Wednesday, August 30, 2017

FW: RHB | Vietnam | Industrial and Export Growth Still Strong in August



Economic Research

30 August 2017






Economic Update



Industrial and Export Growth Still Strong in August


Industrial activities gained pace in August, while external activities remained at a robust pace, albeit easing slightly from the preceding month. Looking ahead, we anticipate robust growth in exports and strong inflows of FDI to remain sustainable, trickling down to the domestic side and boosting overall economic activity. As a result, we forecast real GDP growth to grow at a stronger pace of 6.3% in 2017 (2016: 6.2%). This is premised on stronger growth in exports amid a recovery in global trade activity, sustained inflow of FDIs, robust private investment, and the Government’s efforts on economic restructuring and institutional reform.


Economist:  Vincent Loo Yeong Hong  | +603 9280 2172

Economist: Aris Nazman Maslan | +603 9280 2184




To access our recent reports please click on the links below:


01 Aug : Economic Activity Still Robust In Early 3Q

30 Jun : Exports And Industrial Activities To Drive Growth

30 Jun: 2Q17 Real GDP Growth Gains Momentum

31 May : Indicators Point To Pick-up In GDP Growth For 2017

03 May : Industrial & External Activities Strengthen In April



Economics Team


Lim Chee Sing

Chief Economist

+603 9280 2153


Peck Boon Soon

Chief ASEAN Economist

+603 9280 2163


Vincent Loo Yeong Hong

Malaysia, Vietnam

+603 9280 2172


Ng Kee Chou

Singapore, Thailand

+603 9280 2179


Rizki Fajar

Indonesia, Philippines

+6221 2970 7065


Aris Nazman Maslan

Malaysia, Vietnam

+603 9280 2184






FW: RAM Ratings reaffirms AA3 rating of Tanjung Bin Energy's sukuk

Published on 30 Aug 2017.

RAM Ratings has reaffirmed the AA3/Stable rating of Tanjung Bin Energy Issuer Berhad’s (TBE Issuer or the Company) RM3.29 billion Sukuk Murabahah (2012/2032). The rating reflects TBE Issuer’s continued strong debt-servicing ability, underlined by adequate cashflows notwithstanding the recent unsatisfactory performance of Tanjung Bin Energy Sdn Bhd (TBE)’s ultra-supercritical 1,000-MW coal-fired power plant in Tanjung Bin, Johor (the Plant). The rating is also supported by the favourable terms of TBE’s power-purchase agreement (PPA) with Tenaga Nasional Berhad (TNB). 

TBE’s cash generation has been within RAM’s expectations. This is despite the Plant’s significant downtime as a result of defect rectification works and leaks discovered in the generator following these works. The Plant recorded a rolling 365-day unscheduled outage rate of 14.52% as at end-May 2017, against the threshold of 6% to qualify for full available capacity payments (ACPs). This led to an ACP reduction of RM67.69 million in 5M FY Dec 2017, which was within RAM’s earlier sensitivity threshold of RM134 million for 2017. Despite further ACP reductions under RAM’s sensitised case, we expect the rating of the Sukuk to remain intact. All repair works have been completed and the Plant had subsequently operated smoothly, with no outage in June 2017 and a low monthly UOR of 0.97% in July 2017.

A wholly owned subsidiary of TBE, TBE Issuer is the contractor tasked with developing, constructing and financing the Plant for TBE. TBE, which is fully owned by Malakoff Corporation Berhad (Malakoff), in turn has a 25-year PPA with TNB to finance, construct and operate the Plant. TBE Issuer’s financial commitments will be supported by back-to-back payments from TBE. As such, RAM recognises the strong credit link between these entities and views them in aggregate.

On 9 June 2017, TBE signed a contract for the construction of a new jetty, the progress of which stood at 6.27% as at 15 July 2017. Pending completion of the jetty, TBE will need to incur barging costs for coal delivery, which in 2016 were within RAM’s expectation. The costs are however anticipated to rise given the slow approval process for the jetty’s construction. A prolonged delay in the completion of the jetty would elevate barging costs and exert pressure on the rating of the Sukuk. “Our assessment shows that TBE Issuer will be able to withstand a 3-month delay in the completion of the jetty up to end-June 2019, higher barging costs and cost overruns amounting to 5% of the contract price which is to be borne by TBE,” highlights Chong Van Nee, RAM’s Co-Head of Infrastructure & Utilities Ratings. 

