Malaysia Affirmed by Fitch at A-/Sta; Maybank Well Capitalized

7 December 2016

Credit Markets Update

Malaysia Affirmed by Fitch at A-/Sta; Maybank Well Capitalized 

¨      APAC USD Credit Market: Another stable session for Asian bonds, tracking UST yields movement. IG spreads tightened marginally to 188.5bps, whereas average HY bond yields gained 1bp to 6.80%. Asian IG CDS tightened marginally to 124.3bps. Treasury yields were mostly unchanged to 1bp tighter ahead of ECB meeting this week and the FOMC the following week, alongside economic data such as stronger US Oct factory orders and durable goods orders, while trade deficit increased to USD42.6bn (consensus: USD42.0bn). UST 10y was flat at 2.39% while the 2y dip 1bp to 1.11%. Brent oil prices slipped -1.8% to USD53.9/bbl, the first slip since the OPEC deal last week, where Brent has risen approximately 16% from USD46.4/bbl. In the primary space, Yunnan Energy Investment (issue rating: NR/NR/BBB) priced USD310m 3y Reg S bonds at T+245bps (IPT: +250bps area) and USD130m 5y bonds at T+265bps (IPT: +270bps area). Elsewhere, Olam International (NR) taps the primary market for USD175m 5y bonds in a private placement deal, sold at T+199bps.

¨      SGD Credit Market: Viva Industrial drops S&P rating. The was a 4bps decline in the short-to-mid swap rates, with the 2y and 5y closing at 1.56% and 2.18% respectively. Some short-to-mid dated property names such as PREHSP, GUOSLP and SUNSP as well as longer dated HDBSP papers appeared tighter. Viva Industrial Trust (Ba1) has requested S&P to withdraw its ratings on the REIT as Moody’s recently initiated a rating of Ba1/Sta on the REIT in Nov-2016. Its sole outstanding SGD100m VITSP 9/18 received a one notch lower rating (Ba2) due to the high percentage of encumbered assets of 86%.

¨      MYR Credit Market: Fitch maintained Malaysia’s rating at A-/Sta, however expects governance and domestic political developments to remain prominent in a number of Asian countries such as Malaysia, Philippines and Thailand. The MGS ended firmer yesterday with the 3y declining 7bps to 3.76%, and 10y slipped 6bps to 4.18%. Meanwhile, Moody’s views that Maybank (A3/Sta) strong capitalization mitigated the deterioration of asset quality in Singapore and Hong Kong. However, the banking group’s Baseline Credit Assessment (BCA) could come under pressure if its gross NPL ratio approaches 3%, from the 2.2% in Sep-16. Corporate activities totaled at MYR485m. Notably, Public Bank T2 9/23c18 rose 1.5bps to 4.758% while TCMH 11/19 spiked 33bps to 5.622% amid the negative outlook. On related news, Tan Chong-sponsored auto-loan securitization, Premium Commerce, is planning to tap the market with 2016-A notes (estimated size of MYR219.5m) at preliminary rating of AAA for its Class A Tranche and AA2 for Class B Notes.