All Eyes on US Election; YTL Corp Priced MYR1bn MTN

9 November 2016

Credit Markets Update

All Eyes on US Election; YTL Corp Priced MYR1bn MTN

¨      APAC USD Credit Market: Asian credits tightened as investors braced for the US election results. IG spreads and speculative bond yields tightened 2bps to 192.6 and 6.42% respectively, whereas the Asian IG CDS was relatively unchanged at 116.2bps. UST, meanwhile climbed higher by 1-4bps on improving chances of H.Clinton clinching the presidency after the FBI cleared Clinton from any criminal wrongdoing. The 10y settled 3bps higher at 1.85% and 2y rising 4bps to 0.85%. Over to rating movements, Yuexiu REIT’s rating was slashed by S&P to BBB-/Sta from BBB driven by higher expected leverage due to its debt-funded acquisition of a Shanghai office building and weaker FFO projections from the expiry of income support from its major shareholder, Yuexiu Property Co.Ltd. Elsewhere, S&P upgrades KEB Hana Bank to A+/Sta from A on the back of its strengthened capitalization levels and reduced credit concentration risks by rebalancing and reducing risks levels in its loan portfolio.

¨      SGD Credit Market: Global Logistics’ bottom line rose due to better contribution from associates. There was a mild dip in the short-to-mid SOR curve, with the 2y and 5y falling by between 1.1bps to 2.5bps to close at 1.33% and 1.73% respectively. Perennial Real Estate Holdings (NR) saw its revenue rise 53% YoY to SGD35.1m due to the sale of its office units while net profit dipped 99% to SGD32,000 mainly due to the absence of a one-off investment income seen in 3Q15. Global Logistic Properties (Baa2/NR/BBB+) 2QFY3/2017 revenue rose 12.9% YoY USD213m while net profit rose 25.3% to USD220.8m mainly due to improved contributions from associates which doubled to USD70.7m.

¨      MYR Credit Market: RAM reinstates stable outlook, from developing, on Hong Leong Assurance (HLA) as Hong Leong Financial Group scraped plans to divest its investment arm. YTL Corp (AA1), meanwhile, priced MYR1bn MTN – 10y at 4.63% and 20y at 5.15%. Corporate activities totaled at MYR485m. Telco sector ended flat to wider from Celcom Networks ’21-26 (unchanged at 4.70%-5.10%) and BGSM ’18 (+3bps to 4.32%). Little change in long-dated toll road names such as BFB and LDF3, although Besraya ’27 settled 8bps lower at 4.64%. Liquidity remained thin in the govvies market with MYR1.6bn changing hands yesterday. The MGS curve steepened with the 3y slipping 3bps to 2.98%, while the 10y rose 4bps to 3.65%. The MYR strengthened 0.25% to 4.2005/USD before the US Election overnight.