RAM expects TBE Issuer’s credit metrics to stay strong, with its minimum finance service coverage ratio (with cash balances, post-distribution) projected to stand at 1.52 times for the remaining tenure of the Sukuk despite stress-test assumptions of higher unscheduled outage rates, barging costs, operational and capital expenditure. The rating also takes account of the Company’s healthy liquidity profile which is buffered by standby letters of credit – expected to be renewed every 6 months – to ensure that the Project Company’s Finance Service Reserve Account is fully funded.

A bullet repayment of RM1.29 billion under TBE Issuer’s Junior Term Loan Facility has been successfully refinanced via a RM800 million Sukuk Wakalah facility issued by TBE and a RM500 million shareholder’s loan extended by Malakoff on 15 March 2017.


Analytical contact
Chin Wynn, CFA
(603) 7628 1170

Media contact
Padthma Subbiah
(603) 7628 1162




FW: Indonesia's CPI Outlook August 2017


Monthly Inflation:”Remain eased”


CPI Review

Consumer Price Index (CPI) in July 2017 eased due to the demand for goods and services returned to normal after the celebration of Eid al-Fitr in the last month. Inter-city transport and train fares have declined. On the other hand, the cost of education has increased due to the new school year. Monthly inflation reached 0.22% m-o-m, lower from 0.69% m-o-m in the preceding month. Based component, the inflation was posted by the education component increased by 0.62% m-o-m and the prepared food component rose by 0.57% m-o-m. Furthermore, the foodstuffs component increased by 0.21% m-o-m, the housing component experienced rose by 0.06% compared to preceding month, the clothing component rose by 0.06% m-o-m, and the medical care component increased by 0.15% m-o-m. Meanwhile, the deflation was posted by the transportation and communication component experienced fell by 0.08% m-o-m.


Inflation in the education, recreation and sports component in July 2017 mainly stemmed from higher prices of Primary school tuition, high school tuition, and learning tuition rates. Inflation in the prepared foods component in July 2017 mainly stemmed from higher prices of noodles, sweet coffee, rice with meal, mineral water, cigarette, white cigarette, and filter cigarette.


Furthermore, inflation in the foodstuffs component in July 2017 mainly stemmed from higher prices of fish, eggs, tomato, onion, long bean, cucumber, oranges, papaya, and water melon. We believe the price increase in these products were mainly due to

a.   Lower domestic supply

b.   Higher domestic demand


Meanwhile, Inflation in the housing component in July 2017 still came primarily from higher prices of household operation sub-sector.

Inflation in the clothing component in July 2017 came primarily from higher prices of children's clothing sub-sector. Inflation in the medical care component in July 2017 still came primarily from higher price of body care services sub-sector.


In the other hand, Deflation in the transportation and communication component in July 2017 came primarily from lower prices of intercity freight rates and train fares.


On a yearly basis, inflation remains in check with the downward trend still intact, as the inflation slightly decreased to 3.88% y-o-y in July 2017 compare 4.37% y-o-y in the previous month. Nevertheless, year to date inflation in January–July 2017 reached 2.60% higher than 1.76% for the same time frame in 2016.


CPI Outlook

We expect inflationary pressures remain eased in August 2017. This is due to the relatively stable prices of foodstuffs. Furthermore, the price of some foodstuffs decreased, such as cayenne pepper, red chili, onion, garlic, sugar, and instant noodles. Nevertheless, the prices of some foods still show increases such as rice, eggs, cooking oil, milk, and salted fish. Meanwhile, inflationary pressures stem from the rising cost of education for colleges and universities. Moreover, the price of gold jewelry also increase compared with the previous month along with rising gold prices in the world. Based on these factors, we expect the consumer price index in August 2017 will reach 0.04% m-o-m, lower than 0.22% m-o-m in July 2017. However, we expect the yearly inflation rate in August 2017 will increase to 3.93% y-o-y from 3.88% y-o-y in July 2017. Looking ahead, in line with the government's decision not to raise electricity and fuel tariffs until the end of the year, we revise down the inflation projection from 4.28% to 4.00% by the end of 2017.


