China’s Exports Weaken; UOB, KOROIL to Issue USD Notes; BNM Expected to Maintain OPR at 3.25%

9 March 2016

Credit Markets Update

           

¨      APAC USD Credit Markets: Bearish market sentiment after China’s Feb exports fell -25.4% YoY (consensus: -14.5%; prior: -11.2%), whereas Feb imports declined -13.8% YoY (consensus:-12.0%; prior: -18.8%), while trade surplus printed at USD32.59bn against expectations of USD51.0bn (prior: USD63.29bn). As a result, the iTraxx AxJ IG drifted 2.4bps higher to 153bps, while IG spreads and average HY yields were both 2bps wider at 232bps and 7.86% respectively. Elsewhere, Treasury yields bear flattened as the 2y shed 4bps to c.0.86%, while 10y declined c.7.7bps to 1.83% amid the negative close in US equities and Brent oil prices (-2.9% to USD39.65/bbl). In the primary market, UOB (Aa1/AA-/AA-) may price its USD 10.5nc5.5 B3T2 with an IPT of T+235bps. In the pipeline, Govt of Indonesia (Baa3/BB+/BBB-) plans investor meetings starting from 10-Mar for a potential Sukuk deal, and similarly, Korea National Oil Company (Aa2/AA-/AA-) will hold meetings with investors across Asia, Europe and US from 14-Mar.

¨      SGD Credit Markets: Mizuho prints SGD senior; Jingye Construction outlook downgraded. There was continued flattening in the SOR curve, led by the 5y which declined 1.5bps (to 2.12%) while the 2y rose 1bp (to 1.79%). Interest was observed in high grade papers like MAPLSP, SUNSP, AREIT and banking bonds such as LT2 STANLN and ABNANV. Meanwhile, China Jingye Construction Engineering’s outlook was revised to Baa3/Neg (from Baa3/Sta) as its parent, China Metallurgical Group, a China SOE, was similarly revised to a negative outlook alongside the China sovereign outlook downgrade. Nevertheless, its SGD CHMETL 5/17 was mostly unchanged. In the primaries, Mizuho announced a senior SGD100m (A1/NR/NR) 3y at 2.77%.

¨      MYR Credit Markets: Local govvies and currency fell after the strong rally last week; Government to auction MYR2.5bn new 30y MGS 3/46. The short-end 3y MGS and GII were the most active closing 2bps and 1bps higher at 3.27% and 3.26% respectively. MYR weakened by 0.5% to 4.12/USD weighed by the lower Brent price and hawkish remarks from Fed’s Fisher who sees a better inflation outlook after the strong jobs market print last week. The new MYR2.5bn 30y MGS 3/46 auction is to be tendered on Thursday (10-Mar) with When Issued (WI) was seen quoted at 4.70%/4.65%. BNM to hold the MPC meeting later today where our economist is expecting the central bank to keep OPR at 3.25%, while there are some noises on potential SRR cut by another 50bps to 3% to inject more liquidity into the financial market. On the corporate market, about 47% of total volume or MYR415m was seen traded in BGSM 12/16 and 6/24, which rose 1-2bps to 4.176% and 5.209% respectively.