APAC USD Credit Market: Asian credits markets stayed firm. IG spreads tightened 2.3bps to 190.6bps, while average non-IG yields the held firm at 6.44%. The iTraxx AxJ IG was slightly tighter at 114bps. USTs were mixed as the 2y rose 1bps to 0.85%, and 10y tightened 1bp to 1.75% on the back of dip in Oct consumer confidence index at 98.6 (consensus: 101.5; prior: 104.1) and the auction of USD26bn 2y notes. Over to ratings, Aluminum Corp of China (Chalco)’s outlook was revised to stable by S&P; ratings affirmed at BBB-, premised on improving profitability and financial profile with the recovery of aluminum prices and reductions in production costs. S&P projects the groups EBITD

26 October 2016

Credit Markets Update

APAC USD Primaries Remained Busy; Celcom Networks Priced MYR500m 5-10y Sukuk

¨      APAC USD Credit Market: Asian credits markets stayed firm. IG spreads tightened 2.3bps to 190.6bps, while average non-IG yields the held firm at 6.44%. The iTraxx AxJ IG was slightly tighter at 114bps. USTs were mixed as the 2y rose 1bps to 0.85%, and 10y tightened 1bp to 1.75% on the back of dip in Oct consumer confidence index at 98.6 (consensus: 101.5; prior: 104.1) and the auction of USD26bn 2y notes. Over to ratings, Aluminum Corp of China (Chalco)’s outlook was revised to stable by S&P; ratings affirmed at BBB-, premised on improving profitability and financial profile with the recovery of aluminum prices and reductions in production costs. S&P projects the groups EBITDA interest cover to improve above 1.5-2.4x over the next 1-2 years from 0.9x in 2015. Furthermore, Chalco will meet with investors in Hong Kong and Singapore from today onwards for a potential USD Reg S Perp offering. Meanwhile, the primary front remained busy, BOCOM Leasing (A2/A-/A) sold USD500m 3y bonds at T+127.5bps (IPT: 150bps) and USD1bn 5y bonds at 142.5 (IPT at 165bps). Elsewhere, Commonwealth Bank of Australia (Aa2/AA-/AA-) priced USD1bn 1.75% 3y bonds at T+80bps (IPT: 90-95bps area) and USD500m 3y FRN at 3mL+64bps.

¨      SGD Credit Market: Swissco unveils preliminary restructuring plans. There was a mild fall in the 5y SOR by 0.8bps to 1.66% while the 2y was unchanged at 1.33%. Swissco announced a preliminary restructuring plan which involves delaying around 13% of principal by over 2.5 years while the remaining amount will be swapped for equity. It technically defaulted on its sole outstanding SGD100m SWCHSP 4/18 when it failed to service its coupons due on 16-Oct. Sembcorp Marine’s (NR) 3Q16 revenue fell 21.4% YoY to SGD888m due to project deferments while incurring a net loss of SGD21.8m (3Q15: SGD31.5m) due to forex losses and higher interest costs from increased bank borrowings. Looking ahead, investors will be eyeing the Sept Industrial Production releases (consensus: 1.0%; Aug: 0.1%).

¨      MYR Credit Market: Moody’s flagged concerns over Malaysia’s medium-term goal of a balance budget by 2020 in an absence of major fiscal reforms, combined with falling revenues and weakening debt affordability. On the other hand, Fitch expects Malaysia’s budget is achievable and is better placed than other net commodity exporters to cope with the negative shift in terms of trade. Corporate bonds had an active session with AAA and GG issues — Cagamas 8/17-11/28 (-10.0 to -0.6bps at 3.244-4.349%), PTPTN 3/24-8/26 (-4.9 to +0.7bps at 3.982-4.151%) and Prasarana 9/22-8/26 (-4 to +9bps at 3.930-4.130%). Celcom Networks (MARC: AA+/Neg) priced MYR500m 5-10y sukuk at 4.85-5.27%, with proceeds likely be used to finance MYR817m spectrum fees due Nov-16. MYR appreciated by 0.5% to 4.1575/USD.