Tuesday, October 31, 2017

FW: RAM Ratings monitoring move to abolish Eastern Dispersal Link tolling

 

Published on 30 Oct 2017.

RAM Ratings is closely monitoring the development of the recent announcement by Prime Minister Datuk Seri Najib Abdul Razak during the tabling of Budget 2018 that toll for the Eastern Dispersal Link (EDL) would be abolished effective 1 January 2018. The RM845 million Senior Sukuk of MRCB Southern Link Berhad (the Company), the funding conduit for the 8.62-km EDL in Johor Bahru, is rated BB3/negative. RAM will assess the Company’s ability to meet its obligations in respect of the sukuk in light of the proposed abolition, and hence the rating impact, when details of the move become available. 

 

Analytical contacts
Chinthamani Thanneermalai
(603) 7628 1013
chinthamani@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

 

 

 

FW: RHB | Economic Research | Tracking Global News

 

 

Economic Research

31 October 2017

Global News

 

Economic Update

 

 

 

Tracking Global News

 

US Personal Spending Strongest in Eight Years, Likely Due to Hurricanes

 

Vietnam’s Economic Activity Remains Robust in October

 

Economist: 

Peck Boon Soon  | +603 9280 2163

Vincent Loo Yeong Hong  | +603 9280 2172

Ng Kee Chou  | +603 9280 2179

Rizki Fajar  | +6221 2970 7065

Aris Nazman Maslan | +603 9280 2184

 

 

 

To access our recent reports please click on the links below:

 

30 October 2017

27 October 2017

26 October 2017

25 October 2017

23 October 2017

 

Economics Team

 

 

 

 

Peck Boon Soon

Chief ASEAN Economist

bspeck@rhbgroup.com

+603 9280 2163

Vincent Loo Yeong Hong

Malaysia, Vietnam

vincent.loo@rhgroup.com

+603 9280 2172

Ng Kee Chou

Singapore, Thailand

ng.kee.chou@rhbgroup.com

+603 9280 2179

Rizki Fajar

Indonesia, Philippines

rizki.fajar@rhbgroup.com

+6221 2970 7065

Aris Nazman Maslan

Malaysia, Vietnam

mohd.aris.nazman@rhbgroup.com

+603 9280 2184

 

 

 

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FW: RHB FIC Rates & FX Market Update - 31/10/17

 

 

 

31 October 2017

 

 

Rates & FX Market Update

 

 

Chinese PMIs Continue to Indicate Expansion

 

Highlights

 

¨   Global Markets: US Treasuries gained yesterday with 10Y yield continuing the retreat below the 2.48/2.50% resistance. September Core PCE, Fed's preferred way to gauge inflation, coming as expected at 1.3% YoY, reports that the proposed corporate tax plan might be progressive over the coming years reducing the prospects of a strong economic impact amid new developments stemming from the Mueller's Russia probe boosted the allure of Treasuries while exerting downside pressure on the US Dollar. The Fed's succession race is now expected to end on Thursday and Powell being the next Chairperson is also probably partly priced in thus creating a mild upside risk to the USD should Taylor be nominated instead; however both candidates could be appointed as Chair/Vice Chair hence cushioning extreme reactions ; remain neutral USD and UST.

¨   AxJ Markets: Chinese October official PMI prints came in a touch weaker than September numbers; manufacturing PMI printed 51.6 (Sep: 52.4; consensus: 52.0) while services PMI printed 54.3 (Sep: 55.4). Still, the numbers were indicative that the Chinese economy remains on an upward trajectory, which should offer comfort to regional economies over the remainder of 2017; stay neutral CGBs at this juncture.

¨   The USDJPY dropped ahead of BoJ's meeting against the backdrop of a softer US Dollar. We expect the central bank to keep its monetary policy unchanged at this juncture as inflation remains far from target given slower-than-expected upside progress. In that sense, inflation forecasts will be closely scrutinized. Lastly and looking forward into 2018, the victory of PM Abe's coalition increases the chances of a reappointment of Kuroda at head of the BoJ. We remain neutral USDJPY for now given the monetary policy discrepancy; as the pair remains sensitive to US developments, only a break below 112.85 would trigger a deeper drop to 111.75 max 111.00 in the short term.

