FW: RHB FIC Credit Market Update - 27/1/15

27 January 2015

Credit Market Update

Sentiment Stable Post-ECB Stimulus; Hold MYR TF Senior Varlik 6/19

                                                                                                          

REGIONAL                   

¨      Generally stable sentiment as flight to quality flows eased. UST rates rose 0.5-3bps overnight, erasing gains, following Greece’s anti-austerity party winning Sunday’s elections and also partly due to a snow storm in northeastern US that led to rescheduling of the 2y and 5y auctions. In APAC, risk sentiment remained relatively stable as the iTraxx AxJ softened just 0.54bps to 109bps. Meanwhile, credit yields ended marginally wider with general weakness seen in real estate IG names closing 1-2bps wider against news of China’s investment trusts pulling financing from the property sector. The HY space also generally widened on dealers’ and investors’ profit taking. However, we did continue seeing gains in KAISAG complex on speculation that Sunac China Holdings (Ba3/BB-/BB-) will acquire stakes in Kaisa. Moody’s statement that India’s new loan-pricing rules for banks is credit negative did not see a significant impact on Indian bank credits, with notables ICICI, SBIIN and AXSBIN trading just a touch wider between 1-2bps. On the primary front, Tower Bersama Infrastructure (Ba2/BB/BB) and Maxpower Group Pte Ltd (B1/B/B) are commencing investor meetings today, with the latter planning a USD250m 5NC3 issuance.

¨      SG Industrial Production better than expected. The short-to-mid SORs tightened, with the 3y and 5y closing at 1.14% (-3.25bps) and 1.55% (-5.6bps) respectively, even as similar duration Treasuries saw widening. We saw some selling on yieldy China property names such as YLLGSP and CENCHI as well as CHEUNG. SG’s Dec industrial production numbers were not as weak as expected, coming in at -1.9% (consensus expectations: -3.9%; Nov: -2.8%). We saw mixed activity in existing GALVSP 16’ and 17’s ahead of yesterday’s sole primary which saw Gallant Ventures (NR) price its 2.5y SGD75m paper at 7%.

MALAYSIA

¨      Improved PDS flows driven by GRE names; local govies continue to gain before FOMC and MPC. Corporate flows increased by 27% to MYR391m yesterday, in comparison to last Friday trading activity. The local credit space saw mixed results with interest focused on GRE names such as DanaInfra complex 7/22-11/34 on cumulative transactions of MYR60m, closing between 4.292%-4.85% (-9.9bps to +4.3bps) along with 1MDB widening 0.4bps to 4.951% (MYR20m). Also seen were construction names like Gamuda 4/15, closed at 3.846% (+12.8bps, MYR15m); and IJM 4/20-6/22, tightening 4-6bps in between 4.558%-4.688% (MYR20m). Meanwhile, the sovereign market rallied yesterday ahead of the FOMC and MPC meetings to be held today and tomorrow respectively. The 7.5y-GII remained in the limelight moving 2.5bps down to 4.012% (MYR1.06bn). The MGS curve also shifted downward, with yields for the 3y to 10y benchmarks dropping 1.5 and 3.8bps to 3.501%-3.894% respectively.