Credit Market Watch: Summary for week ending 24-Jul

Credit Market Watch: Summary for week ending 24-Jul
·        MYR Credit:
Ø        Buying flow with foreign demand pushed MGS yields lower WoW. PDS market more active than the week before with MYR1.8b trades done and a large portion focused in the AA3 space. PDS yields generally tightened WoW, and some GG names that lagged the rally may see some tightening this week.
Ø        West Coast Expressway's (WCE) proposed MYR1.0b sukuk is rated AAA by RAM on guarantees by BPMB and Danajamin. Our preliminary view of WCE's standalone credit is in the A rating band given: 1) high construction risk, 2) weak debt servicing ability, and 3) refinancing risk on the MYR1.28b syndicated term loan.
Ø        Relative value: GG 9y papers continue to offer more value than the 10y and may see a revaluation.
·        Asian USD Credit:
Ø        Oil price continued its downward trend with Brent crude falling to USD54.6/bbl as we write vs a YTD high of USD67.7/bbl in May 2015.
Ø        UST yields ended on a stronger tone with the 10y UST lower by 8bps WoW, partly aided by allegedly an unintended release of the Fed staff's economic projections showing more dovish projection of FFR than the FOMC median guidance.
Ø        Asian credits were largely muted with wider spreads for both IG and HY sectors in general. Soft China data and falling commodity prices weigh on sentiment, with selling on tech names e.g. BABA and BIDU. Bank AT1s were still in demand but some selling in Chinese SOE IG.
Ø        Sovereign spreads widened WoW, with INDON, MALAYS and PHILIP all wider by approx. 3-8bps WoW, but KOREA was relatively resilient.
Ø        Credit rating: 1) China Vanke's rating was raised to Baa1 from Baa2 by Moody's, citing the company's leading market position and strong sales performance through the cycles. 2) Greentown China was upgraded to BB from BB-, one notch higher than its standalone rating as it is assessed as moderately strategic to its largest shareholder China Communications Construction. 3) Parkson Retail was put on negative outlook by Fitch.
·        CDS:EM Asia CDS experienced broad widening last week with China, Indonesia and Malaysia the underperformers being 13bps, 12bps and 15bps wider WoW.