Asian credits supported from the spike in yields the previous day. The Asian IG credit-default swaps continued to compress to new lows at 79.8bps (-0.5bps). Bank of India led the rally in CDSs, recovering after the major fall two weeks back. The RBI cut benchmark rate to 6% overnight. CDS levels also fell for Samsung Electronics, and HK corporates Hutchison Whampoa, Sun Hung Kai Properties, and Swire Pacific. China and Korean corporates saw a rise in CDSs as China Development Bank, Bank of China and Kookmin Bank saw spreads rise +0.8bps to +1.68bps. Indonesia and M

4 August 2017

Credit Markets Update

                                               

New GII 20y Gets Low BTC of 1.7x; APAC Primaries Picked Up

MYR Credit Market:

¨         Subdued demand for MYR2.5bn 20y GII 8/37 attracted merely 1.78x BTC with an average yield of 4.755%, compared to the 3.75x BTC in the last 20y GII auction in Dec-16. Govvies yields were little changed yet again as investors stayed on the sidelines ahead of the BOE policy decision, the last global central bank meeting before the summer break. 3y MGS was unchanged at 3.30% whereas 10y MGS slipped below the 4% level to 3.99% (-1bp). The MYR continued to strengthen against the greenback to 4.2788/USD (+0.16%), amid the widening Trump-Russia probe.

¨         Trading volume for govvies saw MYR2.38bn changing hands. The new benchmark GII 08/37 saw MYR270m trades, ending the day at 4.778%. The benchmark 3y MGS and 7y also saw decent trades of MYR268m and MYR107m respectively.

¨         In the corporate segment, trading volumes remained robust with MYR604m changing hands, mostly focused in the AAA and AA segment. The new TNB 8/37 narrowed -5bps to 5.13%, while the 8/32 was unchanged at 4.93% with total of MYR70m dealt. IJM 4/21 and 6/22 rose between 0.4 and 1bp to 4.428% and 4.511%, whereas both SEB 6/18 and 7/24 edged -1.1bp lower to 4.088% and 4.54%. In the quasi-government front, DANAINFRA saw a total of MYR80m trades, DANAINFRA 4/21 and 4/39 tumbled -1.5 to 5.9bps to 4.003% and 5.055% respectively, while the 4/22 added 1.4bps to 4.052%. PRASARANA 18-28 recorded MYR70m trades, both adding 0.4bps and 24.1bps respectively to 3.513% and 4.59%.

¨         MARC assigned final rating of AAA_is to Putrajaya Bina Sdn Bhd’s (PBSB) MYR1.58bn sukuk with a stable outlook. PBSB, a wholly-owned subsidiary of Putrajaya Holdings Sdn Bhd, is undertaking the development of nine blocks of government office buildings and one block of share facilities under a concession agreement with the Malaysian government, which commenced in May-17. Proceeds of the issuances will be used to fund the MYR1.9bn development which entails a three-and-a-half year construction phase and a 25 year asset maintenance phase. Upon, completion and one month after the receipt of Certificated of Acceptance, PBSB will be entitled to receive monthly concession payments in the form of availability charges of MYR215.6m p.a. and asset management service charges of MYR69.2m p.a. for tenancy by various ministries and government agencies. Furthermore, MARC projects that PBSB’s FSCR will range between 2.3x to 27.9x throughout the asset management period.

APAC USD Credit Market:

¨         Treasuries yields slides as risk markets rallied. The risk market saw a reversal overnight, which saw UST rally. The DXY Index was largely unchanged at 92.84%, though the latest economic data may continue to pressure the USD downwards. Over in economic numbers, the ISM non-manufacturing PMI which came in 53.9 (56.9 consensus), though the services PMI did rise to 54.7 (54.2 consensus). As the focus of the market now lies on the upcoming NFPs and trade numbers, the 2y and 10y UST improved, and flattened, as yields fell -2.0bps and -5.0bps respectively to 1.34% and 2.22%.

¨         Asian credits supported from the spike in yields the previous day. The Asian IG credit-default swaps continued to compress to new lows at 79.8bps (-0.5bps). Bank of India led the rally in CDSs, recovering after the major fall two weeks back. The RBI cut benchmark rate to 6% overnight. CDS levels also fell for Samsung Electronics, and HK corporates Hutchison Whampoa, Sun Hung Kai Properties, and Swire Pacific. China and Korean corporates saw a rise in CDSs as China Development Bank, Bank of China and  Kookmin Bank saw spreads rise +0.8bps to +1.68bps. Indonesia and Malaysia also saw spreads rise after their strong rallies.

¨         Primary markets picked up as Gajah Tunggal (Caa1/CCC/NR) priced a USD250m 5nc3 bond at 8.375% vs IPT 8.5% and eHi Car Services Ltd (NR/BB/BB-) tapped USD400m of 5nc3 bonds at 5.875% vs IPT 6.25%. Among the IG issuers, Canara Bank (Baa3/NR/ BBB-) closed USD400m 5y bonds at +150bps vs IPT of +175bps area. Westpac Banking Corp (Aa3/AA-/AA-) via its NY branch tapped the market for 3y papers of USD200m at 2.05%. Vedanta (B3/B+/NR) printed USD1.0bn 7nc4 bonds at 6.125% vs IPT of 6.375%. China Huiyan Juice (NR/NR/B+) and LVGEM China Real Estate (B2/NR/B+) are planning roadshows to further issue USD bonds.

¨         Over to ratings, Moody’s upgraded the rating of Chandra Asri Petrochemical Tbk to Ba3/Sta from Ba1/Sta. The upgrade is predicated on the improvements in its balance sheet, improvement in its production capacity and expected improvement in revenue. The balance sheet improved from the better cash balances, lower debt levels and lowered leverage. The cracker expansion projects improved capacity and additional capex is expected to improve capacity and is expected to improve the stronger operating performance and cash flow generation expected. Moody’s upgraded CIMIC Finance (USA) Pty Ltd to Baa2/Sta from Baa3/Sta, due to the upgrade of its parent company CIMIC Group Ltd. Samsung Electronics Co (SEC) Ltd saw its outlook revised to A1/Pos with Moody’s, as it sees improved operating stability and profitability, and its exceptionally strong financial buffers against high capex need and cyclical effects. Moody’s expects tight supply-demand conditions in the memory chip market and a recovery of its mobile division to lead to improved margins, while SEC sustains its strong market positions. Moody’s also assigns first time ratings of B2/Sta on Construction Company LVGEM (China) real Estate Investment Co Ltd, and rating of Baa1/Sta on Hanwha Total Petrochemical Co Ltd.

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.