FW: RHB FIC Credit Market Weekly - 24/7/15

RHB FIC Credit Market Weekly - 24/7/15

24 July 2015

Credit Market Weekly

Sentiment Returns to the Market as Uncertainty from Greece and China Ebbs Away; Vanke Upgraded to Baa1

                                                                       

APAC USD CREDIT MARKETS

¨      Asian credit markets stabilised. Regional markets stabilised this week following resolution of the Greece’s fifth bailout and focus on BOCOM’s bumper USD2.45bn AT1 issuance. During the week, UST rates tightened 1-11bps following disappointing US corporates results and constant weakness in commodities, despite improvement in housing and job numbers. iTraxx AxJ IG inched up 1.5bps to 106bps after starting the week at 104.5bps. We noted the average IG banks and corporate yields under our coverage tightened by 1-2bps to 2.18% and 3.16% respectively, while the average HY credit yield widened 5bps to 8.94%. IG property credits were the notable outperformers this week with names such as CHIOLI 19-43s, SINOCE 20-27s, and VANKE 18-19s rallied following rating upgrade on Vanke. Elsewhere, O&G names such as CNOOC 17-45s, SINOPC 18-43s, SINOPE 20-45s, RILIN 20-45s and KOROIL 25s saw notable gains despite brent crude prices declined to USD55.27/bbl (-4.0% w-o-w).

¨      More IGs coming to the market. This week primary issues return to the markets as risk sentiments improved. Notable issuances were Adani Ports (Baa3/BBB-/BBB-), China Minmetals (A3/NR/BBB+), BOCOM (A2/A-/A), China Oilfields (A3/A-/A-),  China Minsheng (A1/A/A), Xinjiang Goldwind (A1/NR/NR), Tianjin Binhai (A3/A-/A-), Fukoku Mutual Life (A2/A/A-) and CCB Leasing (A2/A/A). In the pipeline, Shanghai Electric Power (Baa2/BBB/BBB+), HNA Group (N/A) and Chiba Bank (A1/A/NR) met with investors for potential USD bond issuances.

¨      During the week, we note that Moody’s upgraded China Vanke’s credit ratings to Baa1 from Baa2, while SCOR Reinsurance was upgraded by Fitch to AA-.

SGD CREDIT MARKETS

¨      Upbeat secondary flows. Issuers continued to stay on the sidelines, resulting in a quiet primaries week, with YTD issuance of SGD14.1bn slightly below (-1.25%) a similar period last year. This week saw more sanguine flows, with last week’s uncertainty in China and Greece seemingly a bad memory. We broadly saw interest into yielder names (GALVSP, NCLSP, IHCSP) and selling in short-to-mid HDBSP papers. Interest into Chinese names (MAGIC, PCRTSP, YLLGSP) was also ignited towards the end of the week as Chinese equities rallied. Selling was seen in NOLSP papers even as NOL released a statement denying that Temasek was planning to divest its majority stake. Ezra successfully conducted its SGD200m equity fundraising, with the aim of redeeming its SGD225m perpetual callable in Sept-2015. This should be positive for the SGD perpetual market as a whole, where a callable bond that has not been called is virtually unheard off.

¨      Industrial space continues to look weak The SG June Industrial Production numbers came in worse-than-expected at -4.4% (consensus: -0.4%; May: -2.3%), the fifth consecutive month of decline. We opine that these negative headwinds will impair the industrial REITs ability to gain new tenants; thus, continue to like REITs with strong occupancy rates, longer lease rental profiles and higher amount of fixed rate debt (CREISP, SBREIT). 

¨      SORs parallel upward shift. This week saw a parallel upward shift by 6.75bps in the SOR benchmark, with the 3y and 5y closing at 1.75% and 2.24% respectively. As for next week, all eyes would be on FOMC meeting on 28-29 July, US 2Q GDP (30-July) and SG June Bank Loans & Advances (31-July).

MYR CREDIT MARKETS

¨      Credit yields supported amid quiet primary market. Only MYR1.48bn exchanged hands this week from the corporate bond markets as investors extended their leave amid festive Hari Raya holiday. Overall, credit market ended in positive tone - notably, we saw tightening by couple of bps in the government guaranteed bonds such as BPMB, DanaInfra and PTPTN following good performances in the govvies. Meanwhile, BGSM 12/15 and 12/22 led the AA3-space, inched 1bps-7bps lower to 4.0%-4.83% on combined MYR170m trades during the week.   

¨      On the sovereign front, MGS curve shifted downward with the 3y-10y benchmarks slipped 6bps-13bps w-o-w to 3.14%-3.92% amid risk-on sentiment following temporary relief on the Greek debt crisis. Next week, the expected 10y-GII reopening auction should be well supported amid low supply this month (only 2 auctions in July) and heavy govvies maturity of MYR7bn during the month.

¨      Primary market were muted this week. West Coast Expressway (AAA) is planning to issue up to MYR1bn next month, guaranteed by Bank Pembangunan/Danajamin, with expected tenure of 12-21 years.