Bank Pembangunan Priced MYR1.5bn Sukuk; Greentown China Revised to Stable Outlook

2 November 2016

Credit Markets Update

Bank Pembangunan Priced MYR1.5bn Sukuk; Greentown China Revised to Stable Outlook

¨      APAC USD Credit Market: Asian bond markets mostly unchanged. IG credit spreads and average HY bond yields held steady at 190bps and 6.4% respectively, while the iTraxx AxJ IG tightened marginally to 116.2bps (-1bp). UST yields were mostly flat or 1bp lower particularly on the shorter-end amid the US election uncertainty, ahead of the Nov FOMC meeting. Moving to rating, Fitch revised Sunac China Holdings Ltd’s rating outlook to negative from stable; affirmed at BB to reflect surging leverage due to landbank replenishment to maintain its sales expansion. Fitch forecasts its net debt/adjusted inventory to remain above 45%, within its downgrade trigger. Moody’s changed Greentown China Holdings Ltd rating outlook to stable from positive; affirmed at Ba3 on expectations that the property player’s financial profile will moderate around its current level than achieving a material improvement over the next 12-18months. Revenue/adjusted debt will remain around 55-60% as the company continue to look towards debt financing for business expansion. In the pipeline, Wuhan Metro (NR/NR/A) sold USD290m 3y bonds at T+145bps compared to IPT at +180bps area. Central China Real Estate (Ba3/B+/NR) received USD750m orders for USD200m 6.75% Reg S 5nc3 bonds at priced at par, after setting IPT at 6% area. Additionally, Jiangsu Zhongguancun (NR) sold USD220m 3nc2 bonds at 5.95% against IPT at 6.2% area.

¨      SGD Credit Market: OUE Commercial REIT reports strong revenue growth; there was a fall in the short-to-mid SOR, with the 2y and 5y rising by 1.0-2.2bps to close at 1.36% and 1.77% respectively. High rated banking papers such as STANLN, UOBSP and DBBSP traded between tighter (according to Bloomberg). Meanwhile, OUE Commercial REIT (NR) reported gross revenue of SGD44.2m in 3Q16, a 114.4% improvement from 3Q15, and net property income of SGD35.3m (+127.0% YoY). This improvement was on the back of better performance of its OUE Bayfront and Lippo Plaza, and the result of the acquisition of One Raffles Place in October 2015; which saw net finance cost increase 261.2%.

¨      MYR Credit Market: Moody’s expect Telekom Malaysia’s (A3/A-/A-) broadband improvement plan for 2017 that includes faster and more affordable high-speed broadband for residential customers is credit negative. Investment in these projects will probably be front-loaded in the initial years and partially debt-funded, with leverage forecasted around 2.0-2.5x over the next 18 months. Telekom 12/21 was last traded on 27-Oct at 3.912% (-23.9bps). Meanwhile, Tan Sri Lim Siew Choon, the executive chairman of Malton Bhd, acquired 19.67% stake in Dominion Nexus to become the largest shareholder of WCT (AA-/Neg), with WCT 4/18 and 4/20 notes trading yesterday at 5.562% (+99.0bps) and 5.955% (-13.8bps) respectively. In the primaries, Bank Pembangunan (RAM: AAA) priced MYR1.5bn 10-19y sukuk at 4.50-4.95%. Oct’s Nikkei PMI fell to 47.2 from 48.6 in Sep-16, marking the 19th consecutive month of contraction in manufacturing sector.