 

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FW: [Maybank] USD/Asians Mixed On US Developments

 

 

header

GBL: USD/Asians Mixed On US Developments

Global Markets Daily
by Saktiandi Supaat

FX Research

USD/Asians are mixed this morning on overnight developments that weighed on both the USD index and Wall Street. Rumours that the corporate tax cuts would be phased in over a 5-year period (that would limit its overall impact), Jerome Powell as Trump's likely pick for the Fed Chair, and political uncertainty in the US over the first of possibly many indictments over Russian interference in the US presidential election that could be disruptive to Trump's legislative agenda were cause for pause ...

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FW: RHB FIC Credit Markets Update - 31/10/17

 

 

31 October 2017

 

Credit Markets Update

                                               

MYR Bond Trading Quiet, UST Rally on Tax Reform Revelation

 

¨      MYR and MGS rallies post-budget. The MGS saw a rally mainly in the long end of the curve. The MGS 5y-10y rallied between -2.4bps to -3.3bps to close at 3.72%, 3.99% and 4.02% respectively. The 3y MGS was flat at 3.50%. The USDMYR recouped losses to close higher at 4.2378/USD (+0.10%), still underperforming the currencies of most of its neighbours. This despite the Malaysia 2018 budget at the end of the week showing fiscal consolidation remaining on track further supported by strong oil prices (+0.76% to USD60.9/bbl).

¨      Quiet trading session post budget. Govvies saw trade volume plummet to just under MYR1.1bn. Top trades were mostly from off-benchmark securities. The MGS 05/35 recorded the highest trade volume of MYR168m closing at 4.61% (+3.9bps). Other notable off-benchmark trades were MGS 03/23, MGS 02/18 and MGS 09/18 with amount of MYR123m, MYR72m and MYR66m respectively traded at 3.97%, 2.94% and 3.07% respectively. GII 08/18 also saw MYR150m changed hands closing at 3.14%.

¨      Corporate trading was weak as a mere MYR104m changed hands. UEM Sunrise 12/17, 12/18 and 12/19 saw a combined trades of MYR42m with yields changed of +4.4bps, -1bp and -9.3bps respectively. Other trades include UMW Holding 10/26, Korea Export-Import bank 03/18 and DANGA 09/27 with MYR10m recorded each with yields changed between +0.1bp and 0.8bps.

 

APAC USD Credit Market:

¨      Tax reform revelations rally the UST curve. Global risk appetite saw an unwinding following the latest revelations that the latest tax reform proposals, namely the corporate tax-rate cut could see a delayed phased 3% cut a year beginning 2018, which would see a delay in the expected growth dividends of this effects and disappointing investor expectations. Equities saw a fall while the USTs saw a rally. The 2y UST yields rallied -1.4bps to 1.57% while the 10y UST rallied -3.8bps to 2.37%. Further supporting this flattening were comments by Treasury Secretary Steven Mnuchin that the Treasury sees little demand for ultra-long USTs, leading to a rally in the superlong portions of the curve. Adding to the sentiment, news of arrests of President Trump's former campaign chairperson Paul Manafort, aide Rick Gates and foreign policy adviser George Papadopulous in the Russian probe in the US. The USD as seen by the DXY Index retraced to close at 94.56 (-0.38%). Markets will be looking forward to a busy week as the BoJ, FOMC and BoE meet while the US labour market report and China's manufacturing sector reports are also expected.

¨      Asian HY bond outperformed IG. IG credit spreads rose +1.8bps to 157.9bps, whereas the HY bond yields saw the opposite with a decline of -2bps to close at 6.60%. The iTraxx AxJ IG spreads remained unchanged to remain at 74.9bps. Top performer in this space was CapitaLand Ltd with the CDS spreads tightening by -6.15bps. Other top performers include GS Caltex Corp, Kookmin Bank and POSCO with spreads tightening between -1.35bps and -2.18bps. South Korea FIs led CDS widening as Woori Bank and Industrial Bank of Korea saw spreads increased by +2.86bps and +2.15bps respectively. This was followed by China FIs with China Development Bank, Industrial & Commercial Bank of China Ltd and Bank of China Ltd saw spreads changed between +1.11bps and +1.15bps.

