Credit Market Watch: Summary for week ending 6-Apr
· MYR Credit:
Ø MGS yields were more or less unchanged WoW as market was cautious ahead of the local parliament dissolution, which was announced on 6 April. For corporate bonds, trading stayed active particularly in the quasi space, with quasi yields tighter by 1-5bps WoW. Weekly traded volume amounted to MYR3.1b.
Ø Econs: Malaysia external trade exhibited a seasonal swing in February 2018, with exports and imports dipping -2.0% and -2.8% YoY respectively (Jan: +17.9%; +11.6%), as the short calendar month coincided with the Lunar New Year holidays. Nonetheless, trade surplus remained intact and is still wider over Jan-Feb period at MYR18.7b (Jan-Feb 2017: MYR13.5b). External reserves rose at the fastest pace in three years, rising USD3.9b to USD107.8b at end-Mar 2018 (mid-Mar: USD103.9b), the highest since mid-Mar 2015. A risk to global trade outlook is an escalation in US-China trade tension.
Ø Relative value: BEWG 2021 seem to offer some value last trading at 4.90%, or 36bps above our fitted AA2/AA line. YTL Power 2027 traded around 4.89%, which is 10bps wider than the AA1/AA+ fitted line. The strong performance of its UK water segment and steady energy business elsewhere will offset the subdued Singapore power segment and keep its credit profile intact over the medium term.
· Asian Credit:
Ø UST yield curve steepened back slightly as the 2y yield remained flat WoW while the 10y yield was higher by 3bps WoW at 2.77%. The 10y UST yield initially moved upwards earlier in the week, reaching 2.83%, but came back down on renewed US-China trade war concerns, another selloff in US stocks and mixed nonfarm payroll report. The US added fewer jobs at 103k in March compared to 326k in February but the 3-month average of about 200k remains intact. Unemployment rate remained stable at 4.1% and wage growth posted a healthy 2.7% YoY pace.
Ø Asian USD credit strengthened with JACI composite and JACI IG spreads tighter by -2bps each and JACI HY spread tighter by -5bps WoW. Sovereigns had mixed performance with INDON outperforming as yields lowered 2-4bps WoW, PHILIP ranged -2bps to +7bps, while MALAYS, KOREA and CHINA’27 were higher by 3-6bps WoW.
Ø Rating changes: 1) Agile Group Holdings Ltd corporate family rating raised to Ba2 from Ba3 by Moody’s premised on expectations of healthy revenue growth in the next 2 years helping to sustain credit metrics above Ba3-rated China property peers; 2) Matahari Putra Prima’s corporate family rating lowered to B3 from B2 by Moody’s, citing increased liquidity risk and weaker financial flexibility due to non-compliance with certain covenants, weak operating performance, large upcoming debt repayment and limited availability of existing credit facilities. The rating remains on review for possible further downgrade.
· CDS: Tighter EM Asia 5y CDS spreads led by Korea -5bps, followed by Thailand -3bps, and other countries lowered 2bps each WoW.
Winson Phoon, ACA
(65) 6231 5831
Se Tho Mun Yi
(603) 2074 7606
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