Wednesday, November 15, 2017

FW: RHB FIC Credit Markets Update - 15/11/17

 

 

 

15 November 2017

 

Credit Markets Update

           

10y GII 07/27 Reopening BTC 1.83x, Focus on US CPI Numbers

MYR Credit Market:

¨      10y GII 07/27 reopening attracted a BTC of 1.83x; The MGS saw a rally mainly in the long end of the curve. The MYR3bn GII 07/27 garnered a low BTC of 1.83x with an average yield of 4.347% compared to a similar auction in June-17 garnering a BTC of 2.54x, despite the smaller issuance size and higher yield this round. The benchmarks MGS 5y-10y flattened across the curve as the longer-dated benchmark securities saw volumes soared amid decent govvies trading activities. MGS 5y, 7y and 10y ended marginally lower at 3.78%, 3.99% and 4.04% with yields narrowed between -4bps and -7bps. The benchmark 3y MGS, however, edged +3.3bps higher to close at 3.52%. The MYR underperformed against other EM Asian currencies as it ended -0.05% lower against the greenback at 4.1935/USD after a week-long rally. A weakening oil sentiment may continue to drag the MYR further.

¨      Govvies trading activities remained robust as total volume increased to MYR2.6bn. As expected, trades were mostly focused on the reopening of MYR3bn 10y GII 07/27 which saw MYR703m changed hands to close +4.1bps higher at 4.35%. Concurrently, trading interest picked up for the longer-tenure securities with off-benchmark MGS 09/25 rose to MYR199m in volume settling -2.3bps lower at 4.20%. Benchmarks 5y MGS 03/22 and 10y MGS 11/27 recorded MYR128m at 3.78% and MYR100m at 4.04% respectively with yields declining -5bps for the former and -4.3bps for the latter. Other notable trades were the off-benchmarks MGS 09/18 with MYR202m transacted closing -9.5bps tighter at 2.95% while the MGS 03/18 remained relatively active despite volume plummeted to MYR185m with yield narrowed by -9.1bps to end the day at 2.71%.

¨      Corporate flows picked up though remained fairly quiet as MYR300m transacted. Securities among the FI issuers were heavily demanded which accounted for 80% of the total trades. Top traded was the HBMS 3/20 with volume of MYR90m dealt at 4.26% (+5.9bps) while the LPPSA 4/27 was trailing quite closely with total trades of MYR60m settling at 4.52% (+2.4bps). Other notable trades were the AFFINBANK 2/27 and AMBANK (subnotes) 12/23 with MYR20m transacted each to close at 4.89% (-0.1bp) and 4.47% (-63.6bps) respectively.

¨      Over in ratings, RAM has reaffirmed Purple Boulevard Berhad's Class A (AAA/Sta), Class B (AA3/Sta), Class C (A3/Sta), and Guaranteed Class D (AAA/Sta) for its MYR250m Sukuk Ijarah under its MYR450m asset-backed Sukuk Ijarah Programme. Ratings on the special-purpose vehicle under Nadin Holdings Sdn Bhd and Nadin Management Sdn Bhd is expected to be strongly backed by Ampang Point's steady annual net property income (NPI) of above MYR20m and sturdy capital value of MYR221m. In FY17, its NPI dropped slightly by -1.9% to MYR22.9m from MYR23.3m in FY16 as a result of lower average rental rates (ARR). The issuer recorded a healthy finance service coverage ratio (FSCR) of 1.72x as at end-Jun17. On the other hand, there is a rising concern on tenant-concentration risk as its Top 5 tenants accounted for 45.5% of its total net lettable area and 19.7% of its monthly gross rental income as at end-Jul17. In addition, nearly half of its tenancies will expire in 2018 which has affected its lease-maturity profile

 

APAC USD Credit Market:

¨      Risk taken off the market ahead of economic data announcements. In line with our expectations the day before, market took risk off the market ahead of President Trump's possible speeches on trade and ahead of a slew of important economic data which includes the Oct CPI, manufacturing survey numbers, and Oct retail sales numbers. The PPI numbers for Oct which picked up 0.4% MoM ahead of expectations of 0.2% signaling a picking up in prices may allay some of these concerns. Also dragging expectations was the pullback in oil prices, as IEA reduced its demand forecast for 2018, which caused oil prices as seen in Brent crude fall -1.50% to USD62.21/bbl. UST's saw a strong support in the superlong end once more, unwinding the steepening that occurred at the end of the previous week. The 2y USTs fell +0.6bps to 1.69% while the 10y USTs were supported -3.4bps to 2.37%. The 30y USTs saw a rally of -4.1bps to 2.83%. The USD as seen by the DXY Index fell -0.7% to 93.83. Further consternation is expected to grow in the market, especially in light of the recent announcement by House majority leader Kevin McCarthy that the House is expected to vote on their version of the Tax Cuts and Jobs Act on Thursday while the Senate continues to debate their version of a similar bill.

