Fed Stands Pat; New MYR500m Non-rated Programme from Yinson

3 November 2016

Credit Markets Update

Fed Stands Pat; New MYR500m Non-rated Programme from Yinson

¨      APAC USD Credit Market: Asian credits weakened amid the weak market tone. IG spreads and Asian IG CDS widened 2-4bps to 193.9bps and 117.9bps respectively, whereas average HY bond yields pushed lower by -1bp to 6.39%. The overnight weakness in US equities, oil prices (Brent: -2.7% to USD46.9/bbl) amid the heightened US election fears drove investors into USTs as the Fed left interest rates unchanged in its Nov FOMC meeting. UST 10y yields plunged c.3bps to 1.80%, while the 2y slipped 1bp to 0.82%. Moody’s affirmed 4 Chinese distressed asset management companies; changed outlook to stable from negative driven by i) strong government support through the Ministry of Finance and ii) strategic importance to the Chinese financial system (please refer to table 3). Meanwhile, Chinese utilities company, China Yangtze Power (NR/NR/A+) issued benchmark USD300m 5y convertible bonds today with the bond is exchangeable into China Construction Bank’s H-shares.

¨      SGD Credit Market: Rally is SOR from external headwinds. There was a rally in the short-to-mid SOR curve, with the 2y and 5y falling by 2.2-2.5bps to close at 1.34% and 1.75% respectively, following global yields as the upcoming US elections caused consternation in risk assets. Meanwhile, Rowslet Limited Group (NR)’s revenue increased 40% for 3Q16 at SGD24.6m, and an EBITDA of SGD8.73m compared to -SGD1.3m 3Q15, boosted by its UK hospitality and engineering consultancy businesses. BreadTalk Group Limited (NR) saw revenue fall -2.7% YoY to SGD157.3 in 3Q16, but EBITDA rise 8.7% to SGD21.1m the same period. This led to a 107.7% spike in net profits to SGD3.3m. Finally, KrisEnergy Ltd (NR) reported revenue totaling USD44.4m (249.2% YoY growth) and a corresponding EBITDAX of USD4.1m (156.8% YoY) as production volumes increased 68.4%. The Singapore PMI stood at 50 in Oct from 50.1 Sep, the second month of expansionary manufacturing signals.

¨      MYR Credit Market: New MYR500m non-rated programme from Yinson; MISC cautioned of potential significant impairment for FY16. Yinson established a new MYR500m debt programme via its wholly-owned subsidiary, Yinson TMC. The new facility, which is earmarked for loan refinancing and general corporate purposes, will be guaranteed by Yinson Holdings Bhd. Meanwhile, MISC’s (AAA) net profit increased 29% YoY to MYR2.29bn for cumulative 3Q16 though warning of substantial impairment of under-utilized assets for FY16. The shipping giant has no current drawdowns from bond facilities outstanding. Secondary markets were quiet with MYR1.9bn changing hands in both the govvies and corporate market segment yesterday. The MGS moved sideways with the 3y settling at 3.01% while 10y was unchanged at 3.62% before the hawkish FOMC meeting. Short-dated Cagamas ’16-17 led the corporate market on combined MYR160m trades to close at 3.112-3.249% (unchanged to -5bps).