Dear all,
Credit
Market Watch: Summary for week ending 28-Jul
·
MYR Credit:
Ø MGS yields were
range bound amid a lacklustre week, while the 10y yield adjusted higher by 5bps
WoW due to new supply. Trading activity in corporate bonds was also muted with
total weekly volume down at MYR1.3b (previous week: MYR2.3b).
Ø TNB: Raised MYR2b
from a new MYR5b IMTN Sukuk Wakalah programme via 15y and 20y tranches. The
deal garnered strong interest with the order book >MYR7.5b or ~3.8x cover.
15y and 20y notes were sold at yields of 4.95% and 5.18% respectively, 3-5bps
tighter than the low end of IPG.
Ø Relative value:
Tadau’s 2030 paper, rated AA3 and last traded at 5.75%, offers yield pick-up
and is about 50bps wide from our fitted AA3/AA- line. We like the lower
construction risk of solar plant vs thermal plant, supplemented by the contractor’s
experience and a 12% contingency sum set aside. Post completion, Tadau is not
exposed to demand risk. We think the yields compensates for risks of lower
energy generation than assumed due to solar irradiance variability (weather
variability) and lower energy rates to incorporate construction and financing
cost savings.
·
Asian Credit:
Ø UST yields rose
1-5bps along the 2y10y WoW. In Asian credit, spreads were still holding up well
but yields generally shifted higher on weaker UST. On sovereign names, INDONs
held up better with yields roughly +/-2bps for the week while KOREA, MALAYS and
PHILIP yields rose 2-6bps WoW.
Ø New issues: 1)
Azure Power raised USD500m via 5.25NC3 solar green bond at 5.50% from IPT
5.625% on 1.8x book cover. Asset managers were primary subscriber at 95%, while
by region it spread across Asia 48%, EMEA 28% and US 24%. 2) ABM Investama
(Ba3/-/BB-) raised USD300m via 5NC3 bond at 7.375% from IPT 7.625% on ~3.7x
book cover. Investors were 84% fund managers, 9% private banks and 7%
banks/insurers/corps, primarily from Asia 82% and US 14%.
Ø Rating change: 1)
Guangzhou R&F was put on negative watch by Fitch, following announcement to
acquire CNY20b worth of hotel assets from Dalian Wanda as it will slow
deleveraging process and cause the key ratios, such as contracted sales/total
debt below 0.6x and recurring income/gross interest expenses remain below 0.5x.
2) CK Hutchison’s rating outlook was revised to positive from stable by
S&P, citing expectation of strong financial performance and its ability to
weather volatility on the back of strong diversification and market position
with exposure to defensive sectors. Financial disciple is sound with good
records in controlling leverage, citing the rating may be upgraded if debt/EBITDA
ratio go downward to 3.0x.
·
CDS: EM Asia 5y CDS spread
grinded tighter, led by Indonesia -4bps, Malaysia, Philippines and Thailand
-3bps each while China -2bps WoW.
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