Meanwhile, we also expect core inflationary pressures remain manageable in August 2017. The pressure comes from the increase in price of tuition fees, gold jewelry, housing rent, and housing contract. We expect core inflation in August 2017 may reach 0.30% m-o-m slightly higher than 0.26% m-o-m in July 2017. Nevertheless, we expect the yearly core inflation in August 2017 will decrease to 3.00% y-o-y from 3.05% y-o-y in the previous month. Forward looking, we still maintain core inflation projection at 3.20% by the end of 2017 due to relatively tame impact of electricity tariff increases and the government's success to control volatile foods prices.




FW: RAM Ratings reaffirms P1 rating of Sunway REIT's debt facility, issued by financing conduit

Published on 30 Aug 2017.

RAM Ratings has reaffirmed the P1 rating of SunREIT Capital Berhad’s (SunREIT Cap or the Issuer) CP Programme of up to RM1.6 billion in nominal value. SunREIT Cap is the financing conduit of Sunway Real Estate Investment Trust (Sunway REIT or the REIT), and has no operations of its own. The issue rating is supported by the creditworthiness of the REIT, despite the available collateral and underwriting for the CP Programme.

The reaffirmation of the P1 rating reflects our view that the REIT’s portfolio of assets will continue to perform satisfactorily despite the challenging business environment. During the period under review, the REIT’s performance was within expectations, underpinned by its quality and diverse assets as well as the management’s asset-enhancement initiatives. These factors help moderate the geographical- and asset-concentration risks – a respective 72% and 78% of Sunway REIT’s assets (based on market value as at 30 June 2016) and net property income (NPI) (based on 9M FY Jun 2017 figures) are derived from assets within Sunway City. The REIT also benefits from an active sponsor with strong asset expansion and redevelopment initiatives, which may provide a better asset pipeline and sustainable yields.

In fiscal 2016, Sunway REIT’s portfolio yield improved to 5.81% (fiscal 2015: 5.47%), mainly driven by its core retail segment, which posted a 15.1% y-o-y top-line growth, with a stable NPI margin of 70%-71%. As the retail segment remains pressured by weak consumer sentiment and keen competition, we expect rental reversion to moderate. Nonetheless, we envisage that the REIT’s retail segment will remain its key growth driver and help maintain its resilient cashflow.  

In 9M fiscal 2017, the performance of the REIT’s hospitality segment was affected by cashflow disruptions from refurbishment works. This was, however, partially moderated by improved occupancy rates due to the management’s ongoing marketing and pricing strategies amid the competitive landscape.  On the other hand, some of the REIT’s office assets suffered from low occupancy rates following the departure of major tenants. We expect a longer recovery period before any significant pick-up in the occupancy levels of these office assets given the current oversupply and soft demand. That said, we do not expect this to significantly affect the REIT’s performance as the office segment only accounted for 4.2% of the REIT’s total NPI in 9M fiscal 2017. 

Sunway REIT’s debt level remained elevated at RM2.32 billion as at end-March 2017, with respective leverage and debt-to-revenue ratios of 0.35 and 4.46 times (end-March 2016: 0.33 and 4.23 times). In spite of the higher debt level, its fixed-charge cover improved from 3.95 to 4.00 times, supported by its healthier operating profit before depreciation, interest and tax. Given the management’s plans for its upcoming development next to Sunway Carnival Shopping Mall, we envisage its debt-protection metrics to weaken over the next few years as the development project may introduce some cashflow volatility. Nonetheless, we expect its liquidity profile to remain commensurate with its P1 rating. 

As at end-March 2017, the annual rollover rate of the REIT’s debt maturities had declined to 91.39% (end-March 2016: 62.31%), with 82.8% or RM1.92 billion of its debts maturing within a year. However, we derive comfort from the knowledge that refinancing risk is moderated by the REIT’s proven ability to access various forms of capital – an undrawn RM220 million (based on the current underwritten limit) or RM720 million (based on the total CP limit) under the CP Programme, as well as RM89 million of available unencumbered assets. 