¨      IG credit spreads continue to underperform HY credit. As the UST continues to strengthen the day before, the Asia ex Japan IG credit spreads tightened -1.3bps to 161.0bps, while the Asia ex Japan HY bond yields remained unchanged at 6.74%. The iTraxx AxJ spreads tightened slightly to 80.05bps (-0.53bps). Leading the CDS rallies were South Korean names Industrial Bank of Korea, SK Telecom Co Ltd, Hyundai Motor Co, and Korea Electric Power Co, which saw CDS levels tighten between -2.3bps to -5.0bps in line with the tightening of the South Korea sovereign CDS tightening of -2.0bps. Unwinding some of the gains the day before, Petroliam Nasional Bhd and Telekom Malaysia Bhd saw CDS levels edge up close to +0.5bps and +0.3bps respectively.

¨      S&P revised its outlook on Anton Oilfield Services Group to Caa1 on review for upgrade. This is on an exchange offer for any and all existing notes due in Nov 18 (USD243m). With its current issuance plans, this exchange should extend Anton's debt maturity profile by two (2) years to 2020, alleviating near-term liquidity pressures. The financial profile is expected to improve over 12-18 months as revenue growth is expected to grow 20.1% in 2017 to 12.5% in 2018, on stable exploration and production spending. Operation efficiencies and improved margins from increased overseas markets are expected to improve EBITDA to 25.5-26.0% from 16.7% in 2016. The higher profit will be partially offset by modest debt increases. The adjusted debt/EBITDA will be 5.0-5.5x over the next two (2) years from 9.7x at the end 2016. Moody's upgraded the outlook on China National Gold Group (CNG) to Baa3/Sta from Baa3/Neg. The rating changes follow on-going deleveraging exercises of the group supported by the assumption of high level of support from the Chinese government in times of need. CNG has adopted a more conservative financial policy, reducing annual capex to RMB4.5bn 2016 from RMB6-7bn average in previous years. In addition since 2016, it has raised equity worth RMB3.7bn. CNG's EBITDA is expected to increase to RMB6.7bn in 2017 and RMB7bn 2018 from RMB5.9bn in 2016, driven by increases in copper production and the rise in copper and gold prices. CNG's debt/EBITDA is expected to fall to 8.0x in 2017 and to end 2018 at 7.5-8.0x. This is based on expectations of stable metal prices and stable debt growth by CNG. S&P revises its outlook on China Pacific Property Insurance Co Ltd (CPPIC) to A/Neg from A/Sta. S&P revises its outlook on China Pacific Insurance Co (HK) Ltd (CPICHK) to A/Neg from A/Sta. This rating move was largely change in expectations CPPIC's credit will weaken over the next two years, and on the view that CPICHK is a strategically important subsidiary of CPPIC. Due to the aggressive investment appetite and the higher-than-expected loss reserve provisioning required by its life insurance subsidiary China Pacific Life Insurance Co Ltd, CPPIC's capital buffers were reduced in 2017. The company has higher allocation towards more risky assets, such as alternative investments and equities, which S&P views increases its sensitivity to credit and market risks. Moody's assigns Baa3/Sta to Tianqi Lithium Corporation. Tianqi Lithium benefits from its leading position in the lithium minerals and lithium chemical markets, with extensive experience and a long track record. It also has access to high quality lithium minerals, and provides its upstream vertical integration. In addition, the continued growth in demand for rechargeable batteries is expected to support the growth of lithium products over the next 3-5 years. Based on this, Moody's expects revenue to grow 10-12% YoY in 2018 and 2019, from rise in sales volume and capacity expansion while adjusted EBITDA margin to improve to 80% over the next 12-18months, from 70% 2016. Leverage is also expected to remain low with debt/EBITDA coming to 2.0x from 1.6x in 2016, from capex expansions. The company suffers from high concentration risk on lithium minerals and chemicals prices and demand and to regulatory risks to mining and the expansion of demand for lithium battery based products.

 

 

 

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.

 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails