Shanghai Huayi Group downgraded to Ba1/Sta by Moody’s; previously on Baa3/review for downgrade. The ratings were slashed to reflect Moody’s expectations of weaker earnings amid the persistent oversupply in the commodity chemicals segment, while high capital spending will keep debt leverage elevated. The group’s adjusted debt/EBITDA is forecasted to stay high at around 6-7x over the next 1-2 years.

30 June 2017

Credit Markets Update

                                               

Treasuries Extends Losses; 2.6x BTC for SGSP USD500m 10y Bonds

MYR Credit Market:

¨      Global trends hit MYR and MGS. With the fall in equities and the weakness in the USD, Asian currencies fared better. The MYR ended the day largely unchanged at 4.2935/USD (+0.09%). The falls in the bond markets of DM has also taken its toll on regional rate curves. The 3y MGS and 10y MGS fell +0.7bps to +6.4bps, ending at 3.36% and 3.90% respectively. The effects of the spiking global yields are expected to continue weakening the MGS yield curves.

¨         Bond trading improves. Bond trading in govvies improved as MYR2.4bn changed hands. A large portion of which occurred in the 20s maturities (MYR613m), surprisingly in off-benchmark maturities. The 22s and 27s also saw strong trades of MYR190m and MYR361m respectively especially in the 5y GII and the newly issued 10y GII. The corporate bond space remained as tepid as the day before with MYR272m trades. Among the major trades occurred in the short-dated Cagamas 08/17s where 55m of trades were done and YTL Power with MYR45m trades.

¨         Sports Toto issues MYR225m. Over in the primary market, Sports Toto Malaysia Sdn Bhd issued MYR225m in total of bonds, in three tranches of MYR60m, MYR40m and MYR125m, with maturities of 3y, 5y and 1y respectively.

APAC USD Credit Market:

¨         Treasuries extends losses especially at the mid-to-belly of the curve with the 10y rising nearly 4bps to 2.26%, while the 2y climbed 1.6bps to 1.37% as markets continue to weaken since ECB’s Draghi and Fed Janet Yellen’s remarks which were read as hawkish by market participants. On economic data, the final 1Q17 GDP was revised higher to 1.4% compared to the earlier reading of 1.2%, while weekly jobless claims were higher at 244k compared to estimates of 240k. Looking ahead, investor’s will eye the May personal income and consumption print which is expected at 0.3% and 0.1% respectively.

¨         Asian credit markets were stable; the iTraxx AxJ IG CDS spreads was slightly higher at 86.2bp driven by Korean credits such as GS Caltex, KT Corp and SK Telecom. IG spreads were firm at 171bp, while HY bond yields rose a tad to 6.65% (1.7bps).

¨         SGSP Australia Assets Pty Ltd (A3/A-/NR) received 2.6x BTC for USD500m 10y bonds priced at T+132bp compared to IPT at T+155bp, mainly taken up by fund managers (54%) and banks/FI (35%). India’s Rural Electrification Corporation Ltd (Baa3/NR/BBB-) sets final guidance for USD 10y green bonds at T+170bp against IPT at T+200bp area. Elsewhere, Modern Land (B2/NR/B+) sold USD130m 1y bond at 6.5%, at IPT area, with reports that Huarong Investment Stock Corp, a subsidiary of China Huarong Asset Management (A3/A-/A) subscribing USD50m of Modern Land’s new bonds.

¨         Shanghai Huayi Group downgraded to Ba1/Sta by Moody’s; previously on Baa3/review for downgrade. The ratings were slashed to reflect Moody’s expectations of weaker earnings amid the persistent oversupply in the commodity chemicals segment, while high capital spending will keep debt leverage elevated. The group’s adjusted debt/EBITDA is forecasted to stay high at around 6-7x over the next 1-2 years.

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.

