Friday, December 22, 2017

FW: Fixed Income Daily Pulse - 21 December 2017

 

 

 

Good Evening,

 

Today’s trade recap by our trading desk:-

 

·         Overnight headlines focused on Trump administration’s first major legislative victory in US Tax Reform which further boost risk-on sentiments in major DMs. Global bond yields mostly ticked higher with UST 10Y rising to a 9-months high of 2.50% before stabilizing at 2.47% levels at midday. Despite substantial movements in global bonds, the local bond market remained muted throughout the day. While there were some buying interest for benchmark stocks, prices were quoted wide with lackluster trading activities.

 

 

Malaysia Government Bonds Benchmark Issues

MGS

Closing Level (%)

Change (bp)

Volume (RM m)

3-yr

3.375

-

61

5-yr

3.640

-

62

7-yr

3.905

-0.5

10

10-yr

3.950

-

2

15-yr

4.435

-

1

20-yr

4.645

-

-

30-yr

4.900

-

13

Source: BondStream, AmBank

Interest Rate Swap Closing Rates

IRS

Closing Yield (%)

Change (bp)

1-yr

3.650

1.5

3-yr

3.750

0.5

5-yr

3.830

0.5

7-yr

3.940

-1.3

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: RHB FIC : Auction Calendar 2018 - 21/12/17

 

 

21 December 2017

 

Fixed Income Strategy

 

Auction Calendar 2018: Increased issuances of GII in 2018, continued efforts to deepen the GII segment further

 

Increased issuance of GII in 2018, continued efforts to deepen the GII segment further. The Auction Calendar for 2018 was released today. There will be 15 MGS and 18 GII auctions in 2018, bringing a total of 33 auctions versus 16 MGS and 16 GII auctions completed in 2017. We opine the increased issuances of GII auctions in 2018 are positively in line with the Federal Government of Malaysia's (GOM) continued efforts to feature Malaysia as an Islamic financial hub for sukuk issuances, as well as deepening the GII segment further. In terms of overall funding mix, we are expecting an overall balanced mixed of 50 : 50 between MGS : GII in 2018. Of the total 33 auctions scheduled in 2018, there will be a total of 9 new issuances with the remaining balance of 24 auctions featured as reopenings.

 

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FW: MARC AFFIRMS ITS MARC-1 AND AAA/AA/A RATINGS ON KINABALU CAPITAL'S CP AND CLASS A/B/C MTN ISSUANCES RESPECTIVELY UNDER ISSUE 1 OF UP TO RM280 MILLION; OUTLOOK STABLE

 

 

 

P R E S S  A N N O U N C E M E N T

                       

FOR IMMEDIATE RELEASE

 

MARC AFFIRMS ITS MARC-1 AND AAA/AA/A RATINGS ON KINABALU CAPITAL’S CP AND CLASS A/B/C MTN ISSUANCES RESPECTIVELY UNDER ISSUE 1 OF UP TO RM280 MILLION; OUTLOOK STABLE

 

MARC has affirmed its long-term ratings of AAA, AA and A on Kinabalu Capital Sdn Bhd’s (Kinabalu Capital) issue of RM220 million Class A, RM40 million Class B and RM20 million Class C medium-term notes (MTN) respectively. The rating agency also affirmed its MARC-1 rating on Kinabalu Capital’s issue of up to RM280 million commercial papers (CP). The outlook on all ratings is stable.

 

Kinabalu Capital is a special purpose company incorporated by MRCB-Quill REIT (MQ REIT) to mainly raise financing for MQ REIT to part-finance its investment activities. Proceeds from Kinabalu Capital Issue 1 was utilised to partly finance the acquisition of Menara Shell. The MTN and/or CP are secured by a third-party first legal charge on Menara Shell, a 33-storey office tower owned by MQ REIT. The ratings on the MTN and CP reflect the adequate collateral coverage provided by Menara Shell based on MARC’s loan-to-value (LTV) requirements which correspond to their respective rating bands.