Listed on the Main Market of Bursa Malaysia, Sunway REIT is the second-largest Malaysian REIT by assets (RM6.69 billion as at end-June 2017). We note that 99% of the REIT’s assets (based on market value as at end-June 2017) are pledged to the CP Programme, providing an asset-to-debt cover of 2.72 times to the total issued CPs and pari passu debt load of RM2.17 billion as at end-March 2017.


Analytical contact
Evelyn Quek
(603) 7628 1095

Media contact
Padthma Subbiah
(603) 7628 1162





FW: RHB FIC Credit Markets Update - 30/8/17


30 August 2017



Credit Markets Update


GII 7y Reopening Gets BTC of 2.1x; Moody's Downgrades IDBI Bank

MYR Credit Market:

¨         Rally in MGS and MYR. EM Asian equities market underperformed mainly driven by the geopolitical tensions emanating from the Korean Peninsula after North Korea fired a missile over Japan as a flight to safety was seen across Asia. MGS 10y tightened 1.4bp to 3.90%, while the 3y stayed at 3.36%. The MYR over-performed the rest of EM Asia to settle marginally higher against the greenback at 4.2715/USD (+0.02%).

¨         Govvie trading stayed active amid the shortened trading week with MYR5.2bn changing hands. GII were actively traded representing more than half of govvie trades (52%) as most trades we concentrated at the mid-to-longer end of the curve (7-10y). The newly printed 7y GII led trades at MYR853m, settling at 3.98%, followed by the benchmark GII 10y and MGS 10y which recorded MYR820m and MYR720m trades respectively.

¨         Corporate trading slowed to MYR360m. Danainfra complex led trades on combined MYR110m with yields of tranches 5/24, 7/24 and 4/24 rising between 2.9 and 11bps. YTL Power 6/22 and 5/27 on combined MYR55m trades tightened 0.1-2bps to 4.48% and 4.90% respectively. Interest was also recorded in Johor Corp 6/22 on MYR30m dealt, trading 3bps tighter at 4.08%.

¨         In the primaries, the reopening of the 7y GII 08/24 closed yesterday at an average yield of 3.975%. The issuance size was MYR3.5bn with a further MYR500m privately placed, garnering a BTC of 2.1x. This was a weaker demand compared to a similar auction in May which saw BTC of 2.5x.

APAC USD Credit Market:

¨         Safe haven buying saw yields rally. Market participants took stock of the North Korea aggressive actions, and the reactions of Japan and South Korea yesterday, which saw push into safe haven assets and a risk-off to continue. The USD picked up from its lows but the DXY Index remained largely unchanged to end at 92.25. The USTs continued to rally with 2y USTs ending at 1.32% (-1.0bps) and the 10y USTs at 2.13% (-2.8bps). There has been a pause in the risk-off positioning at the end of the US trading session, expected to spill into the trades later today, as market participants halt pricing in further degradation of the current situation with North Korea.

¨         Asian CDS widen especially led by South Korea. The average Asian ex Japan IG spreads and the average yield on HY Asian ex Japan bonds moved in different directions with the IG spread widening +4.5bps and the HY yields tightening -1.0bps respectively to 174.5bps and 6.66%. The average IG Asia ex Japan CDS pared back the previous day's gains to 79.6bps (+2.3bps). The widening was led by PCCW-HKT Telephone Ltd (+7.0bps), GS Caltex Corp (+5.9bps), SK Telecom Co Ltd (+5.2bps) and POSCO (+5.0bps). The CDS of South Korea also picked up +4.9bps as hedging was active following the escalation of geopolitical strain with North Korea continues to drag assets.

¨         DBS Bank Ltd (Aa3/AA-/AA-) issued USD50m 20y callable range accrual notes, callable at 1y. Coupon payments are linked to the 10y constant maturity swap and the spread between the 30y and 5y swap rates, capped at 4.50% a year. Fitch accorded this issuance a AA-(emr) to preclude the embedded market risk associated with the coupons. Sun Hung Kai & Co (BVI) Ltd (NR) is currently running a roadshow in the week for possible new USD bond issuances.

