Credit Market Watch: Summary for week ending 9-Feb
· MYR Credit:
Ø MGS yield curve shifted up by 2-6bps along the 5y10y WoW in line with rising bond yields globally. 10y MGS yield was up by 6bps WoW at 3.96%. Other than 5y corporate bond yields rising 1bp across credit curves, rest were flat WoW in a generally muted week (traded volume MYR1.4b).
Ø Danainfra: Printed government-guaranteed IMTNs in tenors of 7y, 15y, 20y, 25y and 30y at 4.37%/MGS+43, 4.90%/MGS+50, 5.11%/MGS+50, 5.24%/ MGS+48 and 5.36%/MGS+45 respectively and in sizes of MYR0.7b, MYR0.3b, MYR1.5b, MYR1.0b and MYR0.5b raising a total of MYR4.0b.
Ø Econs. Export/import growth slowed to 4.7%/7.9% YoY in Dec 2017 (Nov: 14.5%/15.2%) but still posted strong 19%/20% growth for full-year 2017 (2016: 1.2%/1.9%) with trade surplus at +MYR97.2b (2016: MYR88.1b). The slowdown in December is in line with our economic research’s view of single-digit export and import growth numbers for 2018 due to high base effect, expectations of firmer Ringgit, moderation or slower increase in commodity prices and slowing global electronics cycle. Domestic unemployment rate averaged 3.4% for 2017 and the economic research team expects it to tick lower to 3.3% this year.
Ø Relative value: Edra Energy bonds trading 34-39bps wider than our fitted AA3/AA- line could offer carry value for investors willing to tolerate construction risk, new gas turbine technology risk and possibly lower capacity rate financial.
· Asian Credit:
Ø Volatility picked up in a big way last week and the UST market was not spared. 10y UST yield fell to as low as 2.65% on 5 Feb before rising back up to end the week at 2.85%, higher by 1bp WoW. UST curve steepened further as yields along 2y5y lowered 5-7bps WoW.
Ø Asian credit spreads widened amid the volatility in UST with JACI composite +9bps, JACI IG +7bps and JACI HY +17bps WoW. Sovereigns also generally wider with INDON, PHILIP, MALAYS and KOREA roughly higher by 1-28bps, while CHINA was mixed -3bps to +4bps WoW.
Ø Rating changes: 1) Outlooks of Lippo Karawaci and its financing vehicle, Theta Capital Pte Ltd, were lowered to negative by Moody’s, citing increased execution and financing risks that will weaken debt metrics; 2) Thai Beverage rating was cut to BBB- from BBB by Fitch as the acquisition of Vietnam’s Sabeco in December will increase FFO adjusted net leverage to 5.7x from 1.2x Sep 2017; 3) Central Bank of India’s deposit rating outlook was changed to positive by Moody’s reflecting upward rating forces should the bank continue to make improvements in capital position, asset quality and profitability metrics in the next 12-18 months.
· CDS: EM Asia 5y CDS spreads all widened led by Indonesia +14bps, followed by Malaysia and Philippines +11bps each, China +10bps, Korea +7bps and Thailand +3bps WoW.
Regards,
Winson Phoon, ACA
(65) 6231 5831
Se Tho Mun Yi
(603) 2074 7606
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