Primary Market Stayed Robust As US Rate Expectation Intensifies

7 November 2016

Credit Market Monthly Review

October 2016

Primary Market Stayed Robust As US Rate Expectation Intensifies   

Market Review

¨   USD: UST curve bear steepened on rising expectations of a Dec Fed rate hike. Asian credit market ended mixed. Slew of property tightening measures by local government authorities as China property prices continue to surge.

¨   SGD: MAS stands pat, though weaker growth may tilt towards an Apr-17 easing. SGD bond defaults accelerate.

¨   MYR: Govvies tumbled on weaker MYR. Quasi-government bonds fell 0.04%, other corporate bonds gained 0.24%.

Demand and Supply Trends

¨   USD: Primary supply remained heavily in October with USD22.6bn deals priced during the month. We continue to observed strong issuances from China (37%), closely followed by Korea (22%), Australia (15%) and Hong Kong (9%). 61% of issuance were from the banking/FI sector.

¨   SGD: Oct’s print is weakest monthly print YTD.

¨   MYR: Monthly issuance was 32% MoM higher at MYR8.28bn in Oct. DanaInfra was the top issuer with MYR4.5bn issuance across 7y-30y.

Rating Trends

¨   Moody’s bulk rating action on Chinese mid-small Chinese banks; average upgrade/downgrade ratio of 0.92x against 0.50x in September and YTD’s 0.31x.

¨   Base metals-related companies were upgraded on the back of the rebound in aluminium/steel prices and lower production costs.

¨   Al-Bayan was downgraded by 7 notches to BB2/Neg. UniTapah on positive outlook. Negative outlook for Celcom Networks and MRCB Southern Link. Fitch revised Sime Darby’s outlook to stable from negative after the successful share placement.

Outlook

¨   Event risks on the global front. US Presidential Election on the 8-Nov will be the key wild card. Investors will continue to speculate on the US tightening path. We opine that issuers in APAC will continue to take advantage from the low risk free rates before the rate hikes. We expect BNM to stand pat on the final MPC meeting on the 23-Nov.