Credits Mixed Ahead of Three Major Central Banks

1 November 2016

Credit Markets Update

Credits Mixed Ahead of Three Major Central Banks

¨      APAC USD Credit Market: Asian bond markets ended slightly firmer. IG credit spreads and non-IG bond yields traded 1-8bps lower to 190.0bps and 6.39% respectively, following the primary supply influx. Asian IG CDS edged up 1.4bp to 116.9bps, tracking the underperformance in Chinese equities. US Treasuries strengthened amid the uncertainties leading up to the US presidential election and ahead of the key global central bank meetings (FOMC, BoJ and BoE). UST 10y slipped -2bps to 1.83%, while the 2y shed -1bp to 0.84%. On the US economic data front, US Sept consumer spending rose 0.5%, though the Oct Chicago PMI dipped to 50.6 from 54.0. Elsewhere, primary markets stayed active. Aluminum Corp of China (Chalco) (BBB-) sold USD500m 4.25% Pnc5 bonds at 4.75% (at IPT level); oversubscribed 4.8x. Meanwhile, Central China Real Estate (Ba3/B+/NR) may price USD200m Reg S 5nc3 bonds later today, with price guidance at 6% area. Wuhan Metro (NR/NR/A), Chinese infrastructure and construction service provider, is also looking to price USD 3y bonds with IPT at +180bps area.

¨      SGD Credit Market: Ezra Holdings access the impact of Perisai winding down. There was a rally in the short-to-mid SOR curve, with the 2y and 5y falling by 2.3-2.4bps to close at 1.35% and 1.74% respectively. Meanwhile, Perisai Petroleum Technology Berhad (PPTB), a Malaysian O&G services company, was served a winding up petition in relation to its irrevocable guarantee to the defaulted debt issued by Perisai Capital (L) Inc.. Ezra Holdings (NR), whose subsidiary EMAS Offshore Limited (EOL) owns 11.5% stake in PPBT, is monitoring the situation and accessing the impact on the group. In a related matter, SJR Marine (L) Ltd (SJR) a 51% owned subsidiary of PPTB received a notice of event of default from solicitors of OCBC Al-Amin Bank Berhad. Frasers Logistics and Industrial Trust (NR) announced the establishment of a SGD1bn Multicurrency Debt Issuance Program and have appointed DBS Bank and ANZ Banking Group as joint arrangers and dealers.

¨      MYR Credit Market: S&P affirmed the ratings of 7 Malaysian financial institutions — Maybank, Public Bank, CIMB Bank, CIMB Investment Bank, AmBank, RHB Bank and RHB Investment Bank — premised on sound fundamentals mitigating any possible risks stemming from asset quality pressures in a cyclical downturn. A new MYR1.5bn ICP/IMTN programme from APM Automotive was assigned with AA2/Sta rating by RAM, where the proceeds will be utilised for general corporate purposes and refinancing. Elsewhere, Malaysia and China signed MYR55bn East Cost Railway Line project (ECRL) project that is expected to be finalised by end of this year. Ekovest (NR) secured a MYR2.6bn development order for its EkoGateway @ KL River City project which includes construction of 300 1Malaysia Civil Servants Housing Programme (PPA1M) units. A unit of Ekovest, Lebuhraya DUKE Fasa 3 8/32-8/37 notes were traded tighter yesterday at 5.089-5.295% (-3.6 to -1bps). On the macro front, Sept’s loan growth stabilised at 4.2% YoY as the deceleration in growth of household loans (Sep: 5.6%; Aug: 5.7%) were mitigated by the marginal increase in business loans (Sep: 2%; Aug: 1.9%).