APAC Primaries Rebound; DanaInfra Priced MYR2bn IMTN

17 October 2016

Credit Markets Weekly

APAC Primaries Rebound; DanaInfra Priced MYR2bn IMTN

                                                                      

APAC USD CREDIT MARKETS

¨      UST yields bear steepened, as the longer-dated 10-30y climbed 6-8bps higher WoW to 1.80% and 2.56% respectively; whereas the 2y was unchanged at 0.83% on mounting chances for a December rate hike, Hillary Clinton’s improving position in the polls and Fed Chair Yellen’s remarks last week on letting US inflation run higher. Turning to Asian bond markets, IG spreads and speculative bond yields widened 3-11bps WoW following the weaker Chinese trade data, dampening sentiment. Elsewhere, Asian CDS widened 3bps to 117bps as Thai sovereign CDS jumped 15bps following the passing of the Thai King.

¨      Moving to ratings, Moody’s upgraded Cheung Kong Property (CKP) to A2/Sta from A3 premised on its expectations that CKP can sustain a stronger financial position over the next 2-years reflecting prudent financial management, stable income from investment properties & hotels and strong liquidity position. On the flipside, Moody’s cuts Sunac China’s rating to B2/Sta from B1 to reflect low profitability, weak interest coverage over the next 12-18 months.

¨      Primary activity rebounded. Issuances rose to MYR7.66bn from MYR2.1bn in the preceeding week, bringing the YTD issuances to MYR192.4bn. Upon further breakdown, Bank/FI names dominated primary issues (67%), with bonds sales from Exim Korea (Aa2/AA/AA-), CCB International (A1/A/NR), CBA (issue rating: A3/NR/NR), and KEB Hana Bank (A1/A/NR). Separately, we note 3 deals amounting to USD1.45bn from South East-Asia names i.e. EXIM Malaysia (A3/NR/A-), TNB (A3/BBB+/NR) and Bumi Serpong (Ba3/NR/BB-).

SGD CREDIT MARKETS

¨      Another O&G player seeks bond restructuring. There was a sole print from the SGD space last week as Julius Baer issued its second SGD AT1, with a SGD325m Pnc5 at 5.75%, or around 25bps inside initial guidance. YTD issuances now stand at SGD17.7bn, or 11% below a similar period last year. Flows were generally a tad lighter as investors stood on the sidelines ahead of the bi-annual MAS meeting, though papers such as CENSP, FIRTSP and better grade names like STSP and SPOST appeared tighter. Meanwhile, in the O&G space, Swissco (NR) is currently negotiating with bondholders on the restructuring of its sole outstanding SGD100m SWCHSP 4/18 due to the O&G vessel charterer being unable to service its upcoming SGD2.9m interest due. This is on the back of recent bond restructuring exercises by Marco Polo Marine, Rickmers Trust Management and Ausgroup. Cordlife Group (NR) is seeking to allow for the early redemption of its SGD68.25m CLGLSP 10/17.

¨      MAS chooses to stand pat while 3Q16 GDP is lacklustre. There was a bull steepening in the short-to-mid SOR curve over the week, with the 2y falling by 6bps to 1.40% while the 5y dipped 3bps to 1.76%. MAS chose to leave its monetary policy unchanged last Friday, though 3Q16’s weak GDP release of 0.6% (consensus: 1.70%; 2Q16: 2.10%) will weigh on investor expectations for an easing in its next monetary policy meeting in Apr-2017. Looking ahead, investors will be eyeing the Singapore September CPI (24-Oct).

MYR CREDIT MARKETS

¨      Govvies hit by weaker MYR. The local currency depreciated 1.0% WoW to 4.20/USD as FOMC minutes give hopes for a Fed rate hike in Dec along with the falling CNY to 6.72/USD, the weakest level in 6 years. The weaker MYR could suggest further outflows from the offshore players amid the hawkish sentiment. Foreign holdings on the MGS decreased for the first time this year by MYR5.5bn to MYR181.4bn or 51.3% of the total MGS outstanding in Sep.  As a result, we saw MGS yields spiked up 5-13bps WoW with the 3y jumping 13bps to 3.01%, while the 10y rose 8bps to 3.66%. Nevertheless, the auction for MYR3.0bn 10y GII Reopening concluded at decent 2.02x BTC with average yield of 3.813%. Investors to monitor on the upcoming Budget 2017 (21-Oct) for signs of the government’s commitment towards fiscal consolidation, while Sep CPI (19-Oct) is unlikely to shift BNM’s dovish stance given the still low inflation.

¨      DanaInfra taps the market again. The government-guaranteed MRT financier printed another MYR2bn last week at 3.92%-4.65% across 7y-20y, 9-20bps cheaper than the similar tenure issuance in April (4.10%-4.76%). Corporate activities were 7% slower at MYR2.9bn. Cagamas 10/18 on its debut trading week was seen trading 3.6bps below coupon at 3.384% on MYR350m trades. Other top traded during the week includes Sime Darby Pc26 fell 3bps to 4.851% (MYR300m traded) and Krung Thai B3T2 25c20 rose 2.5bps to 4.801% (MYR160m).

¨      Al-Bayan and Celcom Networks on negative outlook. RAM placed Al-Bayan on negative outlook (rating: A1) as the Saudi-based construction conglomerate failed to meet the minimum requirement balance in the FSRA vis-à-vis its MYR100m maturity on the 16-Dec. Elsewhere, the outlook for Celcom Networks’ AA+ rating was also revised to negative due to the deteriorating margins, and potential higher borrowings to fund the one-off spectrum fees of its parent company, Celcom Axiata.