Muted APAC Primaries; Vedanta Resources Upgraded

19 September 2016

Credit Markets Weekly

Muted APAC Primaries; Vedanta Resources Upgraded

                                                                      

APAC USD CREDIT MARKETS

¨      Asian Bond Markets widened as investors stayed cautious. IG spreads and average HY bond yields added 10-13bps WoW to 190.8bps and 6.41% respectively, while the iTraxx AxJ IG also crept up 5bps to 113.3bps. US Treasuries were mixed, yields of shorted dated 2-7y tumbled -1 to -2bps WoW on weaker US August retail sales and industrial production, whereas the sell-off in longer-dated 10-30y continued with yields rising 2-5bps; UST 10y settled at 1.69%.

¨      Moving to ratings, Moody’s upgraded Vedanta Resources a notch higher to B1 while S&P hands a positive outlook and affirmed its rating at B premised on expectations that Vedanta’s operating performance will improve on higher metal prices, better financial flexibility and the expected merger of Vedanta Ltd and Cairn India Ltd that should reduce refinancing risk for Vedanta Resources.

¨      Quiet primaries in shortened week as most Asian markets were shut for Mid-Autumn Festival. New issuances declined to USD3.3bn from USD5.4bn in the previous week. China’s Industrial Bank (Baa2/NR/NR) sold maiden USD1bn deal, followed by another USD1bn 2-part deal by Hon Hai Precision Industry (NR/A-/NR), which is the world’s largest electronics manufacturing service provider and lastly, State Bank of India (SBI) (issue rating: B1/B+/NR) with the first USD AT1 bond by an Indian bank.

SGD CREDIT MARKETS

¨      Ascendas Hospitality lone primary print; More O&G players seek bond restructuring. The primary space continued to stay largely silent, with only a lone print by Ascendas Hospitality Trust (NR) with a SGD70m 6y at 3.325%. YTD issuances are standing at SGD16.7bn, or 11% lower if compared to a similar period in 2015. Interest appeared in banking papers like ABNANV, STANLN and OCBC, as well as yielder papers like EZISP and GALVSP. Following the previous week’s announcement by Ausgroup (NR) for a two year extension of its outstanding SGD110m AUSGSP 10/16, two more O&G players announced further details on their bond restructuring plans last week, with Rickmers Maritime Trust (NR) proposing to bondholders of its SGD100m RMTSP 5/17 a swap for a SGD28m fixed rate step-up perpetual convertible bond while Marco Polo Marine (NR) will be seeking consent from bondholders for the extension of maturity of its sole outstanding SGD50m MPMSP 10/16. Lastly, Global Logistic Properties (Baa2/-/BBB+) announced that it will be acquiring US logistic properties to the tune of USD1.1bn, with around 57.8% funded via debt and the balance via equity.

¨      Investors to eye CPI and IP ahead of Oct MAS meeting. There was a keen widening in the short-to-mid SOR benchmark, as the 2y rose 9bps to 1.45% while the 5y increased by 17bps to 1.78%. Looking ahead, investors will be eyeing the Singapore Aug CPI (23-Sept) and Aug Industrial Production (26-Sept) for clues on the state of the economy ahead of the MAS bi-annual monetary policy meeting in mid-Oct, where the consensus is tilting towards MAS standing pat on monetary policy, though weaker growth presents some risk towards an easing policy stance via the re-centering downwards of the policy band.

MYR CREDIT MARKETS

¨      MGS curve bear flattened. Yields rose 3-12bps across the 3y-10y MGS with the 3y jumping 12bps to 2.96% while 10y increased 5bps to 3.58% as investors were cautious before the Sept FOMC and BOJ meeting set  on the 22-Sep. The sentiment has led to weak BTC of 1.67x for the MYR3bn 5y MGS Reopening which concluded at average yield of 3.256%. The MYR depreciated 1.4% to 4.13/USD as Brent dropped from the high of USD48/bbl to USD45.7/bbl following news that Nigeria and Libya will resume their exports adding concerns on global surplus. Corporate activity was slower at MYR1.5bn with only three trading sessions last week. Top traded PLUS settled flat to -2bps at 4.32-4.76% for across tranche ’29-36, while Prasarana ’23-41 crossed at 3.84-4.73 (-8bps to +2bps).