Credit Market Watch: Summary for week ending 18-Sep

Credit Market Watch: Summary for week ending 18-Sep

·         MYR Credit:

Ø  PDS market was very quiet with liquidity still thin and buying mainly on short-dated papers. Pengurusan Air SPV Bhd priced its 5y and 10y IMTNs, totalling MYR1.56b, at 4.28% and 4.63% respectively. Focus today will be on the 7y GII re-opening auction with an expected size of MYR3b.

Ø  Rating changes: Celcom Networks Sdn Bhd's (CNSB) rating was downgraded to AA+/stable from AAA/negative by MARC due to Celcom Axiata Bhd's aggressive dividend policy which led to weaker cash flow protection metrics amid an enlarged negative equity, constraining its financial independence and possibly exposing it to Axiata's credit risk. Sunway was assigned AA-/stable by MARC, while RAM withdrew its A2/positive on the company.

Ø  Relative value: CNSB'19 last traded 9bps above our AA1/AA+ fitted line, reflecting the heightened credit risk in line with the downgrade.

·         Asian USD Credit:

Ø  UST rallied after the US FOMC kept FFR at historical low with a dovish statement among others citing concerns over global economic and financial developments. Asian credit tightened a tad, with JACI composite -1bps, JACI IG -2bps and JACI HY +1bps.

Ø  Sovereigns traded stronger, with INDONs outperforming peers tightening by appox. 15-25bps in yields WoW, while PHILIPs were stronger by 10-15bps and MALAYS about 10bps tighter. OGIMK'23 was pretty much flat WoW.

Ø  With some stabilisation in Brent crude price, buying interest was seen on PETMK. Chinese oil names and low-beta Chinese industrial SOE saw demand and traded a touch firmer.

Ø  Rating changes: S&P downgraded Japan's sovereign rating from AA- to A+, while upgraded the Republic of Korea from A+ to AA-. Japanese/Korean companies with likelihood of government support were also affected as a result. Now both China and Korea's sovereign credit rate higher than Japan.

·         CDS: EM Asia CDS spreads tightened WoW. The 5y CDS spreads of Indonesia, Malaysia and Thailand outperformed peers narrowing by 32bps, 27bps and 23bps WoW respectively.