Growth Moderates But Set To Pick Up Slightly In 2H17

Economic Research	30 June 2017
Philippines
Economic Outlook
Growth Moderates But Set To Pick Up Slightly In 2H17 Recovering from a high base effect in 1H due to the May 2016 election, we expect the Philippines’ economy to grow by a faster pace of 6.4% YoY in 2H17, from +6.2% estimated for 1H. A bounce-back in domestic demand is envisaged for 2H, supported by a faster disbursement of a bigger state budget for social and infrastructure projects spending as well as resilient consumer spending on the back of a sustained increase in overseas foreign worker remittances. Economist:  Rizki Fajar  | +6221 2970 7065

US 1Q17 GDP Revised Higher, on Stronger Consumer Spending

Economic Research	30 June 2017
Global News
Economic Update
Tracking Global News US 1Q17 GDP Revised Higher, on Stronger Consumer Spending Eurozone Economic Confidence Hits Decade High as ECB Mulls Exit China President Xi Jinping Vows Continued Support for Hong Kong Vietnam’s Real GDP Growth Picks Up in 2H17; Industrial and External Activities Remain Robust in June Economist:  Peck Boon Soon  | +603 9280 2163 Vincent Loo Yeong Hong  | +603 9280 2172 Ng Kee Chou  | +603 9280 2179 Rizki Fajar  | +6221 2970 7065 Zhang Fan| +8621 6288 9611 ext 105 Aris Nazman Maslan | +603 9280 2184

In contrast with its European peers, Japanese assets failed to partake in the emerging “reflation” theme, with USDJPY mostly within a 1% band on a daily closing basis this week; EURJPY climbed more than 4% since mid-June. Japan May CPI came in at 0.4% y-o-y (consensus: 0.5%), signalling the tough challenges BoJ faced in its quest to achieve its 2% inflation target; we stay neutral JPY.

30 June 2017

Rates & FX Market Update

Chinese PMI Buoyed by Better Domestic and Foreign Demand

Highlights

¨   Global Markets: US 1Q17 GDP 3^rd reading came in at 1.4% q-o-q SAAR (consensus and prior reading: 1.2%), while weekly claims data remained at comfortable levels without any major surprises. UST yields continued to tread moderately higher alongside surging European bond yields, with 2y and 10y c.2-4bps wider overnight, as global central banks signalled the first steps in normalising monetary policies led by Fed’s FFR hikes; stay neutral USTs. Even as several ECB sources sought to downplay Draghi’s apparent hawkish statements, markets continued to position towards an eventual hawkish shift, with 10y EGB yields c.5-12bps higher overnight, while EURUSD climbed to 1.1442 (+0.57%). German June CPI came in at 1.6% y-o-y (consensus: 1.4%), with investors likely to keep a keen eye on EU CPI print later today for signs of any emergent inflation across the bloc; we are mildly bullish on the EUR over the near term.

¨   AxJ Markets: Chinese June PMI prints climbed higher, fuelled by improving domestic demand along with stronger exports. Official manufacturing PMI printed 51.7 (consensus: 51.0; May: 51.2), while services PMI printed 54.9 (May: 54.5). Amid softer movements on the USD, the USDCNY pair broke the 6.80 support convincingly, ending yesterday’s session at 6.7870/USD, where we expect tight scrutiny on Asian currencies by US Treasury coupled with plans to further internationalise the CNY to limit FX interventions by PBoC to drive the CNY materially weaker, underscoring our neutral view on CNY going forward.

¨   In contrast with its European peers, Japanese assets failed to partake in the emerging “reflation” theme, with USDJPY mostly within a 1% band on a daily closing basis this week; EURJPY climbed more than 4% since mid-June. Japan May CPI came in at 0.4% y-o-y (consensus: 0.5%), signalling the tough challenges BoJ faced in its quest to achieve its 2% inflation target; we stay neutral JPY.

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.

Sentiments soured overnight with benchmark equity indices closing red across the board in NY as well as in

GBL: Spooked?

Global Markets Daily by Saktiandi Supaat

FX Research

Sentiments soured overnight with benchmark equity indices closing red across the board in NY as well as in Europe. NASDAQ was particularly hit amongst its peers, down -1.4%, weighed by the decline in tech stocks. There was no obvious trigger for the sell-off with some pinning to quarter end correction. The third reading of US growth came in at 1.4%y/y, revised higher on stronger consumption. USD did not give it much attention with the DXY index dictated by the upswing in the EUR...