APAC HY Primaries Pick Up; Ziya Capital Established MYR20bn Sukuk Programme

3 August 2016

Credit Markets Update

APAC HY Primaries Pick Up; Ziya Capital Established MYR20bn Sukuk Programme

¨      APAC USD Credit Market: Mixed Asian Bond Markets. A weaker session as average HY bond yields widened 6bps to 6.36%, while Asian CDS crept up 1bp higher to 119.8bps. IG spreads tightened 2bps to 196.9bps as Typhoon Nida shuts Hong Kong markets. US Treasuries were mostly mixed, UST 3-30y gained 1-4bps with the exception of UST 2y which fell 1bp to 0.68%, following the improving US June personal spending at 0.4% (consensus: 0.3%), while June personal income grew 0.2% against expectations of 0.3% whereas June PCE index was flat at 1.6% YoY (in-line with consensus). PT MNC Investama was downgraded to B-/Neg from B/Neg by S&P premised on its unfavorable debt maturity profile and given the delays in its refinancing efforts for its USD365m 2018 notes amid still-high capex. Primaries were relatively quiet yesterday as Typhoon Nida looms, nevertheless, ICBC (A1/A/A) via its Singapore branch may price USD benchmark 3y bonds later today (IPT at +145bps), while in the HY space, HK property developer and toll road operator, Road King Infrastructure (B1/BB-NR) may sell USD benchmark 3y bonds with IPT at 5.5%. Fenghui Leasing (B2/NR/B) may also price USD benchmark 3y bonds (IPT at 8.5%). Lippo Karawaci (Ba3/B+/BB-) may tap USD 2022 bonds at 102.5 area while similarly, Samvardhana Motherson (NR/BB+/NR) may tap USD2021 bonds at 4.5% area.

¨      SGD Credit Market: HDB prints 7y at 1.91%; Sembcorp Industries dragged down by Utilities and O&G segments. There was a steepening in the short-to-mid curve, with the 5y rising 4.4bps to 1.74% while the 2y rose 2.9bps to 1.47%. Interest was observed in yielder names like QNMSP, OHLSP as well as SCISP which were around 6-10bps tighter. Sembcorp Industries’ 2Q16 revenue fell 22.7% YoY to SGD1.85bn due to lower contribution from its utilities and O&M segment by between 20-25% while net profit declined 65% to SGD94.8m from the absence of a one-off gain on disposal seen in 2Q15 and higher finance cost. Meanwhile, S&P has reaffirmed Viva Industrial Trust’s rating as BB/Sta. In the primaries, Singapore’s Housing Development Board (Aaa/-/-) has priced a SGD700m 7y at 1.91%.

¨      MYR Credit Market: Weaker session, with 3y-7y MGS increased 2-6bps to 2.92-3.42% as oil commenced its slide back towards USD41/bbl handle. Key focus was the reopening of MYR3.0bn 7y MGS 8/23 quoted at WI of 3.45/39%, which is scheduled to be tendered on 4-Aug (Thursday). Thin flows in MYR credit with merely MYR391m exchanged hand — notably, PLUS 1/29-1/36 and Sabah Development Bank 7/19-8/19. In the primary space, Ziya Capital (NR) established a MYR20bn Sukuk Programme which is secured by a portfolio of Islamic receivables. The Senior Sukuk will be privately placed to a SPV under The Bank of Tokyo-Mitsubishi UFJ, Horizon Funding Corp. Elsewhere, Sime Darby teams up with SP Setia, I&P Group and PT Hanson International for a MYR3.5bn affordable housing projects in Indonesia.