Cheung Kong Property on Positive Outlook; Shanghai Baosteel Downgraded to Baa1; CIMB Bank and Group Each Priced AT1s

                       

20 May 2016

 

 

Credit Markets Update

           

Cheung Kong Property on Positive Outlook; Shanghai Baosteel Downgraded to Baa1; CIMB Bank and Group Each Priced AT1s

¨      APAC USD Credit Market: CDS widened by 3bps to 145.7bps and HY surged 5bps to 7.16% after the FOMC minutes yesterday raised expectations of a rate hike in June, while IG spreads remained stable at 210bps. Yields of benchmark USTs declined 1-2bps with 10y at 1.85% on the back of weaker global equities and commodities. In the primary market, Zhejiang Geely (NR) with SBLC from BOC (A1/A/A) priced USD400m 5y green bond at T+140bps vs. IPT+170bps area. On the rating front, Moody’s revised Cheung Kong Property’s A3 rating to positive from stable to reflect its low leverage and strong liquidity position that exceeds the A3 rating threshold while Shanghai Baosteel Group was downgraded to Baa1 from A3 by Moody’s on the back of weak operating performance and credit profile given low steel prices and substantial losses at two of its steel subsidiaries.

¨      SGD Credit Market: SingPost under corporate governance investigation. We observed a rise in the short-to-mid SOR curve, with the 2y increasing 6.3bps to 1.67% while the 5y rose 8.3bps to 2.01% as the USDSGD has weakened by 0.85% since Tuesday. There was better risk appetite, with interest in yielder names such as KRISSP, NOLSP and EZISP; while SPOST was largely unchanged even as it was announced that the Accounting and Corporate Regulatory Authority would be investigating SingPost, especially with regards to its corporate governance. Meanwhile, the Singapore Exchange has expanded its bond framework to allow retail investors to buy wholesale bonds, which were initially offered to institutional investors only, as long as issuers satisfy a list of eligibility criteria. 

¨      MYR Credit Market: Concession bonds led corporate activity amid active trading session of MYR747m. Top traded was PLUS 1/24 rising 3bps to 4.33%; while MAHB Pc24 settled flat at 4.94%. Little change on the govvies front with the 3y-10y MGS benchmarks closing at 3.19%-3.83%; although the 3y GII slipped 9bps lower to 3.16% before BNM’s decision to keep the OPR at 3.25%. Meanwhile, the government is to auction a new 10.5y MGS 11/26 at issue size of MYR4bn (tender closing: 23-May) with the WI last seen quoted at 3.89/80%. On the primary market, CIMB Group and CIMB Bank each priced MYR1bn of their Pnc5 AT1 at 5.8% (5yMGS+245bps). Elsewhere, RAM assigned AA3 to Bank Rakyat’s proposed MYR5bn B3T2 subordinated sukuk; while YTL REIT established a new MYR1.65bn unrated MTN Programme to refinance its existing borrowings from Ambank and Maybank.