 

As at December 31, 2016, Menara Shell was valued at RM648 million by an independent appraiser. However, based on MARC’s methodology, Menara Shell is valued at RM517.4 million which represents a 20.2% discount from its appraised value. MARC used a stabilised net operating income (NOI) of about RM38.8 million and a capitalisation rate of 7.5% to derive the office tower’s value. The rating agency views Menara Shell’s strategic location within the KL Sentral transportation hub and its high building grade status would ensure fairly resilient capital value and occupancy levels. This notwithstanding, the prevailing oversupply of commercial space in the Klang Valley would continue to pose downward pressure on Menara Shell’s occupancy levels and rental rates.

 

Occupancy risk is mitigated by a long-term tenancy agreement with anchor tenant, Shell People Services Asia Sdn Bhd (Shell), a wholly-owned subsidiary of oil major Royal Dutch Shell plc. Shell occupies 54.7% of Menara Shell’s net lettable area (NLA) of 557,053 sq ft. While the large single occupancy poses tenant concentration risk, MARC understands that the tenancy agreement terms and rental review provisions are expected to mitigate this risk. In the event of early termination, Kinabalu Capital via its REIT trustee can claim rental revenue from its tenants for the remaining tenancy period. MARC opines that both Shell’s strong creditworthiness and its long-term tenancy period will offer cash flow stability to support the debt service requirements of the rated issuance.

 

As at end-September 2017, the building was about 97.0% occupied with an average rental rate of RM7.33 per sq ft (psf). MARC notes that about 25.1% of its tenanted NLA will be up for renewal in 2018. In this regard, the ability of the REIT manager, MRCB Quill Management Sdn Bhd (MQM), to maintain occupancy levels is important. MARC considers MQM’s track record as REIT manager to be adequate based on its management of 11 properties with NLA of 2.25 million sq ft, average occupancy of 96.6% and a lease renewal rate of 90.0% in 3Q2017.

 

Under the issue structure, the MTN and/or CP are required to have a minimum debt service cover ratio (DSCR) and security cover ratio (SCR) of 1.50 times throughout the tenure. A breach in the financial covenants will trigger the security trustee to dispose the collateral on behalf of CP and/or MTN holders. The base case cash flow projections show a DSCR of 3.31 times for the CP, while the MTN Classes A, B and C register 3.72 times, 3.13 times and 2.81 times respectively. MARC takes comfort from its sensitised cash flows which remain resilient even in the event of a 35% revenue decline and 5% increase in operating costs.

 

The issuances are structured on an interest-only basis with no amortisation of principal prior to their respective maturity dates. The bullet principal repayments of the CP and MTN are expected to be funded by proceeds from refinancing or the disposal of Menara Shell. The refinancing risk is mitigated by the two-year tail period between the expected and legal maturity dates. In respect of the CP, the availability of a commitment provided by investors throughout the expected tenure would address any potential rollover risk.

 

The stable outlook reflects MARC’s expectation that the actual LTV ratio on the rated issuance will remain within the LTV requirements and Menara Shell will continue to demonstrate a resilient performance that is supportive of the ratings.

 

 

Contacts: Adib Asilah, +603-2717 2943/ asilah@marc.com.my: David Lee, +603-2717 2955/ david@marc.com.my.

 

December 21, 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: RAM Ratings reaffirms AmInvestment Bank's ratings

 

Published on 21 Dec 2017.

RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of AmInvestment Bank Berhad (the Bank). The reaffirmed ratings reflect those of AmBank (M) Berhad (AmBank, rated AA2/Stable/P1), the core subsidiary of AMMB Holdings Berhad (AMMB or the Group). AmInvestment remains a highly strategic entity as the investment-banking and stockbroking arm of the Group. The Bank is expected to receive ready group support should the need arise.

AmInvestment’s operations are highly integrated with those of its sister banks, AmBank and AmBank Islamic Berhad, under a universal-banking model. This allows the Bank to leverage their larger balance sheets to underwrite sizeable deals. AmInvestment is an established domestic investment bank, particularly in the debt capital market. On the stockbroking front, AmInvestment ranked 6th by trading value among stockbrokers in 11M 2017, despite a smaller market share of 5.1% (2016: 7th, 5.5%).

Similar to other investment banks, AmInvestment’s earnings display an inherent volatility as its involvement in capital-market activities is subject to market conditions and investor sentiment. Nonetheless, the Bank enjoys a robust capital position. Its common-equity tier-1 and total capital ratios stood at a respective 35.4% and 35.6% as at end-September 2017. 

