FW: RHB FIC Credit Markets Weekly - 2/10/17

 

 

2 October 2017

 

 

Credit Markets Weekly

 

Tax Reform Unleashed on UST; S&P Downgrade Wanda to BB/Neg

 

SUMMARY:

¨      MYR Credit Market: With the rest of EM Asia, the MYR gave back -0.33% WoW to end at 4.221/USD. Despite this, both the MYR and PHP performed well against regional peers. The MGS yield curve saw a tumultuous period, rallying in the beginning of the week, to settle largely unchanged from the yields of the previous week. Despite the continued weakness in the USTs, the 3y and 10y MGS remained largely unchanged at 3.38% and 3.91%. The primary market picked up slightly as it saw MYR 3.8bn in corporate bonds issued over the week. The secondary market also saw a resurgence. Weekly govvies trading rose to MYR15.5bn while the Corporate flows on the other hands rose to close to MYR4.2bn.

¨      Corporate News – RAM Rating upgraded UniTapah to AA1/Sta from AA2/Positive. RAM Rating places Premium Commerce Berhad (PCB) 2016 Notes on negative Rating Watch. Ram rating includes Cendana Sejati sukuk on negative rating watch.

¨       APAC USD Credit Market: Tax reform unleashed on the market. The week saw the release of the tax reform plan touted by the US President, prepared jointly by his cabinet and members of the Republican Party amid a failure to repeal and replace the Patient Protection and Affordable Care Act (ACA). The UST yield curves spiked up after the lows seen the week before, as the 2y UST continued to spike up +5.2bps WoW to 1.48% whereas the 10y UST yield spiked +8.4bps WoW to 2.35%. The IG credit spreads increased to +1bps WoW to 166.4bp still outperforming the HY where the average HY yields rose +8bps WoW at 6.64%.

¨      Rating Actions – Moody's upgrades the rating of Metallurgical Corporation of China Ltd (MCC) and the bonds it guaranteed under MCC Holdings Hong Kong Co Ltd, to Baa1/Sta from Baa2/Sta S&P upgraded the rating of Agile Group Holdings Ltd to BB-/Sta from B+/Sta. Moody's downgrades the rating of Hang Seng Bank Ltd to Aa2/Sta from Aa1/Neg Moody's also downgrades HSBC Bank PLC rating to Aa3/Neg from AA2/Neg S&P lowers the rating on CITIC Ltd and CITIC Group Corp to BBB+/Sta from A-/Sta. S&P downgraded Dalian Wanda Commercial Properties Co Ltd to BB/Neg from BBB-/Neg and downgraded Wanda Commercial Properties (HK) Co Ltd to BB-/Neg from BB+/Neg. Moody's maintains PT Indika Energy TBK and its guaranteed issuance by Indika Energy capital II Pte Ltd at B2 with review for upgrade Fitch also maintains PT Indika Energy TBK and its guaranteed issuance by Indika Energy capital II Pte Ltd at B- with review for upgrade. S&P places Sunac China on B+/Neg removing it off its negative watch. Fitch maintains Honghua Group at CCC removing it from its rating watch positive.

 

 

 

Table 1: Index Weekly Movements

Indices	29-Sep	22-Sep	Weekly Chg (bps)
iTraxx AxJ 5y IG	81.6	79.7	2
AxJ IG Spread (bps)	166.4	165.6	1
AxJ HY (%)	6.64	6.56	8
SOR 2y (%)	1.39	1.36	3
SOR 5y (%)	1.86	1.80	6
Malaysia 5y CDS	68.7	68.5	0
MGS 3y (%)	3.38	3.38	0
MGS 5y (%)	3.58	3.60	-2
MGS 7y (%)	3.84	3.82	1
MGS 10y (%)	3.91	3.91	0
AAA 5y Spread* (bps)	71	69	2
AAA 10y Spread* (bps)	84	71	13
AA 5y Spread* (bps)	103	103	1
AA 10y Spread* (bps)	121	108	13

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

 

 

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