Credit Market Watch: Summary for week ending 10-Jul

Credit Market Watch: Summary for week ending 10-Jul

·         MYR Credit:

Ø  No change in OPR was widely expected hence did not have much impact. PDS market remains muted amid volatilities. There appears to be some preference for short duration as trading was more active in the <3y bucket. Putrajaya Holdings priced its multi-tranche MYR900m issuance and interestingly bids in the AAA space widened by several bps after the book opened.

Ø  On rating updates, RAM affirmed UMW's rating at AAA with a stable outlook on the back of its strong liquidity. Last Friday the Federal and Selangor governments signed a supplemental water agreement which should benefit Gamuda in terms of resumption of negotiations for SPLASH and possibly higher valuation for its water assets.

Ø  Relative value: KLK'22, which last traded 16bps under our fitted line, has been trading at yields lower than its rating indicates. Golden Agri and Alpha Circle still trades at very wide spreads given their weak credit profiles

·         Asian USD Credit:

Ø  Asian credit spreads widened in a week filled with fear from the Chinese equities massive selloff (then rebounded) plus uncertainty from the Greek debt fallout. JACI composite widened by 10bps, JACI IG a milder 8bps while JACI HY was 21bps wide WoW.

Ø  Market's aversion to risks remain evident, but on the back of firmer Chinese equities, Chinese IG traded tighter in late last week with strong demand on AMC and oil & gas names, while cheapened HY papers also attracted interest.

Ø  On sovereigns, in general MALAYS underperformed regional peers widening by 1-2bps in spread WoW likely due to the escalation of political risks. OGIMK'23 the 1MDB USD paper at some point cheapened significantly to just under the 8% handle from previous week's close of 6.27%, but then recovered to the 7% region.

Ø  Credit rating: Honghua Group was placed on negative outlook by Moody's citing the potential heightening of financial and liquidity risk due to weakening of profitability.

·         CDS: EM Asia’s CDS had mixed performance, with Malaysia, Indonesia and Thailand 2-4bps tighter, while Korea and Philippines was marginally wider by 1bp WoW.