Malaysia Oct CPI Eyed; Maybank Revised Loan Growth Target Lower

25 November 2016

Credit Markets Update

Malaysia Oct CPI Eyed; Maybank Revised Loan Growth Target Lower

¨      APAC USD Credit Market: Quiet Asian bond markets ahead of the US Thanksgiving holiday. Asian IG CDS was a tad tighter at 127bps as CDS spreads of CNOOC Ltd and Korea Electric Power tightened 4-5bps, although EM govvies widened yet again (Indonesia and Malaysia). Brent oil prices hold around the USD49/bbl level as uncertainty builds ahead of the planned OPEC meeting next week. In the primaries, Chinese infrastructure construction firm, Shaanxi Xixian New Area Fengxi (NR) and Zhenjiang Cultural Tourism Industry Group Co.Ltd (NR), a Chinese water utility company may look to price USD bonds later today. The former planned USD 3y bonds with guidance levels at 6% level, while the latter sets USD Reg S 3y bonds with IPT indicated around 5.3% area.

¨      SGD Credit Market: KrisEnergy reaffirms final terms of consent solicitation to stay. There was a strong widening again in the short-to-mid SOR curve, with the 2y rising by 7.4bps to 1.68% while the 5y rose 9.6bps to 2.27%. Ausgroup (NR), which successfully received consent to extend the maturity of their SGD110m AUSGSP 10/16 by two years, announced that their 1QFY9/2017 revenue fell 23.7% to AUD101.3m while registering a loss of AUD2.2m partially due to finance costs which increased 250% as a sizeable portion of interest costs was previously capitalized in the comparative quarter as its Port Melville project was still under construction then. Meanwhile, despite some pushback from bondholders, KrisEnergy (NR) has reaffirmed that they won’t be changing their final terms of the consent solicitation.

¨      MYR Credit Market: MGS tumbled again to push benchmark 10y note higher to 4.34% (+4bps). Maybank (A3/A-/NR)’s net profit fell 5.4% YoY to MYR1.86bn in 3QFY16 due to a rise in net insurance benefits and claim incurred, net fee and commission expenses, charge in expense liabilities and taxation of life and takaful fund to MYR1.1bn (from MYR608.3m in 3QFY15), and a lower foreign exchange translation gain of MYR799.7m (from higher base of MYR2.6bn last corresponding period). The bank reported a net interest income of MYR2.8bn (-2.4% YoY) in 3QFY16, while expecting loan growth to fall to lower range of 2-3% in FY16 (from the earlier target of 8-9%). Maybank T2 5/24 was last traded on 23 Nov at 5.05% (+70.4bps). On the other hand, Genting Malaysia (RAM: AAA) reported a 68.7% YoY rise in net profit to MYR532m in 3QFY16 on lower net fair value loss on derivative financial instruments and impairment losses, with its Genting 6/22 seen trading at 4.359% (+0.8bps) on 6 Oct.