China Issuance Dominates Markets; Maxis Issues MYR500m 4y Sukuk at 4.7%

28 October 2016

Credit Markets Update

China Issuance Dominates Markets; Maxis Issues MYR500m 4y Sukuk at 4.7%

¨      APAC USD Credit Market: Developed market government bond yields extended their rise, with UST yields rose 2-7bps across the curve, particularly at the longer-end as UST 10y jumped to 1.85% (+6bps or 5-months high) while UST 2y closed at 0.89% (+2bps) on the back of the i) better than expected UK 3Q GDP print; ii) comments by the BoJ’s Kuroda on steeper Japanese yield curve and iii) higher oil prices on renewed OPEC hopes (+1% to USD50.5/bbl). Asian bonds widened amid the primary supply influx. IG spreads stayed flat at 190.3bps, whereas average HY bond yields widened 4bps to 6.47%. Asian CDS tightened marginally at 115.1bps. There were 6 deals priced yesterday as issuers rush to the markets probably ahead of the key event risk over the next two weeks (US presidential election and the Nov FOMC meeting). Li & Fung (issue rating: Baa3/BBB-/NR)’s USD650m subordinated Pnc5 was oversubscribed by 6.7x, priced at 5.25% (IPT: 5.625%). Bank of East Asia (A3/A/NR) sold USD500m 10nc5 T2 bond at +270bps compared to IPT at +285bps. China Development Bank (Aa3/AA-/NR) via its Hong Kong unit sold USD350m 5y bonds at +70bps (IPT at +95bps). Additionally, Beijing Capital Development (NR/NR/BBB-) received around USD3.5bn for its USD500m 5y bonds priced at +225bps against IPT at +260bps area.

¨      SGD Credit Market: OCBC grows on non-interest income. The 2y SOR fell rising 2bps to 1.35% while the 5y rose 4bps to 1.72%. Mapletree Commercial Trust (Baa1/NR/NR) 2Q16/17 revenue rose by 23.6% QoQ to SGD88.1mn, while net property income rose by a larger 24.8%. Revenue and property income were supported by its existing portfolio while its successful acquisition of Mapletree Business City I has brought properties under management up to SGD6.2bn post-acquisition. Mapletree Greater China Commercial Trust (Baa1/NR/NR) on the other hand saw 2Q16/17 fall -1.9% QoQ to SGD83.1mn, while net property income fell by a further 3.2%. The fall was mainly attributed to the depreciation of HKD and RMB against the SGD and the rise in property taxes. Meanwhile, OCBC Bank (Aa1/AA-/NR) saw earnings grow 4.5% YoY 3Q16 to SGD943mn, largely driven by the growth of its non-interest income (25% YoY) whereas the net income fell (-6% YoY). NPLs continued to increase to 1.19% as at Sep 2016 from 1.14% in Jun.

¨      MYR Credit Market: MGS held in a wider range for longer-dated as the government auctions MYR2.0bn of 20y note at higher WI of 4.33/23 compared to yesterday’s 4.30/20. Maxis Broadband Sdn Bhd (NR) issued MYR500m 4y sukuk at 4.700%, while Perbadanan Kemajuan Negeri Selangor (RAM: AA3) priced MYR200m 1-2y sukuk at 4.25-4.45%. Turning to pipeline issue, IGB Corp (NR) together with its joint venture partner, Southkey City Sdn Bhd, plans to raise up to MYR1.0bn via an unrated 8y MTN programme, with proceeds earmarked for development and construction of the Mid Valley Megamall Southkey project in Johor. Tenaga Nasional (A3/BBB+/BBB+) reported a 19% YoY increase in net profit (excl. forex translation losses of MYR115m) to MYR1.9bn due to 4.0% electricity growth and 77% lower tax expenses. JEP 6/32 and 12/32 were seen traded tighter at 4.979% (-21.6bps) and 5.049 (-10.0bps) on MYR20m yesterday.