OPR Maintained at 3.00%; Improved Bottomline for RHB and MMC

24 November 2016

Credit Markets Update

OPR Maintained at 3.00%; Improved Bottomline for RHB and MMC

¨      APAC USD Credit Market: Asian bonds tightened as UST weakened. The IG spread narrowed 2bps to 187.9bps, although the Asian IG credit protection cost rose 3bps to 129bps dragged by Asian govvies CDS (Malaysia, Indonesia), while the HY bonds clinched 1bp higher to 6.77%. Selloffs in the USTs with the 2y UST increasing 3.6bps to 1.12% and the 10y rose 2bps to 2.35% following the hawkish FOMC minutes strengthening the view of a Dec rate hike. Primary issues continued to be strong - Horsepower Finance, guaranteed by ICBC Hong Kong (issue rating: A1/A/NR) priced USD550m 3y bonds at +107.5bps (IPT+130bps). Changsha’s local government financing vehicle, Changsha Pilot (NR/BBB-/BBB-) also sold USD350m 3y bonds at +220bps (IPT +240bps) while, Chalieco (NR/BB/NR) printed USD350m Pnc3 with step-ups, senior guaranteed by China Aluminium International Engineering Corp (NR/BB+/NR) at 5.70% (IPT: 6.125%). On the other hand, State Power Investment Corporation (A2/NR/A) and Guangzhou Industrial Investment Fund Management Co.Ltd (NR/BBB+/A-) prepares to meet investors for a planned USD bond issuance.

¨      SGD Credit Market: SOR has spiked since US election. There was only a marginal decline by around 1bp in the 2y and 5y SOR which closed at 1.62% and 2.18% respectively. Since the US Presidential election, the weakening SGD against the USD has seen the 2y SOR rise by 29bps while the 5y rose by a larger 44bps as investors are currently pricing in a 100% probability of a rate hike in Dec-2016. There was some selling in higher grade/ quasi papers such as HDBSP and LTAZSP. Singapore 3Q final GDP was released this morning at 1.1% (consensus: 1.0%), while investors will be eyeing the Oct Industrial Production (consensus: 1.0%; Sept: 6.7%) to see if the mini-rebound that started in Jan-2016 will be sustained.

¨      MYR Credit Market: BNM, held OPR unchanged at 3.00% as expected, while lowering inflation outlook to 2.0-2.5% (which was not materially different from the Sep forecast of 2.0-3.0%). Accordingly, MGS yields ended relatively flat except for the 7y MGS (-4bps to 4.22%). RHB Bank (A3/BBB+/NR) reported a net profit of MYR511m (+2.2x YoY) in 3QFY15 from the absence other operating expenses (driven by the one-off career transition scheme of MYR308.8m in 2015), although loan growth eased to 2.3% YoY (from 4.8% YoY in 2QFY16), and loan loss provisioning surged by 51.7% to MYR146m. RHB T2 7/24 was last traded on 22 Nov at 4.902% (+51.5bps). On the other hand, MMC Corp (MARC: AA-)’s net profit increased 121% to MYR105.9m in 3QFY16 due to the consolidation of NCB Holdings’ earnings and a one-off land sale gain, with its MMC 11/20 trading at 4.808% (+0.7bps). On the macro front, Oct’s inflation rate to be released tomorrow and is expected to maintain at 1.5%.