FW: RHB FIC Credit Market Update - 5/5/14

5 May 2014

Credit Market Update

MYR Secondary Flows Remain Sound; APAC Spreads Widen On Declining UST Yields

MALAYSIA                      

¨      MYR credit space remained busy; investors focused on mid-end AA3-rated papers. Local activity last Friday remained relatively stronger despite slowing 15% to MYR404m from the previous day’s figure of MYR478m. Trades, which were mostly in AA3 notes, were concentrated along the belly of the curve. In addition, yield performance was generally marginally positive among the top traded names. Emerging as most-traded for the day, we saw property name UEMS 12/18 unchanged at 4.60% since 29-Apr 14 on MYR90m transacted. Meanwhile, other active names seen were MAHB 9/18 ending flat at 4.09% on MYR70m traded as well as Khazanah 2/21, NACF 10/14 and PDB 3/15 which settled 1-3bps tighter at 4.35%, 3.61% and 3.48% respectively. DRB-Hicom complexes also a material sum of MYR60m transacted, with DRB-Hicom 16-22s trading 9-20bps wider and realigning from levels as far back as 23-Nov 12 (DRB-Hicom 3/19).

                                   

¨      Public Bank (AAA) issues MYR400m Senior MTNs under a MYR5.0bn programme. The newly issued Public 5/19 (AAA) is a 4.20% 5y-tenured MTN and appears fairly priced against the indicative AAA yield for FI papers of 4.27%.  

REGIONAL

¨      APAC credit yields broadly declined even as JACI spreads increased on declining UST yields. The JACI Composite widened 2.3bps to 260.5 which was mirrored in the JACI IG (+2.1bps) and JACI HY (+3.1bps). Over in China, yields generally declined c.2-3bps led by property & logistic papers like HUWHY 11/33, HUWHY 8/17, CRHZCH 2/24 and HKLS 6/22. Over in HK, yields went south c.3-4bps on a mixed variety of papers such as YUEXIU 1/18 (-c.13bps to 4.704%), HAIAIR 2/20 (-c.8bps to 4.030%) and HKCGAS 8/18 (-c.9bps to 2.636%). Singapore saw marginally smaller tightening c.1-2bps with a Power-sector bent on names such as STSP 12/31 (-c.8bps to 4.406%), SPSP 9/22 (-6bps to 3.321%) and RATCH 5/19 which has continued to trade tighter since reoffer (-c.20-25bps to 3.27%). The 10y benchmark UST tightened c2.9bps to 2.58% as NFP numbers came in much stronger than expected (actual: 288k; expected: 218k) as USTs yields rose intra-day but closed lower as weak factory order numbers (actual 1.1%; previous 1.6%) coupled with continued Ukraine geopolitical uncertainty drove safe haven flows. Upcoming US data this week includes Markit US Services (5-May), MBA Mortgage Applications (7-May) and Initial Jobless Claims (8-May). Key data from China includes the HSBC Manufacturing PMI (today) and Services PMI (7-May).

¨      The primary markets were quiet on Friday due to the long-weekend. Gallant Venture is issuing a SGD 3y (NR) at initial price guidance of 6.125%.Gallant last printed a SGD 2y at 5.95% which has been trading cheaper since reoffer. Rickmers Trust Management is also printing a 3y SGD (NR) at initial price guidance of 8.5%.

TRADE IDEA

¨      MYR: We reiterate value on IESB 11/20 (RAM: AAA/Sta) that is currently trading at 4.85% (last trade 30-Apr) (MGS+c.100bps) which provides a potential pick-up of c.40-50bps compared to our proprietary AAA curve. Impian Expresi’s IESB issuance is guaranteed by Maybank, which in turn has a guarantee from the major shareholder, Datuk Desmond Lim. The proceeds (and subsequent repayments) will be utilized for IESB’s maiden project which is the redevelopment of Pusat Bandar Damansara, hence it faces single project risk. Nevertheless, we continue to like IESB due to a personal commitment and guarantee from the major shareholder, experienced project team which largely hails from Malton and Pavilion Real Estate Investment Trust and the strategic location of the project site.