FW: Credit Market Watch: Summary for week ending 5-Jan

 

 

Credit Market Watch: Summary for week ending 5-Jan

·         MYR Credit:

Ø  MGS yields lowered 2-5bps WoW likely due to real money accounts looking to rebuild positions as the strength in Ringgit continued with USDMYR pair breaking below 4.00 level. The 10y yield was down 5bps to 3.87%. Corporate bond yields were little changed though there was a pick-up in trading activity.

Ø  Econs: Malaysia’s export and import growth moderated to 14.4% and 15.2% YoY in Nov 2017 (Oct: 18.7%; 20.9%), but trade surplus was resilient at around MYR10b (Oct: MYR10.45b). The rise in global manufacturing PMI in Dec 2017 suggests still strong external trade outlook for end-2017 and early-2018, according to our economic research team. External reserves position ended 2017 at USD102.4b, an increase of 8.2% YoY (2016: -0.7%).

Ø  Rating changes: 1) Bumitama’s outlook was raised to positive by RAM, citing improved credit metrics which are expected to be sustained while debt load remains steady. Maintaining debt/EBITDA <3x and FFODC >0.3 could lead to a rating upgrade; 2) Premium Commerce’s 2016 MYR179m Class A Notes/ MYR4.5m Class B Notes (collectively 2016-A Notes) were lifted from RAM’s negative watch with the AAA/AA2 ratings reaffirmed with a stable outlook. Recall that it was placed on negative watch in Sep 2017. This follows bondholders’ approval to extend maturities for 2 out of 5 of the Class A Notes series which alleviates liquidity concerns.

Ø  Relative value: With the positive credit outlook, Bumitama bonds are being priced closer to AA2 levels as its 2019s traded around 4.45-4.50%, which is close to where FRL 2020 last dealt.

·         Asian Credit:

Ø  UST curve shifted 7-8bps higher WoW, with the 10y yield up 7bps to 2.48%, after the December jobs report showed unemployment rate stable at 4.1%. In addition, FOMC’s December meeting minutes showed most members favor continued tightening as well as expectations of inflation rising towards 2%.

Ø  Asian credits spreads were firmer with JACI composite, JACI IG and JACI HY tighter by -3bps, -2bps and -8bps respectively. Sovereign space generally weakened with CHINA, KOREA and MALAYS up 2-6bps WoW, while INDON and PHILIP curves were mixed +/- 5bps WoW.

Ø  Rating change: 1) Dalian Wanda Commercial Properties’ rating was lowered 2 notches to BB+ by Fitch and remains on negative watch. This follows an earlier move by S&P on concerns over the company’s ability to tap offshore funding for liquidity; 2) West China Cement was upgraded by Moody’s to Ba3 from B1 on expectations that higher cement prices, driven by favorable supply/ demand dynamics, will continue to support improved operating performance.

·         CDS: EM Asia 5y CDS spreads tightened led by the Philippines -12bps WoW then followed by Indonesia -5bps, Korea and Malaysia -4bps each and China and Thailand -2bps each.

 

 

 

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