Celcom Networks on Negative Outlook; TNB Priced USD750m Sukuk

13 October 2016

Credit Markets Update

Celcom Networks on Negative Outlook; TNB Priced USD750m Sukuk

¨      APAC USD Credit Market: Asian Credit markets waned; dragged by weak investor sentiment. IG spreads and average speculative bond yields rose another 1-2bps to 189.6bps and 6.4% respectively, while the iTraxx AxJ IG was 1.5bps wider at 116.5bps. US treasuries ended mixed after the release of the hawkish Sep FOMC minutes, in-line with US equities. 10y UST added +1bp to 1.77%, whereas 2y slipped -1bp to 0.86%. Primary market activity stayed active, Tenaga Nasional Bernad (A3/BBB+/NR)’s USD750m 10y sukuk priced at T+145bps (IPT at +170bps area) was oversubscribed by 2.7x. Zhuzhou City (Baa3/NR/BBB-) received USD1.9bn orders for USD300m 3y bonds at 217.5bps against IPT at 245bps. Elsewhere, Commonwealth Bank of Australia (issuer rating: A3/NR/NR) sold USD750m 10nc5 T2 bond at T+210bps compared to IPT at 235bps area.

¨      SGD Credit Market: Investors at the sidelines ahead of Oct MAS meeting. There was a mild tightening of around 2.3-2.5bps, with the 2y and 5y closing at 1.45% and 1.82% respectively. Flows were lighter ahead of the MAS monetary policy announcement tomorrow morning, though yielder papers such as HYFSP and OHLSP appeared tighter. Looking ahead, investors will be eyeing the release of Singapore’s 3Q GDP advance estimates (consensus: 1.7%) and Aug retail sales (consensus: 0.8%) as well as the bi-annual MAS monetary policy announcement, where consensus is weighted towards a status quo decision by MAS, after the two previous meetings in Apr-2016 and Oct-2015 saw an easing stance via the flattening of the SGD policy band. In the primaries, Julius Baer (A3/NR/NR) announced a SGD AT1 at initial guidance of around 6%.

¨      MYR Credit Market: Celcom Networks on negative outlook. MARC revised the outlook of the network telecommunication services to AA+/Negative, due to the tightening margins and the possible higher debts to finance the one-off spectrum fees and capex of its parent, Celcom Axiata Bhd. The rating agency added that Celcom’s rating could be downgraded should its EBITDA margin fell below 30% (2015: 39.6%) and adjusted cash over debt ratio below 45% (2015: 51.9%). Secondary markets remained thinly traded on combined volume of MYR2.5bn over the govvies and corporate markets. Benchmark MGSs were generally unchanged, although the 10y MGS declined 2bps to 3.59%. MYR weakened by another 0.46% to 4.194/USD before Fed released the rather hawkish FOMC minutes. Corporate bonds also moved sideways with Sime Darby Pc26, JEP 6/28, and DanaInfra 10/33 topping the volume chart. Moving to MYR primary market, DanaInfra (GG) priced its new MYR2bn 7y-20y at 3.92%-4.65% (MGS+ 43-50bps), within the IPT of 3.87%-4.71%.