DBS Sets to Issue New AT1 Bond; Petronas’ 2Q Earnings Dips 85.4% YoY

23 August 2016

Credit Markets Update

DBS Sets to Issue New AT1 Bond; Petronas’ 2Q Earnings Dips 85.4% YoY

¨      APAC USD Credit Market: Credit markets stay firm with the iTraxx AxJ traced lower to 110.9bps (-1.5bp), while the IG credit spreads tightened 1.4bps to 183.2bps, whereas non-IG bond yields were unchanged at 6.25%. US Treasuries strengthened 1-5bps with the 2y at 0.74%, while 10y dipped 5bps to 1.54% driven by lower Brent prices at USD49.2/bbl (-3.4%) and the slip up in US equities. Moving to ratings, Fitch upgrades Modern Land China to B+/Sta from B premised on its lower leverage as compared to peers and higher contracted sales especially in 2016. In the primaries, Korean SOE, Small and Medium Business Corp (Aa2/AA/AA-) sold USD500m 10y bonds at T+67.5bps against IPT at 90bps area. Elsewhere, China Orient Asset Management (A3/NR/A) may price USD 5y bonds later today; IPT at +170bps area, while in the pipeline, DBS (Aa2/NR/AA-) plans investor meetings from tomorrow onwards in Singapore and Hong Kong for USD ATI bond deal.

¨      SGD Credit Market: Lippo Malls secures SGD350m facility; SG CPI out this afternoon. There was a strong bear flattening in the SOR curve, with the 2y rising 7.4bps to 1.45% while the 5y rose 7.2bps to 1.72%. Lippo Malls Indonesia Retail Trust (Baa3/-/-) announced that it has secured a SGD350m term loan facility (with a greenshoe SGD70m option) for acquisition and refinancing purposes. Ezra Holdings Ltd’s (NR) 20%-owned associate company, KLSE-listed Perisai Petroleum Teknologi Bhd (NR), announced that it will ‘commence discussions and engage with holders of the Notes’, referring to its sole outstanding SGD125m PPTMK 10/16. Looking ahead, investors will be eyeing the Singapore July CPI this afternoon (consensus: -0.5%: June: -0.7%).

¨      MYR Credit Market: Belly of the MGS treading water on mixed flow, with the 5y yield dipped 2bps to 3.15% while the 7y rose 2bps to 3.45% ahead of the inflation data (24-Aug). MYR credits were trading at a lower volume of MYR589m against last Friday’s MYR755m with investors’ activity concentrated on Putrajaya 4/22-4/24 and PASB 2/23-6/23. Elsewhere, Petronas (A1/A-/A-) reported a 85.4% YoY fall in 2Q16 net profit to MYR1.6bn, dragged down by MYR7.2bn impairment losses on its upstream assets. On the macro front, foreign reserves as at 15-Aug improved slightly to USD97.5bn from USD97.3bn previously. The MYR weakened 0.3% to 4.02/USD amid the lower oil prices and hawkish sentiment in the US front.