Asian Bonds Recovered Post-Brexit; Baosteel on Rating Watch, PLN Revised to Stable; CIMB Thai Priced MYR570m 10nc5 Subdebt

29 June 2016

Credit Markets Update

Asian Bonds Recovered Post-Brexit; Baosteel on Rating Watch, PLN Revised to Stable; CIMB Thai Priced MYR570m 10nc5 Subdebt

¨      APAC USD Credit Market: Improvement in sentiment after last week’s selloff continues to lift Asian credits with the iTraxx AxJ, IG spreads and HY c.2-3bps lower at 147.7bps, 225.4bps and 6.88% respectively. Meanwhile, yields of benchmark USTs rose c.1-3bps with 5y and 10y at 1.01% and 1.47% respectively following the rebound in global equities and commodities. On rating actions, Fitch placed Baosteel Group and its group of companies’ A- rating on rating watch evolving following announcement of restructuring between Baosteel Group and Wuhan Iron and Steel Group (WISCO), which may weaken its financial metrics due to WISCO’s highly geared profile. Elsewhere, outlook of Perusahaan Listrik Negara’s BB rating was reduced to stable from positive by S&P on expectation of thin liquidity and debt servicing capability in the next 3-4 years following delays in the new tariff mechanism while it continues to embark on debt-funded investment plans.

¨      SGD Credit Market: Mapletree Logistics acquire Malaysian warehouse. There was a flattening in the short-to-mid curve, with the 5y falling by 3bps to 1.70% while the 2y declined 1.5bps to 1.37%. Brent oil prices lingered below the USD50/bbl threshold this week, closing at USD48.6/bbl yesterday, with interest in quality papers like STHSP, CCTSP and STSP. Mapletree Logistics Trust (Baa1/-/-) announced that it is acquiring a warehouse facility in Shah Alam for MYR160m (SGD53.2m) from its sponsor, Mapletree Investments Pte Ltd.

¨      MYR Credit Market: MGS curve bull-flattened and MYR strengthened amid low global yields. Yield for the 3y MGS fell 3bps to 3.18% while 10y MGS tumbled 8bps to 3.78%. MYR strengthened 0.5% to 4.0775/USD along with other regional currencies. The reopening of MYR2.5bn MGS today will likely attract good demand where the WI was quoting tighter at 4.63/60%, from 4.79/4.60% the day earlier. Trading activity in the corporate market remained vigorous with total volume increasing c.40% to MYR1.4bn. We saw interest in quasi-government names - PASB ’21-’26 on combined MYR250m trades decreased 3-29bps to 3.90%-4.33%, while Danainfra ‘21-‘36 fell 3-19bps to 3.90%-4.73%. In the primary market, CIMB Thai (AA3) priced MYR570m of its 10nc5 subdebt at 5.30%, 30bps below its previous issuance back in 2014. Valuecap (NR) printed MYR1bn redeemable unsecured bond 5y at 4.109%, the second tranche after the MYR3bn issuance in Dec-15.