 

Analytical contact
Chan Yisze 
(603) 7628 1111
yisze@ram.com.my

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

 

 

 

FW: RAM Ratings reaffirms AmBank's AA2 financial institution rating

 

Published on 21 Dec 2017.

 

RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of AmBank (M) Berhad (the Bank), as well as the issue ratings of the Bank and its funding conduit, AmPremier Capital Berhad (Table 1).

Table 1: Issue ratings of AmBank and AmPremier Capital

 

Rating

 AmBank (M) Berhad

 

 RM1 billion Negotiable Instruments of Deposit

AA2/Stable

 RM2 billion MTN Programme (2008/2028)

AA3/Stable

 RM500 million Non-Cumulative Perpetual Capital Securities (2009/2069)

A1/Stable

 RM500 million Innovative Tier-1 Capital Securities Programme (2009/2069)

A1/Stable

 RM7 billion Senior Notes Issuance Programme (2010/2040)

AA2/Stable

 RM4 billion Tier-2 Subordinated Notes Programme (2013/2043)

AA3/Stable

 AmPremier Capital Berhad

 

 RM500 million Subordinated Notes (2009/2069)

A1/Stable

 

AmBank is the core banking subsidiary of AMMB Holdings Berhad - a mid-sized banking group that ranks sixth (by total assets) among its Malaysian peers. The Bank has resumed growth with a lending expansion of 7% in FY Mar 2017 and 8% (annualised) in 1H FY Mar 2018. Loan growth had been mainly driven by SMEs and residential property mortgages while the expansion of its auto financing had been marginal due to its group-wide portfolio-rebalancing strategy.

At 1.8% as at end-September 2017, AmBank’s gross impaired-loan (GIL) ratio was healthier than some of its larger peers’, which have been affected by their overseas operations. Thanks to strong recoveries, the Bank has been recording net impairment write-backs for 5 consecutive fiscal periods, since FY Mar 2014. However, credit costs are expected to eventually normalise even though there could still be lumpy recoveries. Meanwhile, there has been some weakness in the Bank’s commercial real estate and oil and gas loans. While further slippage from these portfolios cannot be ruled out, we do not expect the Bank’s overall asset quality to be affected much. 

AmBank’s deposit franchise lags its peers’, with a high loans-to-deposits ratio of 97% as at end-September 2017 and a low proportion (20%) of current- and savings-account deposits (industry averages: 87% and 27%). Including non-deposit funding, its loans-to-funds ratio of 85% is more in line with peers’. Furthermore, the Bank’s liquidity coverage ratio is healthy and comfortably above 100% while its net stable funding ratio also exceeds 100%. 

AmBank’s pre-tax profit declined 7% y-o-y to RM581 million in 1H FY Mar 2018, mainly attributable to lower impairment write-backs, leading to an annualised return on risk-weighted assets of 1.7% for the period. The Bank’s profitability is soft due to its comparatively thin net interest margin (1.9% in 1H FY Mar 2018) and relatively high cost-to-income ratio (54%). 

Relative to its risk profile, AmBank’s common-equity tier-1 capital ratio of 11.4% as at end-September 2017 is sound. The implementation of Malaysian Financial Reporting Standards 9 effective April 2018 is unlikely to exert much capital impact on the Bank given that its GIL coverage ratio (inclusive of regulatory reserves) had been boosted to 101% (end-March 2017: 85%). 

 

Analytical contact
Lim Yu Cheng, CFA
(603) 7628 1188
yucheng@ram.com.my

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

 

 

 

 

FW: Welcome to the December issue of DIFC Link

 

 

Welcome to DIFC Link

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DIFC Link

 

 

More than one of the world's top ten financial centres, DIFC is also a leading destination for lifestyle, arts and culture. As we wrap up 2017, we invite you to read more about happenings from this exciting final quarter...

 

DIFC

 

Arif Amiri

MESSAGE FROM THE DIFC
 

Marcus Bailey
Vice President & Acting Head – Marketing & Corporate Communications


Welcome to the final edition of DIFC Link for 2017.

2017 has been a year of innovation for Dubai, and certainly for us here at the DIFC.  

Perhaps the most significant development in this regard was the launch of a USD 100 million FinTech fund at the inaugural Global Financial Forum, reinforcing the Centre's commitment to driving the growth of financial technology in the region.  

Read more...

