Parkson Retail Slashed to B- by Fitch; New MYR6.0bn MTN from AFFIN

10 January 2017

Credit Markets Update

Parkson Retail Slashed to B- by Fitch; New MYR6.0bn MTN from AFFIN   

¨      APAC USD Credit Market: Safe-haven demand as Britain’s PM sparks hard Brexit fears. There was a pivoting towards safe-haven assets after Britain’s Theresa May sparked concerns that the UK would leave the EU’s single market, which led to a Treasury curve bull flattener, with the 2y and 10y yields falling by 2.8-5.5bps to close at 1.18% and 2.36% respectively. This risk-off sentiment was correspondingly observed in the iTraxx AxJ which rose by 0.8bps, while the JACI IG mildly declined by 0.4bps to 180.8 even as the HY rose by 1bp to 6.66%. In the rating space, Fitch downgraded Parkson Retail Group to a B-/Neg (from B/Neg) due to weaker operating performance as the retailer faces stiff competition from e-commerce while revising the outlook of Indonesia’s Eximbank to BBB-/Pos (from BBB-/Sta) following Fitch’s similar revision to the Indonesia sovereign in Dec-2016. In the pipeline, New World Development is speaking to investors for a planned USD issuance.

¨      SGD Credit Market: Sembcorp agrees to delay of rig delivery again. There was a parallel decline in the short-to-mid SOR curve by around 3.3-3.5bps, with the 2y and 5y closing at 1.64% and 2.23% respectively. Sembcorp Marine (NR) has announced that it has agreed to an extension again with North Atlantic Drilling Ltd for the delivery of a drilling rig until July-2017, which is the fourth extension announced.

¨      MYR Credit Market: Dec foreign ownership in MGS+GII fell at a slower pace of MYR6.0bn (vs. MYR18.8bn in Nov-16) to MYR190.0bn (or 33.8% of the MYR561.9bn outstanding). MGS benchmarks were relatively flat with the 10-year note unchanged at 4.22%. Corporate bond market saw thinner flows at MYR571m (vs. MYR777m on average last week), where c.50% of the trades were on SYMPHONY 11/17-11/18 papers.  AFFIN Bank’s proposed senior and subordinated notes under MYR6.0bn MTN programme was assigned with AA3 and A1 ratings by RAM.