¨      In the primary market. Chandra Asri Petrochemical Tbk Ltd (Ba3/B+/BB-) has priced USD300m benchmark 7nc4 bond at 5.10% against IPT at 6.5% area, with a BTC of 7.3x. Franshion Brilliant Ltd (NR/BB/NR) issued bonds guaranteed by China Jinmao Holdings Group Ltd worth USD300m following its recent USD500m issuance in Apr. The Pnc6 bonds were issued at 4.875% against IPT at 5% area. Huarong Finance 2017 Co. (Baa1/NR/A) plans to tap the market across three tranches which may be priced later today; USD 5y FRN at 3mL+155bps; 10y fixed notes at T+220bps area; 30y fixed notes at 5.25% area.  

¨      Over to rating, S&P has downgraded China Merchants Port Holdings Co Ltd ratings from BBB+ to BBB; outlook is stable. The China-based port company has been aggressive with their expansionary plans in line with the Belt and Road initiative. In the 2H17 saw the company entered into a concession agreement with Sri Lanka Ports Authority and the Sri Lanka government for the Hambantota Port in addition to 90% stake acquisition of Brazil-based Terminal de Conteineres de Paranagua S.A. S&P has forecasted that CMPort's funds from operations to debt (FFO/Debt) ratio to drop below the 20% downgrade-threshold level over the next 2 years. S&P assigned A- rating to ICBC International Holdings Ltd; outlook is stable. The Hong Kong-based operates as an investment and financial services company offering banking, securities brokerage, fund management as well as financial consulting. As a subsidiary to ICBC, the bank mainly taps mainland Chinese and Hong Kong companies through their parent's wide network of clients and customer distributions. S&P has forecasted asset growth to grow more than 2x of around HKD36.2bn with leverage to rise steadily from 4.8x as at end-2016 to be contributed by the cross-selling with their other business segments such as corporate finance, sales and trading as well as asset management. MNC Investama Tbk. rating lowered to CCC from CCC+ by S&P; outlook is negative. The downgrade on the Indonesia-based investment company was a result of rising financing risk which can be reflected on their insufficient credibility to repay their maturing USD-denominated notes in May 2018.

 

 

 

 

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FW: MARC AFFIRMS BANK MUAMALAT'S FINANCIAL INSTITUTION RATINGS AT A/MARC-1; CONCURRENTLY AFFIRMS ITS AIS RATING ON THE BANK'S SUKUK PROGRAMME OF UP TO RM2.0 BILLION

 

 

P R E S S  A N N O U N C E M E N T

 

FOR IMMEDIATE RELEASE

 

MARC AFFIRMS BANK MUAMALAT’S FINANCIAL INSTITUTION RATINGS AT A/MARC-1; CONCURRENTLY AFFIRMS ITS AIS RATING ON THE BANK’S SUKUK PROGRAMME OF UP TO RM2.0 BILLION

 

MARC has affirmed its financial institution (FI) ratings of A/MARC-1 on Bank Muamalat Malaysia Berhad (Bank Muamalat) and concurrently affirmed its AIS rating on the bank’s Islamic Senior Notes Programme (Senior Sukuk) of up to RM2.0 billion. The outlook on the ratings is stable. The rating on Bank Muamalat’s Senior Sukuk programme is equalised to its long-term FI ratings based on the seniority of the sukuk.

 

Bank Muamalat provides a full range of Islamic financial services, accounting for 3.4% and 4.8% of domestic Islamic banking gross financings and deposits respectively for the financial year ended March 31, 2017 (FY2017). With an asset size of RM23.5 billion, Bank Muamalat is considered a mid-sized bank; it also lacks economies of scale compared to many of its domestic peers which as part of large banking groups benefit from shared infrastructure and resources. These factors, along with weaker-than-industry averages in key metrics, remain the main consideration in affirming Bank Muamalat’s FI ratings.

 

Bank Muamalat recorded a financing growth of 2.9% y-o-y in FY2017 compared to the Islamic banking industry growth of 11.6% over the same period. This low growth has been partly attributed to the bank’s funding profile, which remains largely characterised by volatile and costlier wholesale deposits which comprise 67.4% of the bank’s total deposits as at end-June 2017 (1QFY2018). While the bank is seeking to strengthen its retail deposit structure, this task could be challenging given its limited network of 65 branches. Total deposits declined to RM18.1 billion, leading to an increase in the financing-to-deposit ratio to 82.4% in 1QFY2018 (FY2017: 76.4%).

 

In terms of financing portfolio, residential property financing accounted for 31.2%, personal financing for 25.9% and SME financing, which it expects to focus on in the medium term, less than 1.0%. Gross impaired financing ratio weakened to 2.7% as at end-June 2017 compared to the Islamic banking industry average of 1.4%, with the increase driven by the household sector particularly personal financing. The bank’s financing loss coverage ratio stood at 85.6% as at end-June 2017, which is consistent with the industry average of 84.6%. With the implementation of MFRS 9 beginning 2018, Bank Muamalat’s impairment charges, as with other financial institutions, will potentially increase as banks will be required to record a minimum 12-month expected credit losses at initial recognition.

 

The aforementioned factors notwithstanding, asset quality concerns are moderated by Bank Muamalat’s strong capital ratios with Tier 1 and total capital ratios (CAR) standing at 14.8% and 17.2% respectively as at end-June 2017 (FY2017: 14.4%; 16.7%). The bank’s capital position is further supported by the new Basel III-compliant Subordinated Sukuk of up to RM1.0 billion; as at end-June 2017, a total of RM250 million has been issued. The bank’s cost-to-income ratio was largely unchanged at 58.6%, while pre-tax profit remained flat at RM170.5 million in FY2017 as the higher net financing was offset by higher losses on revaluation of its financial investments.

 

The stable outlook on the ratings reflects MARC’s expectation that Bank Muamalat will be able to maintain its credit profile over the next 12 to 18 months on assumption of moderate economic challenges.

 

 

Contact: Joan Leong, +603-2717 2934/ joan@marc.com.my; Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my,

 

October 31, 2017

 

 

[This announcement is available in the MARC corporate homepage at http://www.marc.com.my]

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

 

© 2017 Malaysian Rating Corporation Berhad

 

 

 

 

 

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FW: AmBank Research - Malaysia Marine and Heavy Engineering Holdings - 3QFY17 rebound from lumpy change orders Hold, 31 oct 2017 (Additional Report)

 

 

Additional Report

-       We maintain our HOLD recommendation on Malaysia Marine and Heavy Engineering Holdings (MMHE) with an unchanged fair value of RM0.78/share based on a 50% discount to its FY17F book value given the group's potential losses and impairment provisions towards the end of the year.

-       MMHE’s forecasts are maintained for now even though its 9MFY17 loss of RM14mil appears to be not as poor as our expectation, accounting for only 29% of our FY17F loss. However, the loss is already above street’s RM8mil. The group did not declare any interim dividend as expected due to the losses.

-       The group’s 3QFY17 rebound to a net profit of RM16mil from a 2QFY17 loss stems from RM24mil lumpy recognition of change orders for the completed Malikai and Gumusut-Kakap platform projects as well as Cendor FPSO conversion job, even though revenue declined 16% QoQ to RM215mil.

-       As a comparison, MMHE recognized RM36mil of change orders in 2QFY17, which drove its revenue up by 9% QoQ, while still registering a loss of RM14mil.

-       We understand that there may be up to RM35mil of balance change order to be recognized from these completed projects. While a full recognition of these items may deliver a positive 4QFY17 bottomline, we remain cautious of any potential impairment given the group’s declining order book.

-       As the group did not secure any substantial orders over the past 3 months, MMHE's outstanding order book has dropped by 13% QoQ from RM1.6bil to RM1.4bil- 1.4x FY17F revenue.

-       Excluding unrealized forex losses, MMHE’s 9MFY17 net profit plunged 82% YoY to RM7mil as its revenue decreased 20% YoY from insufficient projects reaching the group’s revenue-recognition progress threshold while the Malikai tension leg platform, F12 Kumang, Besar, Bergading and Baronia structures have been completed in 2QFY17.

-       MMHE's yard utilisation is still expected to remain below 50%  until 2Q2018 when the RM1bil Bokor central processing platform project, expected to be completed in 2Q2020, has reached steel cutting threshold.

-       Given that the group does not account for any profit contribution until its projects have reached the completion stage of 50%, the Bokor job, which accounts for 63% of MMHE’s outstanding order book, is unlikely to significantly contribute to the group's weak FY17F-FY18F earnings prospects.

-       Hence, the stock currently trades at a fair P/BV of 0.5x due to the likelihood of further losses against the backdrop of the upstream sector's slow project rollouts.

