FW: RHB FIC Credit Markets Update - 14/9/17

 

 

 

14 September 2017

 

 

Credit Markets Update

                                               

MYR Snaps Two Day Fall; S&P Revise Wesfarmers to Stable

 

MYR Credit Market:

¨      Trading in the govvies segment stayed strong. Trading volume amounted to MYR4bn with majority of the trades tilted to the shorter-end especially in off benchmark 9/18 and 10/17 with MYR465m and MYR411m change hands. Benchmark 3y MGS recorded MYR229m trades with yields inching 1bp lower to 3.31%. The 10y MGS on MYR136m trades ended similarly 1bp lower to 3.84%. MYR, meanwhile snaps its two day losses, strengthening 0.39% to 4.1915/USD as the USD remained flat the day before though the recent strengthening in the USD should see levels rise once more.

¨      Corporate trading volume rose to MYR704m. Quasi-government names continued to be well demanded. Danainfra was the top traded with tranches 5/22 and 4/22 on MYR125m with yields declining -2 to -3bps to 4.00% and 4.01% respectively. Prasarana 9/22 traded -6bps lower to 4.02% on MYR100m. Other notable trades were LDF3 complex on MYR80m combined while YTLPI 3/23 and 5/27 saw yields narrowed -1 to -4bps to 4.52% and 4.86%.

¨      On ratings, MARC affirms the rating of Kimanis Power Sdn Bhd's (KPSB) MYR1.16bn sukuk programme at AA-_is with a stable outlook. KPSB is the owner of a 285MW combined-cycle gas power plant at Kimanis Bay, Sabah. MARC cited that capacity payments were within expectations in 2016 and 1Q17, while energy payments were higher. KPSB's finance service cover ratio stood at 2.10x against a covenant of 1.25x as at Dec 2016.

¨      BNM announced the reopening of the 5y MGS 3/22. The reopening of the 5y 11/27 is scheduled for the end of the week with a planned issuance totalling MYR4bn.

APAC USD Credit Market:

¨      USTs continue its weakening trend as the USD improves. The USTs continued to see yields push higher as risk on trades continued in the market. In economic news, the wholesale PPI rose 0.2% in August (0.3% consensus), on rising fuel prices, while food prices fell over the month. The UST curve saw a bear steepening though the long end of the curve did see support as the 30y UST auction occurred. The 2y UST weakened as it gained +1.2bps to 1.35% while the 10y UST yields rose +2.1bps to 2.19%. The USD saw a strong performance especially among the G10 currencies as the DXY Index was rose overnight to 92.52 (+0.70%). The Ways and Means Committee of the US House of Representatives has announced plans to release the latest tax proposal by the Cabinet on 27 September, leading to a higher expectations of a tax reform bill in the US.

¨      Asian credit spreads unmoved. The average Asian ex Japan IG spreads and the average yield on HY Asian ex Japan remained largely unchanged at 170.8bps and 6.55% respectively, despite the weakening of USTs yesterday. The average IG Asia ex Japan CDS also remained unchanged at 74.49bps (-0.3bps). Woori Bank, Reliance Industries Ltd, DBS Bank subdebt and the sovereign of Thailand each saw CDS levels fall -2.0 to -1.5bps.

¨      Primaries remained active with issuance by Wynn Macau Ltd (B1/B/NR) 7nc5 and 10nc 5 senior notes totalling USD600m and USD750m respectively. The smaller tranche was issued at 4.875% v IPT of 5.125% while the other priced at 5.50% from IPT of 5.625%. Shinhan Bank Co Ltd issued Baa1/BBB+/NR rate AT2 bonds of USD350m at T+167.5bps v IPT of 190bps with a BTC of 3.14x. Estate Sky Ltd (NR) an issuing entity of CSI Properties Ltd printed USD200m Pnc5 at 5.75% (T+400.5bps). Commonwealth Bank of Australia (Aa3/AA-/AA-) issued a total of USD3bn bonds, issued in 5 tranches.

¨      In ratings, S&P revised upwards Wesfarmers outlook to A-/Sta from A-/Neg. Wesfarmers credit metrics improved in 2017, with its growing earnings and debt reduction initiatives. The management's commitment to maintain a diversified business model, with retail emphasis and solid positions in key market segments is expected to help moderate the group's exposure to economic cycle and operational risks at the individual businesses. Wesfarmers is expected to maintain its debt-to-EBITDA ratio below 2.5x with reductions in lease adjusted debt burdens and with its strong cash flow, a FFO-to-debt above 28%.

 

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