Ø MGS yield curve shifted 2-3bps higher WoW at the 10y and 15y points in a lacklustre week as market treaded cautiously. The corporate bond market was cautious as well as some bonds were dealt slightly higher in yield, though the AA space had strong

Credit Market Watch: Summary for week ending 4-Nov

·         MYR Credit:

Ø  MGS yield curve shifted 2-3bps higher WoW at the 10y and 15y points in a lacklustre week as market treaded cautiously. The corporate bond market was cautious as well as some bonds were dealt slightly higher in yield, though the AA space had strong interest. MYR3.3b of volume traded for the week.

Ø  WCT: MARC placed it on Developing Watch vigilant of changes in credit profile following the entrance of a new major shareholder. WCT’s founding members sold their entire 19.7% stake to Tan Sri Desmond Lim Siew Choon who is now the WCT’s Executive Chairman. The agency will assess new management’s plan for the company’s direction, in particular with regards to the high leverage and low liquidity. This is in line with our view that MARC may put on hold any rating changes as the actual impact of the shareholder change on WCT’s credit profile remains uncertain.

Ø  Premium Commerce: Class B Notes upgraded to AAA/stable from AA2/positive by RAM. The underlying receivables performed better than the agency expected and a faster than scheduled deleveraging led to improvements in the collateralization ratio to 7.45% from 5.55% previously.

Ø  Relative value: Aman Sukuk’s 2024 appear to have value, last traded at 4.24% or 11bps outside the fitted line. Similar tenor Telekom papers were dealt about 10bps lower in the range of 4.10%-4.12%. UniTapah’33 and ’34, which last traded 8-9bps above our fitted AA2 line, offer value and is on positive outlook by RAM.

·         Asian Credit:

Ø  UST curve shifted lower WoW with the 10y yield 7bps lower at 1.78% as risk-off tone initially prevailed on Trump’s chances of winning the US Presidential Election, but UST yield rose back 4-5bps as we write after the FBI reportedly cleared Clinton of criminal offence, brightening her prospect of winning the election. The probability of FFR hike by Dec-16 rose to 76% from 69.2% in prior week, on the back of well-balanced jobs data: NFP slightly lower than consensus but with prior month revision gains and solid wage growth.

Ø  In Asian USD credit, spreads widened with JACI composite +7bps, JACI IG +5bps and JACI HY +3bps WoW. The performance of sovereign names diverged. INDON and PHILIP yields rose 5-10bps while KOREA and MALAYS moved in almost an opposite direction 6-9bps lower in yields.

Ø  Rating update: Moody’s raises the issuer rating outlook of four Chinese AMC, i.e. China Cinda, China Huarong, China Orient and China Great Wall, to stable from negative, as the agency views that their current ratings will remain resilient even if the sovereign is downgraded by one notch, citing further the important role of AMC in distressed asset management and banking system especially for the debt-to-equity swap programme, hence the high likelihood of government support and the uplifted A3 ratings for all four AMCs still has 3 notches cushion from the Aa3 sovereign rating.

·         CDS: EM Asia 5y CDS spreads ended wider WoW, led by Indonesia +5bps, China and Malaysia +4bps each, Korea +3bps while Philippines and Thailand +2bps each.