Monday, August 28, 2017

FW: Credit Market Watch: Summary for week ending 25-Aug


Credit Market Watch: Summary for week ending 25-Aug

·         MYR Credit:

Ø  MGS traded firmer with the curve down by 2-4bps WoW in a slight flattening bias along the 3y10y on continued buying flows from foreign investors and real-money accounts. Corporate bond yields followed suit and largely tightened 1-3bps WoW. Trading activity sustained momentum with corporate bond volume totalling MYR3.6b (previous week: MYR3.1b), skewed towards short-dated bonds (<3y).

Ø  Putrajaya Bina: Rated AAA by MARC and a wholly-owned subsidiary of Putrajaya Holdings Sdn Bhd, is looking to raise MYR600m through 5y, 7y, 9y and 10y bonds at MYR150m size per tranche. IPT as a spread over MGS was about 64-79bps for the 5y, 48-63bps for the 7y, 56-71bps for the 9y and 61-76bps for the 10y. Putrajaya Bina is the concessionaire to build and manage 9 blocks of government buildings and a shared facilities block in Precinct 1 Putrajaya. Risks under construction is mitigated by a irrevocable and unconditional letter of support by Putrajaya Holdings Bhd, a 64.4% owned indirect subsidiary of Petronas through KLCC (Holdings) Sdn Bhd, while post construction cash flows is supported by concession payments by ministries and government agencies.

Ø  Economic: Malaysia external reserves rose to USD100.4b on 15 Aug 2017 (end-July: USD99.4b), hitting the USD100b mark for the first time in almost two years, mainly supported by the repatriation of exports earnings. Headline inflation moderated to 3.2% in July (June: 3.6%), while core inflation was steady at 2.6% (June: 2.5%). Our economic research maintained full-year forecast of 3.5-4.0%.

Ø  Relative value: Bumitama 2019 last traded at 4.48% seem to offer value being 10bps wide from the fitted AA3/AA- line. Bumitama raised full-year FFB growth guidance to 25% YoY following significant fertilizing works done in 1H17. Coupled with higher brought forward inventory, Bumitama could post stronger performance in 2H17 despite weaker CPO prices.

·         Asian Credit:

Ø  UST curve flattened along the 2y10y WoW with 2y yield 3bps higher and 10y yield 3bps lower. Speeches by Janet Yellen and Mario Draghi in the Jackson Hole symposium didn’t offer much new clues on the interest rate outlook. Market seems still bogged down by the US politics and debt ceiling risk, with the DXY index declining to the lowest level since January 2015.

Ø  Asian credit market was firmer with JACI composite -2bps, JACI IG -2bps and JACI HY -3bps WoW. In sovereign sector, yields were overall 2-3bps tighter across INDON, MALAYS and PHILIP while KOREA yields inched slightly higher WoW.

Ø  SGD new issues: 1) Mapletree raised SGD300m via 5y bonds at 2.85% yield on ~1.2x book cover. Allocations were insurers/funds 51%, banks/agencies 42% and PB/others 7%. 2) OUE CT Treasury raised SGD150m via 3y bonds at 3.03% from 3.23% IPT on ~2.7x book cover. Allocations were fund managers/insurers 47%, banks 20% and PB 33%.

Ø  USD new issues: 1) Hyundai Capital Services raised USD600m via 5y bonds at +135bps from 155bps IPT on ~2.7x book cover, and USD300m via10y bonds at +155bp from 170bps IPT. Allocations to 5y bonds were asset managers 55%, banks 28%, SWF 9% and PB/others 7%, while allocation to 10y bonds were asset managers 47%, insurers 31%, banks 17% and PB/others 5%.

Ø  Rating change: 1) West China Cement was upgraded to BB- from B+ by Fitch, citing improved profitability and margins on higher average selling prices of cement products. The company has returned to positive cashflows, net debt has reduced and leverage ratio improved to well below the agency’s trigger, justifying an upgrade. 2) Gajah Tunggal was upgraded by Moody’s to B2 from Caa1. This follows a similar action by S&P after the successful debt issuance which improves debt maturity profile.

·         CDS: EM Asia 5y CDS spreads across the countries, led by China -7bps, followed by Indonesia, Malaysia and Thailand -6bps each, Philippines -5bps and Korea -4bps WoW. 



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