Credit Market Watch: Summary for week ending 18-May
· MYR Credit:
Ø MGS yield curve shifted 1-9bps higher WoW. While initial offshore selling post-election was moderated by support from local real money, the announcement of zero GST beginning 1st June without offsetting measures yet and bearish UST weakened market sentiment. Corporate bond yields followed suit to rise 4-9bps WoW with MYR1.0b traded volume in secondary market.
Ø Rating changes: SPRINT’s outlook was revised to stable from negative by MARC, citing manageable debt repayments until the end of the rated Islamic bond programme in 2020. In 10M17, traffic grew by 6.9%, 6.2% and 4.1% YoY on Damansara Link, Kerinchi Link and Penchala Link respectively, but only Damansara Link has outperformed full-year projection while traffic on Kerinchi and Penchala Links have yet to recover to pre-Oct 2015 levels. Cash balance was MYR354m at end-Oct 2017 which covers MYR194m debt maturing in FY3/19. Facility DE ratio stood at 1.34x at end-Mar 2017.
Ø Macro: Malaysia 1Q18 GDP growth eased to 5.4% YoY (4Q17: 5.9%) on slower agriculture and construction on the supply side, while on the demand side, private investment growth decreased significantly and public spending stagnated. Our economic research kept full-year GDP growth estimate at 5.3%, expecting stimulated consumer spending to help moderate impact from reviews of mega projects and government spending.
Ø Relative value: Danainfra 7/24 appears to offer value trading at 4.52%, which is 14bps above our fitted quasi line and just 10bps below AAA-rated Telekom 3/24 at 4.62%. The review of mega infrastructure projects may reduce future GG supply.
· Asian Credit:
Ø UST curve bear-steepened along the 2y10y WoW with the 10y yield rising at a faster pace than the 2y, crossing the 3.10% at one point. This happened despite a relatively data light week in the US. Speculative funds remain heavily positioned toward net shorts at near record level on 10y UST, with a bear-steepening view as they scale back net short positions at the 2y point.
Ø In Asian USD credit, the spike in UST yields last week has weighed on regional sentiment and affected primary issuances. Even the high-grade names China Overseas Grand Oceans (Baa2/BBB-/BBB) and Zhongyuan Yuzi Investment Holding (A3/-/A-) reportedly had to postpone their USD offerings. Regional USD sovereign was the underperforming sector because of a deterioration in perceived risk over EM debts. INDON and PHILIP yields jumped by about 10-25bps, KOREA yield rose by about 10-15bps while CHINA and MALAYS rose by about 5-10bps.
Ø Rating changes: Vietnam’s sovereign rating was raised to BB from BB- by Fitch premised on improved policy making that focuses on macroeconomic performance, stronger external reserves, improved banking sector liquidity on the back of capital inflows and firm government commitment to curb debt levels and reform SOEs. Its latest 5-year average GDP growth of 6.2% is far above the median 3.4% in the BB group and Fitch expects economic expansion to remain at the 6%-level in 2018.
· CDS: EM Asia CDS performance was mixed WoW. 5y China and Malaysia CDS spread tightened by 2bps and 4bps respectively, Korea and Thailand was unchanged while wideners were led by Indonesia +11bps, followed by Philippines +7bps.
Regards,
Winson Phoon, ACA
(65) 6231 5831
Se Tho Mun Yi
(603) 2074 7606
This message is intended only for the use of the person to whom it is expressly addressed and for the purpose of the subject of this email and may contain information that is confidential and legally privileged. If you are not the intended recipient, you are hereby notified that any use, reliance on, reference to, review, disclosure or copying of the message and the information it contains for any purpose is prohibited. If you have received this message in error, please notify the sender by reply e-mail of the misdelivery and delete all its contents.
Opinions, conclusions and other information in this message that do not relate to the official business of Malayan Banking Berhad shall be understood as neither given nor endorsed by it.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.