 

FINTECH UPDATES

 

SHAPING THE FUTURE OF FINANCE IN MEASA

DIFC announces $100 Million FinTech Fund at the Inaugural Global Financial Forum. 

Read more...

 

DIFC TRIPLES ITS COMMITMENT TO FINTECH

FinTech Hive concluded its opening series and announced two new specialised programmes for 2018 at Investor Day. 

Read more...

 

A VIEW FROM THE CEO

Arif Amiri, CEO of DIFC Authority on how FinTech is transforming the MEASA's financial services industry. 

Read more...

 

 

EVENTS OF THE QUARTER

DIFC continues to grow and innovate in the first half of 2017 

DIFC recognises continued support of Government entities at Strategic Partners Awards Ceremony 2017.

 

Global Financial Forum will explore opportunities for emerging markets in the 'New Order'

DIFC organises inaugural Global Financial Forum, attended by over 350 influencers from the financial services sector.

 

DIFC and Harvard

International Monetary Fund launches its Fall 2017 Regional Economic Outlook Report in the DIFC.

 

NEWS HIGHLIGHTS

 

The Academy

DIFC PROPOSES NEW TRUST AND FOUNDATION LAWS

New laws will benefit Wealth & Asset Management sector, as well as regional and international family businesses.

Read more...

 

INTRODUCING 'DIFC CONNECT' 

INTRODUCING 'DIFC CONNECT' 

Promoting innovation and enhancing community experience, DIFC launched its new interactive mobile app at GITEX Technology Week 2017.

Read more...

 

EMERGING MARKETS AVIATION LEASING

DIFC GEARS UP FOR BOOM IN EMERGING MARKETS AVIATION LEASING AND FINANCE

Offering a range of innovative structures to support aviation financing transactions, DIFC reinforced its commitment to the growing aviation sector at a dedicated event last month.


Read more...

 

 

COMMUNITY

 

DIFC HOSTS SECOND EDITIONS OF ART NIGHTS

DIFC HOSTS SECOND EDITION OF ART NIGHTS

The second Art Night of the year welcomed 4,000 guests to the Gate Village showcasing celebrated artists, music, and culinary offerings.

Read more...

 

IMAGES OF UAE LEADERS UNVEILED ON THE GATE BUILDING

IMAGES OF UAE LEADERS UNVEILED ON THE GATE BUILDING FOR 'YEAR OF ZAYED'

To mark the UAE's 46th National Day and the upcoming 'Year of Zayed', Brand Dubai and DIFC unveiled artistic images of the late Sheikh Zayed bin Sultan Al Nahyan and His Highness Sheikh Mohammed bin Rashid Al Maktoum by Emirati artist Maitha Demaithan on the façade of the iconic Gate Building.

Read more...

 

BLOOMBERG SQUARE MILE RELAY RETURNS TO DIFC

BLOOMBERG SQUARE MILE RELAY RETURNS TO DIFC

DIFC is set to host the Bloomberg Square Mile Relay in 2018 for the third consecutive year.

Read more...

 

NEW TO THE DIFC: AÇAI SPOT 

NEW TO THE DIFC: AÇAI SPOT 

The Açai Spot's vibrant and cozy setting offers a range of açai offerings as well as delicious and healthy salads and sandwiches.  Come enjoy their Brazilian hospitality and the best açai in town! 

Read more...

 

 

PROPERTIES

 

GATE AVENUE AT DIFC COMES TO LIFE 

GATE AVENUE AT DIFC COMES TO LIFE 

Bringing life to the district's flagship development, H.E. Essa Kazim, Governor of DIFC, Arif Amiri, Chief Executive Officer of DIFC Authority, and Nabil AlKindi, Chief Real Estate Officer of DIFC Authority, planted the first three trees in the North zone of Gate Avenue at DIFC. 

Read more...

 

See available properties

With plenty of options to buy or lease, find your ideal property in the region's leading financial centre.

See available properties

 

 

 

This communication contains information which is proprietary to DIFC, is (and is intended to remain) confidential, being provided for the exclusive use of the intended recipient, and may be legally privileged. If you have reason to believe you are not the intended recipient(s), and received the information by error, disclosing, copying, disseminating or otherwise taking any action in connection with this communication or the information in it is prohibited and may be unlawful. We ask you to notify us and delete this communication from your system.

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