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

 

 

 

17 October 2017

 

Credit Markets Update

                                               

Press Metal to meet Investors for USD Bond; Govvies Trade Quiet

 

MYR Credit Market:

¨      MYR strengthened against the greenback to 4.2175/USD (+0.11%) as Brent oil prices climbed to USD57.8/bbl (+1.14% overnight) amid tensions in the Middle East impacting supply. The MYR could trend lower later today given the appreciation of the greenback given the pricing of a Fed rate hike in December and Mar-18. Both the MGS 3y and the 10y was unchanged at 3.40% and 3.89% respectively.

¨      Govvies trading weak amid the shortened trading week as MYR982m changed hands. Focus was yet again on the benchmark MGS 7y 9/24 on MYR336m trades, which represents 34% of total trade volume (-0.7bp to 3.87%). The benchmark 15y MGS 4/33 recorded MYR162m transactions (+2.3bps to 4.33%), while the off-benchmark MGS 7/21 saw MYR123m (-1.5bps to 3.53%).

¨      Corporate trading activities hovered near the MYR500m level; mostly focused on GG/AAA segment. Top traded was PTP 9/20 (GG) with MYR60m transacted, narrowing sharply by -7.6bps to 3.98% and was previously last traded on Jul-17. Putrajaya IMTN 9/20 and 12/21 on combined MYR100m changing hands settled at 4.14% (-0.1bp) and 4.23% (-3bps) respectively. Other top trades were AAA-rated EKVE 1/36 which edged 0.8bp lower to 5.13%, while Prasarana 2/23 and 9/27 ended mixed at 4.10% (+1.6bp) and 4.46% (-3.5bps).

¨      Press Metal Aluminium Holdings Berhad will hold investor roadshows in Singapore, Hong Kong and London for a potential USD bond issuance, following its approval by BNM for a Reg S senior notes of up to USD400m. The company has been assigned with a rating of Ba3 and BB- by both Moody's and S&P.

APAC USD Credit Market:

¨      UST bear flatten on reports that Stanford University economist John Taylor has made a favourable impression to President Trump amid the new Fed Chair talk. John Taylor is seen as more hawkish than Fed Chair Yellen and the other candidates linked to take over from her. Treasuries were also higher following the weekend comments by Fed Chair Yellen that ongoing economic strength warrants gradual rate hikes as soft inflation readings are unlikely to persist. UST 2y rose +4.5bps to 1.54%, while the 10y gained +3bps to 2.30%. The DXY saw a decent uptick as it closed at 93.3 (+0.24%) as probability of a December rate hike rose to 80.2% (last Friday: 73.3%).

¨      The iTraxx AxJ IG closed marginally higher at 77.59bps (+0.3bp) with most constituent members broadly unchanged, except for POSCO which tightened approximately -6bps. Mostly paring back losses from last Friday given rising commodity prices, which could see the company's profitability margins improve given its focus in high quality steel products. Elsewhere, Asia IG credit spread rose 1.5bps to 162.1bp, whereas the average HY bond yields tightened -2bps to 6.57%.

¨      In the primaries, Yihua Overseas Investment Ltd (B3/B-/NR), a subsidiary of Yihua Enterprise Group Co Ltd, which has business interest in furniture production, property, health care sector, printed USD250m 3y bonds at 8.5% against IPT at mid-8%.

¨      Moody's changed the outlook for LVGEM (China) Real Estate Investment Co Ltd B2 rating to negative from stable. This reflects LVGEM's acquisition of a grade A office project in Kwun Tong, Hong Kong (under development) for HKD9bn, which will weaken the company's liquidity position and increase its debt leverage, without any near term revenues benefit from the project. Potentially raising further offshore debt will see the company's adjusted debt/capitalization ratio rise to 65-70% over the next 12-18 months from 53.3% as at end-June 17.

¨      Elsewhere, Moody's confirms the rating of Lodha Developers Private Limited at B2/Sta. The confirmation of ratings highlights the alleviation of refinancing risk following the establishment of a loan that will mature in 40 months for the construction of the Grosvenor Square development in London, which replaces of an initial bridge loan for the project.

 

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