3 February 2016 Credit Market Update

3 February 2016

Credit Market Update

           

China Loosens Mortgage Policy; Downgrade Pressure for Wanda Commercial and Posco; Kexim Taps USD400m Green Bonds

¨      APAC USD Credit Markets: The iTraxx AxJ IG and IG spreads widened c.3bps to 155.4bps and 168.5bps respectively, dragged by property and O&G credits such as FRANSH ’21, VANKE ‘19, PTTEPT ’21 and PTTTB ’22. Contrastingly, average yields of junk-rated credits inched 4bps lower to 11.54% led by Evergrande ’18-20 and Central China ’18. Meanwhile, yields of benchmark Treasuries edged c.8-11bps lower with 10y at 10-month low of 1.84% as global equities fell while Brent oil plunged 4.4% to USD32.7/bbl. Rating actions saw S&P slashed Wanda Commercial to BBB from BBB+ with negative outlook on expectations of weaker leverage in next 24 months given aggressive expansion plan whereas Posco’s Baa2/BBB+ ratings were placed on negative outlook by Moody’s and S&P citing concerns over the challenging Asian steel industry and its implication on the company.  In primaries, Kexim (Aa2/AA-/AA-) issued USD400m 2.125% 5y green bonds at T+87.5bps vs. IPT+105bps.

¨      SGD Credit Markets: Weak HK Jan property sales reported; China further eases mortgage policy. Spreads on some HK property names (HENLND, WHARF, WHEELK) widened as Centaline, a Hong Kong property agency, reported that Jan-2016 new home sales plummeted to 420 units (from over 2,100 in Dec-2015) while PAHSP 7/17 continued to trade lower at 25 cents to a dollar after Pacific Andes Resources Development’s subsidiary China Fisheries missed its coupon payments due 30-Jan on its USD300m CFGSP 7/19. China announced a further loosening of mortgage downpayment to 20% for first time home buyers (from 30% previously), which may spur interest in names such as CENCHI and YLLGSP. There was a parallel rise of 2bps in the short-to-mid benchmark SOR curve, with the 2y and 5y closing at 1.82% and 2.25% respectively.

¨      MYR Credit Markets: MYR5.4bn Govvies and MYR552m corporate bonds traded. MYR5.4bn of Govvies were traded though benchmark yields diverged with MGS 10y dropping 3bps to 3.82% while 7y rose 7bps to 3.68%, while the Malaysia CDS rose 9bps to 192bps. Corporate trades totaled MYR552m topped by MYR70m of Maybank 3/21 at 3.75%, MYR70m of Rantau 12/20 at 4.14%, MYR60m of JCORP 6/22 at 4.29%, MYR50m of KLK 9/22 at 4.61% and MYR45m of PTPTN 3/24 at 4.46%. Separately, the MBSB-Bank Muamalat deal to form Malaysia’s largest Islamic bank had fallen through as respective shareholders could not reach an agreement on the terms and conditions.