers. Tingyi said to be launching 3y CNH bond today.

*      Indonesia bond market slumped ahead of the FOMC meeting. Sell off was seen during the day supported by a moderate trading volume. We see that an aggressive has cause the decline as there were minimum market sentiments during the day. We still believe that there are potential chances for the LCY bond prices to decline in near future. 5-yr, 15-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.114%, 8.622%, 8.762% and 8.795% while 2y yield shifts up to 7.761%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,128 bn with PBS008 as the most tradable bond. PBS008 total trading volume amounting Rp2,024 tn with 17x transaction frequency and closed at 99.293 yielding 7.833%.
*      Corporate bond trading traded thin amounting Rp438 bn. ANTM01BCN1 (Shelf registration I ANTAM Phase I Year 2011; B serial bonds; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp50 bn yielding 10.370%.
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