MBSB Expects Impairment Programme to End by 2017

6 December 2016

Credit Markets Update

MBSB Expects Impairment Programme to End by 2017 

¨      APAC USD Credit Market: Asian bonds were relatively stable as the risk-off sentiment sets in after the Italy referendum defeat. IG spreads and speculative bond yields were unchanged to marginally wider at 187.8bps and 6.81% respectively. Asian IG CDS tightened marginally to 124.9bps. UST yields push higher following the improved US Nov ISM non-manufacturing print (actual: 57.2; consensus: 55.5) and hawkish Fedspeaks, shrugging off the failed Italian referendum. UST 10y gained 1bp to c.2.39% while the 2y added 2bps to 1.12%. In the primaries, Zhenjiang Transportation (issue rating: NR/BB/NR), a Chinese construction company, priced USD160m 3y Reg S bonds at 5.5% (IPT: 5.75% area). Later today, Changde Urban Construction (NR/NR/BBB-) and Danyang Investment (NR) meets with investors for planned Reg S USD bond deals, whereas China Minsheng Banking Corp (NR/BBB/NR) plans USD AT1 bonds.

¨      SGD Credit Market: Ascendas REIT grows with SGD420m acquisitions. The short-to-mid SORs dipped by 3-4bps, with the 2y and 5y closing at 1.59% and 2.22% respectively. Ascendas REIT (A3) announced that it was acquiring 3 buildings at Singapore Science Park for SGD420m to be financed via internal cash and credit facilities as well as a SGD100m issue of new units to the seller Ascendas Land, who currently holds a 16.8% stake in Ascendas REIT. Meanwhile, Sabana Sukuk REIT (NR) is divesting its 218 Pandan Loop property for SGD14.8m which has been vacant since Nov-15.

¨      MYR Credit Market: Govvies extend gain. MGS curve continued the downward shift with 7y declining 17bps to 4.06% and the 10y fell 12bps to 4.25% amid firmer MYR. MYR strengthened 0.11% to 4.45/USD following the proactive BNM measures to enhance the liquidity of the foreign exchange market. Looking ahead, investors to focus on upcoming MYR1.5bn 20y GII Reopening scheduled to close on the 7-Dec. Over the corporate market, short-dated bonds topped the trading chart – Khazanah 7/18 climbed 89bps to 4.241% on MYR130m trades, followed by SabahDev 4/17 (-1bp to 4.579%). Meanwhile, MBSB (A2) expects impairment programme to end by 2017 after the lender’s earnings hit by higher credit costs over the past 2 years. MBSB currently has MYR2.785bn Covered Sukuk outstanding, which received 4-notch rating uplift at a rating of AA1. MBSB 10/20 was seen traded at 4.50% on the 25-Oct.