 

DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

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FW: Fixed Income Daily Pulse - 30 October 2017

 

 

 

Good Evening,

 

Today’s trade recap by our trading desk:-

 

·         Yields eased late Friday evening after reports of Trump in favour of a more dovish Jerome Powell to chair the Fed emerged, overshadowing a strong Q3 US GDP number. This also halted the USD’s rally and saw other currencies strengthened. Hence, the week started off on a positive noted for the MYR market as local bonds were seen to be well bided on the front end of the curve up to 10Y in maturities while MYR strengthened slightly to trade at 4.2375 levels. However, trading activity remained subdued as market players are gearing up for an eventful week with upcoming FOMC and BOE rates decision in focus, while the decision for the next Fed Chairperson is expected to be revealed during the week as well.

Malaysia Government Bonds Benchmark Issues

MGS

Closing Level (%)

Change (bp)

Volume (RM m)

3-yr

3.520

-1.5

30

5-yr

3.740

-4.0

-

7-yr

4.010

-2.0

-

10-yr

4.025

-3.5

0

15-yr

4.475

-

50

20-yr

4.645

-

168

30-yr

5.000

-

3

Source: BondStream, AmBank

Interest Rate Swap Closing Rates

IRS

Closing Yield (%)

Change (bp)

1-yr

3.525

0.0

3-yr

3.668

0.2

5-yr

3.803

0.3

7-yr

3.950

-2.3

10-yr

4.070

-1.0

Source: Bloomberg, AmBank

 

Best regards,

Fixed Income Research & Strategy

AmBank Research, AmBank (M) Berhad

+603 2036 2292 (DL) +03 2031 7218 (Fax)

Level 15, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50200 Kuala Lumpur

 

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FW: CIMB Thematic Fixed Income Outlook 30 Oct 2017 - Malaysia’s Budget 2018

 

 

RATIONALE SUMMARY

  • The government foresees stronger GDP growth in 2017, projecting a range of 5.2-5.7%, and to continue the strong momentum of 5.0-5.5% in 2018. In comparison, growth was 4.2% in 2016. The risk on growth remains slanted towards the external sector. Though exports and imports will show tremendous growth in 2017 the pace in 2018 is expected to slow remarkably. External risks include rising protectionism and policy uncertainties in developed economies and financial market volatility.
  • The federal government remains on course in its fiscal consolidation drive in 2017 and 2018, with the fiscal deficit expected to hit 3.0% of GDP in 2017 and lower at 2.8% of GDP in 2018. The drive for fiscal health is the more commendable in view of upcoming general elections before August 2018. Increased discipline in government's expenditure and measures to enhance revenue, contributed to the continued consolidation in fiscal position.
  • Few supply concerns rest of 2017. Achieving the 3.0% to GDP fiscal deficit target in 2017 alleviates supply pressures the rest of this year. A 3.0% deficit equates to RM39.9b in required fiscal deficit financing. The Economic Report 2017/2018 showed that gross domestic borrowings in 2017 comprising MGS+GII will surmount to RM107.5b. YTD, MGS+GII offering has come up to RM93.5b. The difference (RM107.5b-RM93.5b) equates to RM14.0b, which will be pretty light for the remaining five MGS+GII auctions the rest of 2017
  • As for 2018, based on the targeted 2.8% fiscal deficit and GDP growth of 5.0-5.5%, fiscal deficit financing is expected to touch RM39.8b. From present data, maturing MGS+GII in 2018 is another hefty RM66.8b. Hence, we think total MGS+GII offerings in 2018 will be almost equal to 2017's at RM106.5-107.0b. We opine supply absorption is not an issue in 2018. Continued hefty supply of MGS+GII in 2018 and aversion against EM bonds, Malaysian bond yields would show an upward trend.
  • However, there is a saving grace in the form ofwe are comforted by expected Bank Negara MalaysiaBNM's expected interest rate policy direction, which we think will show a consistent OPR level of 3.00% throughout 2018 apart from the demonstration of relative historical stability, although there is the risk that rising growth and inflation may weigh more heavily in the policy decision. Thus, we expect a measure of yield curve steepening in 2018 (as rise in short dated yields are limited). In our opinion, players should focus on shortening the duration of their MGS+GII holdings early in 2018, and lengthening duration in step as longer tenor yields rise.

Best Regards,

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
Find us on Bloomberg at CIMR <Go>

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