RHB FIC Credit Market Update - 27/3/15

27 March 2015

Credit Market Update

StanChart AT1 Attracts USD22bn Orders; Value in Anih 11/23 MYR

REGIONAL                                                                                      

¨      Yields, CDS tilted wider; StanChart AT1 attracts more than 10x BTC. ITraxx AxJ edged wider to 1.5bps, having spiked 11.4bps since last Friday. Similarly, credit yields eased wider following a slew of rallies earlier this week although FIs bucked the trend. We saw widening on HUWHY 19-22, TEMASE 19-23 as well as HK/CN property names like SWIRE 23 and SUNHUN 22. FI names remained in good demand on risk aversion mode, particularly seniors such as ICBCAS 18, EIBKOR 18-19 and EXIMCH 24 which tightened a couple of bps. Asian credits may continue to trade softer today following weak lead on USTs (5y-30y benchmarks: +4bps to +7bps) and expectations of stronger US GDP and Uni of Michigan sentiment tonight. On the primary front, Standard Chartered received more than USD22bn orders for USD2bn Pc20 AT1 bond (Ba1e/NR/BBBe), with investors evenly diversified across the globe (Asia: 35%, Europe 30%, US 35%). The bond was priced at 6.5% (initial guidance: high 6%).

¨      Weaker-than-expected production numbers to sustain safe haven demand in SGD.  Yesterday’s swap movements were rather muted, compared with movements this past week, with the 3y and 5y SOR marginally tightening by -1.5bps to 1.71% and 2.01% respectively. We saw keener activity in the corporate credit market, with demand interest in higher yield property names such as YLLGSP, CENCHI and Oxley Holdings, OHLSP, while selling was seen in NOLSP and PSASP. There was some offloading of existing GAVLSP papers too as Gallant Venture (NR) printed a SGD175m 3y at final price of 7%. Singapore’s Feb Industrial Production numbers came in weaker at -3.6% (consensus: -2.2%), and this should reinforce the case for MAS to ease monetary policy via at least widening the currency bands to managed currency volatility (especially against the USD) at its next monetary policy meeting in mid-April.

¨       

MALAYSIA

¨      Strong corporate flows led by PASB; all eyes on new MGS 7.5y auction. Corporate flows stayed active with a total of MYR997m transacted, once again led by GRE names. PASB dominated the activity chart saw MYR550m exchanged hands, inched lower to 3.679%-3.894% for maturity 6/17-6/19; while Prasarana 3/20-3/30 fell 1-13bps. Elsewhere, BGSM complex 12/19-6/24 tightened 2-3bps to 4.599%-5.079%. Meanwhile, govvies ended in mixed tone with 3y-10y MGS benchmarks settled at 3.325%-3.893% (-2.1bps to +1.2bps), amid auction for the new MYR4bn 7.5y-MGS 9/22 (tender closing next Monday, 30-Mar). On primary front, HSBC Amanah printed MYR750m 5y Senior Sukuk at 4.24% (5yMGS+65bps).

TRADE IDEA: MYR

Bond(s)	Anih 11/23 (MARC: AA)(Last trade: 10-Mar; Price: 104.16, YTM: 4.751%; 10y-MGS+86bps)(Amount O/S: MYR180m)
Comparable(s)	Kesas 8/23 (RAM: AA2)(Last trade: 18-Mar; Price: 101.39, YTM: 4.648%; 10y-MGS+76bps)(Amount O/S: MYR105m) Besraya 7/24 (RAM: AA3)(Last trade: 24-Mar; Price: 102.00, YTM: 4.771%; 10y-MGS+88bps)(Amount O/S: MYR60m)
Relative Value	Within the toll roads space, we see value in Anih 11/23 which was trading 11bps higher than similarly rated Kesas 7/23. In addition, Anih 11/23 is only trading at 2bps premium to the lower-rated and longer-tenure Besraya 7/24.
Fundamentals	Anih’s solid credit profile is supported by the following key aspects: 1)     Strategically aligned expressway comprised of KL-Karak, East Coast Expressway and KL-Seremban. Both KL-Karak and KL-Seremban registered high average daily traffic of combined 243k in 2014. 2)     Strong debt coverage. We expect Anih’s FSCR to be sustained above 2x during the tenure of the bond. In addition, the strict minimum post-distribution FSCR of 2.5x prevent Anih from aggressive dividend distribution, hence provide some protection to bondholders. 3)     Key risks: KL-Karak and ECE1 are scheduled for toll rate hikes in 2015 and 2020, which are subject to regulatory risk. Nevertheless, we view that the government will compensate Anih in the event of delay in toll hike.