Korean Banks on Negative Outlook, Woori Slashed to A2/Neg; Kia Motors and Frasers Centrepoint Printed New Deals

15 April 2016

Credit Markets Update

           

Korean Banks on Negative Outlook, Woori Slashed to A2/Neg; Kia Motors and Frasers Centrepoint Printed New Deals

¨      APAC USD Credit Market: Asian CDS and IG spreads closed c.2bps lower at 139.5bps and 214.4bps, while average yield of junk bonds declined c.5bps to 7.34% on extended rally from prior day's positive Chinese trade data. Meanwhile, yields of Treasuries crept up 2-4bps with 5y and 10y at 1.25% and 1.79% respectively as US and European equities gained.  On rating actions, Moody’s placed five Korean banks on negative outlook, namely Busan Bank, Daegu Bank, KEB Hana Bank, Kyongnam Bank and Shinhan Bank, while Woori Bank was downgraded to A2/Neg from A1 to reflect expectations of a more challenging operating environment for banks in Korea as well as the corresponding adverse effect on profitability and asset quality. Primary market saw Kia Motors (Baa1/A-/NR) priced USD400m 5y at T+145bps and USD300m 10y at T+152.5bps, while BOC Aviation (NR/A-/A-) commences investor meetings for a proposed USD deal.

¨      SGD Credit Market: PBs look for yields in IG. SOR 2y rose 13bps to 1.66% while the 5y rose 11bps to 2.01%. In the news, OLAM secured dual-tranche (1y & 2y) revolving credit facility totaling USD650m for refinancing, Keppel T&T 1Q16 revenues inched up 0.7% to SGD48.27m, and Oxley Holdings agreed to sell Royal Wharf Development lots in London for GBP59.9m. PBs looked for yields in IG on growing concerns over HY refinancing amid Singapore’s slowdown, with interest seen in DBS T1 perps and LT2 22c17 and AREIT and ARTSP complex. In the primary, Frasers Centrepoint (NR) priced SGD250m at 4.25%.

¨      MYR Credit Market: Local govvies slipped as USDMYR weakened 0.5% to 3.8915 after Singapore eased their monetary stance to zero percent appreciation in the exchange rate. The 3y-10y MGS settling flat to +3bps with the 3y benchmark closing at previous level of 3.21%. Meanwhile, the 20y MGS Reopening auction received decent demand of 1.99x BTC averaging at 4.242%. Corporate activity breached MYR634m with about 47% of transactions focused in Alliance B3T2 10/25c20 (-8bps to 5.158%) and Prasarana 23-33 declined 2-8bps to 4.098-4.516%.