Credit Market Watch: Summary for week ending 21-Aug

Credit Market Watch: Summary for week ending 21-Aug

·         MYR Credit:

Ø  MGS likely to remain under pressure and PDS bid-offer stay wide as USDMYR weakened sharply being quoted at around 4.265/275 as we write.

Ø  PDS yields ended higher by 2-9bps WoW. Front end credit spreads played catch up, widening 5-8bps WoW. Overall fairly slow activity, particularly in the GG space. Bids dried up while offers remained firmly below MTM levels as many were unwilling to cut losses.

Ø  Relative value: The wide difference between Bahrain Mumtalakat'17 and KT Kira'20 from our fitted line we think is partly due to yield premium for sovereign risk.

Ø  Toll roads: Last week we sent a roundup report. We reiterate our call that we are somewhat cautious against newer toll road lacking track record with cash flows metrics highly contingent on above-average future traffic growth as such names are more affected by demand risks amid economic headwinds and are more susceptible to rating downgrade or restructuring risks arising from the underperformance of traffic growth.

·         Asian USD Credit:

Ø  Flight to safety is apparent. UST curve bull-flattened WoW but JACI spreads widened across, with JACI composite +16bps, JACI IG +13bps and JACI HY +34bps.

Ø  Oil price sank further with the prices of WTI at USD40/bbl and Brent crude at USD45.1/bbl as we write. Malaysia foreign reserves declined to USD94.5b as at 14 Aug, down by USD2.2b from USD96.7b on 31 Jul.

Ø  Sovereigns were sold off. Yields of INDON jumped 20-30bps WoW, MALAYS weakened 15-20bps but PHILIP and KOREA were relatively resilient. OGIMK'23 yield spike up by >60bps to ~7.90% as we write from Friday's close at 7.25% the week before.

Ø  Chinese property traded wider, with HY names massively wider where double-B segment +20 to 40bps wider and single-B segment as much as +50 to 80bps WoW.

Ø  Rating changes: Greenland's rating was downgraded to BBB- from BBB with a negative outlook by S&P, citing deterioration of leverage given the debt-funded expansion and weak cash collection from property sales.

·         CDS: Broad widening of EM Asia CDS spreads was extended. Indonesia the worst performer +28bps WoW, Thailand +22bps while Korea, Malaysia and Thailand all traded +11bps wider.