Malaysia Foreign Reserves Slips to USD96.4bn; Exports Fell Sharply

8 December 2016

Credit Markets Update

Malaysia Foreign Reserves Slips to USD96.4bn; Exports Fell Sharply 

¨      APAC USD Credit Market: Asian bonds to stay range-bound. IG corporate CDS outperformance in Telekom Malaysia, Bank of India and Samsung Electronics led to narrower Asian IG CDS spread at 121.1bps (-3bps). Average HY bond yields edged 3bps lower to 6.78%, while IG spreads traded slightly wider at 189.1bps. Treasury yields strengthened overnight after disappointing economic data in Europe dampened global growth sentiment ahead of the ECB meeting. UST 10y declined 5bps to 2.34%, while 2y slipped 2bps to 1.09%. Chinese new issuance continue to pick-up, China Minsheng (issuer rating: NR/BBB/NR) sold USD1.439bn AT1 Pnc5 bonds at 4.95% compared to IPT at 5.25% area. Country Garden (expected issue rating: Ba1/NR/BB+) taps the market for USD350m 10Put5 bonds priced at 5.625% in-line with initial target price. Furthermore, Changde Urban (NR/NR/BBB-) may sell USD benchmark 3y bond (IPT at +290bps) later today, while China Grand Auto (issue rating: NR/NR/B+) plans to price USD Pnc3 with IPT at 9%.

¨      SGD Credit Market: Banyan Tree collaborates with Accor. There were minor movements in the short-to-mid swap curve, with the 2y rising 0.2bps to 1.56% while the 5y dipped 0.8bps to 2.17%. Banyan Tree (NR) announced a strategic collaboration with Accor S.A. which includes co-developing hotels, a nomination of an Accor director to Banyan Tree’s (BTH) board of directors and the proposed issuance by BTH to Accor of a SGD24m convertible debenture.

¨      MYR Credit Market: FX reserves and export fell; Offshore players selloff in November. Malaysia FX reserves fell USD1.9bn to USD96.4bn as at 30-Nov, compared to the level registered two weeks ago. This coincides with the foreign outflows during the month where offshore players reduced their holdings in MGS+GII by MYR18.8bn to MYR196bn (or 33.2% of the MYR590.4bn outstanding). Exports fell for the 2nd consecutive months by -8.6% YoY in Oct (Sep: -3.0% YoY) on the back of contraction in commodities and non-E&E shipments. Govvies maintained the positive momentum as yields continued to fall, notably in the 3y MGS (-15bps) and 5y MGS (-7bps) while the MYR strengthened for the 5th continuous trading session to 4.43/USD. The improved sentiment spurred the demand for the MYR1.5bn 20y GII Reopening auction which garnered the highest BTC this year of 3.75x at average yield of 4.811%. Corporate activities were relatively quiet at MYR375m. Notably, yields for banking names such as Public T2 23c18, RHB T2 22c17 and Ambank T2 22c17 closed higher.