Corporate News – MARC assigned final rating of AAAis 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 facil

7 August 2017

Credit Markets Weekly

Malaysian June Exports Slowed to 10% YoY; NFP Above Expectations

SUMMARY:

¨      MYR Credit Market: MYR and MGS rally. The MYR rallied WoW to end the week at 4.2782/USD (+0.07%) amid a mix performance among EM Asia currencies. The 3y MGS closed at 3.27% (-5.5bps) while the 10y MGS remained largely unchanged at 3.99%. The coming week may see a further weakness in EM Asia as markets globally reel from the positive numbers from the US.

Corporate News – 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. MARC projects that PBSB’s FSCR will range between 2.3x to 27.9x throughout the asset management period.

¨      APAC USD Credit Market: UST yields push lower particularly at the longer end despite the strong NFP print. The July employment report showed NFP printed at 209k against expectations of 180k (prior: 222k), while average hourly earnings rose to 2.5% on a YoY basis easing concerns over the December rate hike (probability rose to 40.2% from 38.7% in last Friday). The Treasury Borrowing Advisory Committee (TBAC) for 3Q17, failed to address the ongoing concerns on the ultra-long UST issuance, but did mention its ability to fund within the debt-ceiling up to the end of September. UST 10y yields rallied -2.7bps WoW to 2.26%, while the 2y was unchanged at 1.35%.

Rating Actions – Moody’s upgraded the rating of Chandra Asri Petrochemical Tbk to Ba3/Sta; Moody’s upgraded CIMIC Finance (USA) Pty Ltd to Baa2/Sta; Samsung Electronics Co Ltd saw its outlook revised to A1/Pos with Moody’s; Moody’s has revised upwards its negative outlook of COFCO Hong Kong Ltd affirming it at A3/Sta; China Railway Group’s (CREC) outlook was changed to Positive by S&P,  affirmed at BBB+; S&P placed Chinese port operator, China Merchants Port Holdings’ (CMPH) BBB+ rating on negative watch.

Table 1: Index Weekly Movements

Indices	04-Aug	28-Jul	Weekly Chg (bps)
iTraxx AxJ 5y IG	80.1	82.0	-2
AxJ IG Spread (bps)	169.2	168.6	1
AxJ HY (%)	6.74	6.67	7
SOR 2y (%)	1.25	1.26	-1
SOR 5y (%)	1.71	1.73	-2
Malaysia 5y CDS	79.3	79.8	-1
MGS 3y (%)	3.27	3.32	-5
MGS 5y (%)	3.69	3.69	0
MGS 7y (%)	3.91	3.91	1
MGS 10y (%)	3.99	3.99	0
AAA 5y Spread* (bps)	61	60	1
AAA 10y Spread* (bps)	66	67	0
AA 5y Spread* (bps)	96	96	0
AA 10y Spread* (bps)	103	103	0

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

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