FW: RHB FIC Credit Markets Update - 4/1/18

 

 

 

4 January 2018

Credit Markets Update

           

WCT Issues MYR100m; MGS 04/37 Reopening Today.

MYR Credit Market:

¨      Slow trading to start the year; USD weakness continues to support the MYR. The USD weakness took a breather and ended mixed for of EM Asia, though the MYR continued to be one of the better performers in the region. The MYR continued to rally to 4.0145/USD (+0.12%). In line with the fall in global bonds the day before, the MGS yield curve continued to be pressured especially in the belly of the curve. The 3y MGS at 3.33% (+1bps) while the 10y MGS closed +0.8bps weaker at 3.91%. The 30y MGS on the other hand ended -0.5bps to 4.85%.

¨      Trading activities remained subdued; pickup seen in corporate bonds. Govvie trading volume remained slow as MYR1.1bn was recorded again. The benchmark GIIs again dominated trades, and accounted for 48% of total trades done for the day. Most notably the 5y, 10y and 15y benchmark GIIs GII 04/22, GII 07/27 and GII 06/33, saw a reversal of the performance yesterday, as the securities were traded -1.5bps, +1.3bps and +0.4bps at 3.79%, 4.16% and 4.66% respectively. These benchmark GIIs saw MYR270m, MYR112m and MYR90m change hands.  Corporate bonds/sukuk saw trades pick up to MYR330m done for the day. MYR100m of which were of the RHBINVB subdebt callable 10/22 which was traded at 4.90% (+0.1bps). Other notable trades were the ALDHAZAB 09/19 which saw MYR20m traded unchanged at 4.55%, GOLDEN ASSET 19s which saw MYR20m change hands at 5.17% (-0.5bps) and MAH SING perps callable 03/22 closed at 6.60% (+21.4bps) with MYR20m recorded. The MMC Corporation complex saw MYR15m each of MMC CORP 11/20 and MMC CORP 11/27 traded at 4.90% (-1.4bps) and 5.36% (+0.4bps) respectively.

¨      Over in primaries, the first bond issued for the year by WCT Holdings Berhad with MYR100m of 7y sukuks from its AA- rated MYR1.5bn sukuk programme. The sukuks were issued with profit rates of 5.55%, 167bps over the benchmark 7y MGS at issuance. Focus in the primaries will be on the upcoming reopening of the 20y MGS 04/37 of MYR2bn with MYR1bn additionally privately placed.

¨      Over in ratings, RAM Rating reaffirmed BNP Paribas Malaysia Berhad at AA2/Sta. This rating is based on expectations the bank will continue to enjoy ready parental support from BNP Paribas SA if needed, while also leveraging on its parent's global franchise, international network and technical expertise. Parental support is evident from BNP Paribas SA's conversion of MYR160m of subordinated debts into the Bank's equity in 2013, and a MYR48m capital injection in 1Q 2016. BNP Paribas SA is one of the world's largest financial institutions and among the globally systemically important banks identified by the Financial Stability Board. With focus on wholesale banking, BNP Paribas Malaysia's earnings are volatile. The pretax profit has risen to MYR36.8m 1H 17 (MYR18.3m 2016) amid increased client flow. RAM Rating also reaffirmed Maybank Investment Bank Berhad (Maybank IB) at AAA/Sta. The ratings are premised on the strategic importance the bank plays as the investment-banking and stockbroking arm of Malayan Banking Berhad. Again, Maybank IB's earnings too are volatile due to the nature of its business. Its pretax profit rose to MYR88.3m (M17 (MYR75.4m 9M 16) amid a conducive operating environment and healthier deal flows. In addition, RAM Rating also reaffirmed Affin Hwang Investment Bank Berhad at AAA/Sta. This rating is based on Affin Hwang's strategic role as AFFIN Bank Berhad's investment-banking arm. Affin Hwang has consistently ranked among the top stockbrokers in Malaysia, with a strong retail presence. The Bank came first in terms of the market's trading value in 10M 2017, having facilitated 11.9% of the industry's transactions. Affin Hwang also stands among the leading domestic asset-management companies, placing fifth with close to RM40 billion of assets under management as at end-June 2017. The bank's pre-tax earnings was reported at MYR140.4m 9M 17 (MYR131.0m 2016) driven by a healthier deal flow, a more robust stock market and a better performance from its asset-management unit.

APAC USD Credit Market:

¨      US Treasuries ended mixed post-FOMC minutes; gradual rate-hike remained firmly on track. Focus was mostly on the minutes of Fed Dec17 FOMC meeting where further rate increases is widely expected in the coming year. Despite policy outlook unchanged with three (3) rate hikes forecasted in 2018, reaction from Fed officials on the pace of the rate hike was mostly mixed; some reiterated the need to be aggressive in light of expectations the new tax policy would improve consumer and business spending while others remained uncertain on the impact the new policy would have on the economy. The USTs on the longer end of the curve were seen paring losses from yesterday though the shorter-end fell further following the minutes release. The 2Y UST saw yields rising to 1.93% (+1.22bps) while the yields on 10Y UST retreated to 2.45% (-1.62bps) as the 2s10s spreads has now narrowed to 52bps. The USD was seen recouping losses from the previous day as the DXY rose +0.32%, closing at 92.2. Over in economic data releases, ISM Manufacturing came in above the forecasted level 58.2 as the reading for Dec17 period increased to 59.7, the highest activity gauge recorded since 2004.

¨      Sovereign Philippines led the tightening in AxJ IG CDS. The iTraxx AxJ IG spreads reached to a new lows as it declined to 66.5bps (-0.6bps). Over in CDS space, sovereign Philippines led the tightening for the day as levels fell approximately -6.5bps. This was followed by South Korea's Fis Kookmin Bank and Woori Bank which saw spreads shed about -5.7bps and -5.6bps respectively while CDS levels of Industrial Bank of Korea declined nearly -2.9bps. Bank of India continued to rally as spreads tightened -3.4bps in estimation. Other notable entities include Samsung Electronics Co. Ltd and Petroliam Nasional Berhad which saw spreads compress close to -2.9bps and -2.2bps respectively. Meanwhile, corporate PCCW-HKT Telephone Ltd pared yesterday's gain as CDS levels rose approximately +4.7bps.

¨      Fitch Ratings has downgraded Wanda Commercial Properties Co. (Wanda) to BB+ from BBB; remained on a negative watch. The two-notch downgrade reflects on the difficulty currently faced by Wanda to boost its offshore liquidity as a result of inability to gain access on offshore funding channels. Following the downgrade to below IG status by Moody's and S&P back in Sep17, Wanda has made the move to negotiate with creditors regarding to debt rescheduling. Fitch opined that insufficient offshore funds may pressure Wanda should offshore creditors seek early repayment or the company fails to raise enough funds overseas to pay USD510m due in March.

 

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