S&P cut the ratings on Global A&T Electronics to D from CCC-, on its failure to make a USD56m interest payment due in Aug 1 2017, despite a 30-day grace period, as it will require all of the company’s cash, and the company has proposed a consensual restructuring of the notes. Moody’s downgraded MNC Investama to Caa3/Neg from Caa2 on refinancing risks considering its IDR5.9tn consolidated outstan

9 August 2017

Credit Markets Update

                                               

Foreign Holdings Slip Further to 40.1%; Trump Threatens N. Korea

MYR Credit Market:

¨         Foreign ownership in MYR bonds decreased MYR2.3bn in July. Extending the foreign ownership selldown in Malaysian bonds in June. Government debt saw an outflow of MYR1.46bn which brings the foreign ownership of MGS to decline to 40.1% from 41.2% the month before. Total foreign holding in government debt amounted to 26.5% from 27.2% during the same period.

¨         MGS mostly unmoved. Benchmark MGS were relatively unchanged tracking UST yields except for the belly of the curve with the 5y MGS tightening almost -3bps to 3.69%, whereas the longer-dated 15y rose 1bp. The MYR was hardly changed, moving +0.1% t0 4.2850/USD as markets await the upcoming US CPI print.

¨         Government bond trading volume totalled MYR4.16bn where 62% were focused on the shorter-end particularly in MGS 10/17 and 11/19, while the GII sphere saw trades totalling to MYR1.1bn. We continue to observe trading interest in benchmark MGS 5y 03/22 and 7y 09/24 amounting to MYR131m and MYR306m respectively.

¨         Active trading day in the corporate space with MYR738m changing hands. Most of these were concentrated in the AAA/AA segment. Top traded was AAA-rated GENM 8/25 tightened 5bps to 4.78%. UMWH 20-22’ rose between 2.8 and 7.1bps (4.63% and 4.82%), while the longer-tenure LDF3 saw MYR95m dealt. Elsewhere, Cagamas complex saw a combined MYR60m trades, 18-22’ settled at 3.70-4.135% (-0.7bp to -8.1bps).

APAC USD Credit Market:

¨         Markets fall on President’s warning. US President Trump’s aggressive message amid mounting tensions between Washington and Pyongyang following reports North Korea successfully produced a miniaturised nuclear warhead has moved the market. Economic data saw the US Labor Department JOLTS job openings in June spike to 6.16m from 5.8m in May, while the NFIB small-business owners optimism rose in July to 105.2 (103.6 previously). As the equities market saw a fall, the 2y UST remained at 1.35% while the 10y UST fell to 2.26% (+0.9bps). The DXY Index rose +0.23% to 93.65, as the Brent crude fell -0.44% to USD51.84/bbl.

¨         Asian CDS compress again led by South Korean names. The Asian HY credit yield index remained unchanged for yet another trading day as the Asian IG credit spread further compressed -0.4bps to 167.9bps on the back of rising UST yields. Despite increasing tension in the region arising from North Korea, the Asian IG CDS compressed once more to 79.3bp (-0.4bps). Korean names again led the rally as financial names Kookmin and Woori Bank reduced -5.73bps and -5.52bps respectively and non-FI KT Corp, SK Telekom and Samsung Electronics compressed close to 3bps respectively. Singaporean FIs OCBC, UOB and DBS all saw rallies -4.58 to -4.13bps. South Korea, on the other hand saw, CDS levels rise 2.9bps while IDBI Bank spreads widen 4.49bps.

¨         Primary markets saw Gemstone International Limited (B3/NR/B+), a wholly-owned incorporated SPV wholly-owned by LVGEM (China) Real Estate Investment Company Ltd (B2/NR/B+), tap the market for USD225m 3y bonds. The issuance saw BTC of 1.89x and settled at 8.5% (IPT of high 8%). Kaisa Group Holdings (NR) via a private placement with an institutional investor printed USD50m additional to its current senior notes due 2025, USD120m to senior notes due 2022, and USD115m to senior notes due 2024. Country Garden (Ba1/BB/BB+) may price up to USD100m 5nc3 bonds today.

¨         S&P cut the ratings on Global A&T Electronics to D from CCC-, on its failure to make a USD56m interest payment due in Aug 1 2017, despite a 30-day grace period, as it will require all of the company’s cash, and the company has proposed a consensual restructuring of the notes. Moody’s downgraded MNC Investama to Caa3/Neg from Caa2 on refinancing risks considering its  IDR5.9tn consolidated  outstanding debt which includes USD365m bonds maturing May 2018, with no definitive restructuring plans. Moody’s also raised concerns on the complex organizational structure and holding company status, where it depends on cash flow from subsidiaries to meet obligations, but does not enjoy full ownership of these entities.

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.