¨         Over to ratings, S&P upgrades Yuzhou Properties to BB-/Sta from B+/Sta. This follows the diversification of Yuzhou from its concentration in Fujian (now accounts for only 37% of earnings) and sales expansion expected to RMB37bn from RMB23bn in 2016. S&P raises MIE Holdings Corp rating from D to CCC-/Neg. This follows the completion of an exchange offer to holders of the 2018 and 2019 bonds. The repayment risk for the outstanding debt still remains a concern especially in the upcoming 12 months. Moody's downgrades IDBI Bank rating to B1/Sta from Ba2. This follows a review for downgrade initiated in May. Despite receiving INR18.6bn and INR3.9bn of equity injection from the government and Life Insurance Corporation of India (LIC), the CET1 ratio of 6.5% remains below 7.375% required by RBI for 2018. With loss expected reported for 2017 and asset quality issues persisting, Moody's sees limited room for further government support despite it being systemically important.




FW: RHB FIC Rates & FX Market Update - 30/8/17


30 August 2017



Rates & FX Market Update



Strongest BTC Ratio for 15y SGS Reopening Since 2006




¨   Global Markets: Volatile movements were seen on the major FX crosses yesterday following North Korea's provocation, with EURUSD notably testing the 1.20 resistance, surging to a session high of 1.2060 before retracing lower back below 1.20. We continue to view the bloc's currency favourably, recommending for investors to position for a mildly bullish EUR over the medium term, as ECB's tolerance for a strengthening currency, coupled with its improving economic outlook across the bloc and increasing hawkish monetary policy rhetoric sets the platform for further medium term recovery on the EUR. Keep a close eye on economic data coming out of the bloc over the first week of September, where another month of outperforming data could cement EURUSD's surge above the 1.20 handle.

¨   AxJ Markets: Robust demand was seen for the SGD1.3bn 15y SGS reopening yesterday, where the auction garnered the highest BTC ratio for the paper since 2006 at 2.19x. Post auction, yields on 15y SGS continued to decline below the cut-off yield of 2.40% to 2.37% yesterday amid the heightening risk aversion sentiment yesterday. We eye the domestic bank loan data scheduled to be released tomorrow, where another strong expansion in domestic demand for loans are likely to remain supportive of the tight spreads between SGS and USTs over the near term; keep a neutral duration view on SGS.

¨   The overnight rebound on USDKRW was sharp, with KRW depreciating by 0.54% to 1,126/USD following North Korea's most recent missile launch which flew over Japan. Lingering bouts of escalating tensions are likely to fuel volatility on KRW, where we may see currency movements overshoot past major resistance levels, before retracing lower. We keep a mildly bearish view on KRW over the near term, with the geopolitical woes unlikely to be assuaged while the prospect of increasing sanctions on North Korea could fuel further retaliations.



FW: [Maybank] Unwinding of Demand for Safe Haven



GBL: Unwinding of Demand for Safe Haven

Global Markets Daily
by Saktiandi Supaat

FX Research

USD rebounded overnight as risk sentiment recovers (N.Korean geopolitical tensions faded) while US consumer confidence soared to 16-year high. Asian equities also opened firmer this morning. On FX, KRW was the main beneficiary, gaining 0.4% for the day. Unwinding of safe haven plays may persist today but focus remains on US data – ADP and 2Q GDP later today – upside surprise may help support the USD. But we caution that intensification of hurricane Harvey may pose some risks to Fed's plan of...

FW: AmBank Research - RHB Bank : Stronger non-interest income ahead BUY, 30 Aug 2017 - Part 2



RHB Bank : Stronger non-interest income ahead                                                                               BUY


We  maintain  our  BUY call on RHB Bank with an unchanged fair value of RM6.00/share. Our fair value is based on FY18F ROE of 9.1% leading to unchanged P/BV of 1.0x. No change to our earnings forecast.


2QFY17 net profit came in at RM501mil (+0.1%QoQ: 43.1%YoY). On QoQ basis, earnings growth was flat with a higher total income offset by an increase in OPEX as well as an impairment of RM108mil on its bonds related to the oil & gas sector in Singapore.



Others :

AIRASIA : Cruising altitude maintained                                                                                   BUY

Kimlun Corp : 1HFY17 net profit declines 27% YoY                                                              BUY

MRCB : Stronger performance expected in 2H17                                                               BUY

Sunway : Positive growth sustained                                                                                        BUY

Telekom Malaysia : Flat revenue trajectory amid higher operating costs                 BUY

Alliance Fin. Group : Loan growth remained lacklustre                                                    HOLD

Lafarge Malaysia : Subdued 1HFY17 performance                                                             HOLD

Media Chinese : Lost resiliency                                                                                                  HOLD

MSM Malaysia : Still in the red in 2QFY17                                                                               HOLD

WCT Hldgs : Bagging LRT3 job, hiving off 80% TRX development                                  HOLD

Oil & Gas : 2Q17 Report Card: Largely in line                                                                         NEUTRAL   




Stocks On Radar

PMB Technology, Yong Tai, Encorp, Malaysia Airports Holdings




UMW Holdings : Strengthens ties with Komatsu

Bursa Malaysia  : Adopts green lane policy

Budget 2018 : MoF denies rumours of inheritance tax




FW: CIMB Daily Fixed Income Commentary - 30 Aug 2017 - Geopolitics sway bonds


Market Roundup

  • US Treasuries strengthened on the back of geopolitical fears after North Korea's missile launches this week. However, gains were eventually pared by profit taking activities as tensions eased amid a lack of further developments and restrained response by Trump. The 10T yield dipped below 2.10% and hit 2.08% for the first time since Nov 2016, but was able to edge higher to 2.13% by late Tuesday.
  • Malaysia: MYR sovereign papers were dealt firm alongside UST gains. Flows were heavy and led by 7- and 10-year GII, as well as 10-year MGS. We reckon activities were aided by month-end flows. The 7-year GII reopening auction saw firm demand, indicated by bid-cover of 2.104 times for the RM3.5 billion public tender (another RM0.5 billion private placement). Average yield was 3.975%, in line with the WI levels around 3.96-3.99% in the previous two trading days. Post auction it was traded within tight range of 3.96-3.98%.
  • Thailand: Thai govvies ended with gains Tuesday, falling 2-3bps in the intermediates and long-ends. Market still looks to buy 49-year LB666A with expected good demand from long-term local players (current yield at 3.57%). Foreign investors returned to the front-ends (+Bt1.67 billion) after more than a week of sell-off while they booked profit of longer term bonds about Bt1.75 billion, causing overall net-sell position of Bt78 million. Funds rotated to equity with foreign net-buy position at Bt4.82 billion as local political concern was alleviated and SET index passed 1,600pt to close at 1,614.14pt.
  • Indonesia: IndoGBs opened with wide bid-offer spreads as global markets experienced a risk-off mode due to North Korea's missiles. Market rebounded though, as bids remained strong, and market even chased benchmark bonds especially on belly to long end.


FW: RHB | Economic Research | Tracking Global News



Economic Research

30 August 2017

Global News


Economic Update




Tracking Global News


US Consumer Confidence Hits Second Highest Level Since 2000


Trump Pledge of Swift Harvey Aid May Be Slowed By Congress


Japan’s Labour Market Tightens But Household Spending Slipped In July, In Contrast With Strong Retail Sales Growth


Vietnam’s Industrial and External Activities Remain Robust



Peck Boon Soon  | +603 9280 2163

Vincent Loo Yeong Hong  | +603 9280 2172

Ng Kee Chou  | +603 9280 2179

Rizki Fajar  | +6221 2970 7065

Aris Nazman Maslan | +603 9280 2184




To access our recent reports please click on the links below:


28 August 2017

25 August 2017

24 August 2017

21 August 2017

18 August 2017


Economics Team





Peck Boon Soon

Chief ASEAN Economist

+603 9280 2163

Vincent Loo Yeong Hong

Malaysia, Vietnam

+603 9280 2172

Ng Kee Chou

Singapore, Thailand

+603 9280 2179

Rizki Fajar

Indonesia, Philippines

+6221 2970 7065

Aris Nazman Maslan

Malaysia, Vietnam

+603 9280 2184




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