FW: RHB FIC Credit Markets Update - 30/11/17

 

 

 

30 November 2017

 

Credit Markets Update

                                               

MYR Surge Past 4.10/USD; MYR Corporate Primaries Total MYR4.53bn

MYR Credit Market:

¨      MYR surge past 4.10/USD, MGS closed mixed. The 3y-10y MGS ended mixed as the 3y MGS weakened +1.7bps to 3.41% while the 10y MGS remained unchanged at 3.95%. The MYR surged higher versus the USD closing at 4.0817/USD, gaining +0.51% overnight. Focus on OPEC meeting to be held later today as OPEC and Russia planning to extend oil supply cuts until the end of 2018 with the option to review the agreement in June 2018.  Brent crude oil prices continued to be pressured by the rising uncertainty over the outcome of today's OPEC meeting given the supply level of domestic crude in the US which have been declining for the past week.

¨      Govvies trading activities picked up strongly as trades recorded at a healthy MYR2.7bn. Benchmark 7y MGS 09/24 saw trading interest pick up significantly with total transactions of MYR318m to close -0.7bps lower at 3.92%. The recently reopened benchmark 5y GII 04/22 remained attractive among investors which saw MYR196m change hands with yields holding firm at 3.872%. Longer-dated benchmark 10y GII 07/27 was also well demanded with total trades of MYR151m dealt at 4.28%, +1.3bps higher from previously traded. Benchmark securities 5y MGS 03/22, 10y 11/27 and 15y 04/33 were actively traded as well which saw MYR136m, MYR121m and MYR106m change hands respectively with yields falling -1.3bps for the 5y to close at 3.63%, -0.3bps for the 10y to close at 3.95% and -1.3bps for the 15y to close at 4.47%.

¨      Active secondary flows in the corporate bond space with trade volume rose to MYR440m. Top trades were the AA-rated MEX 04/30 and 04/32 which recorded combined transactions of MYR77m, settling higher at 5.28% (+13.2bps) and 5.46% (+6.1bps) respectively. DANAINFRA 05/37 and 11/47 were also well demanded with combined trades of MYR60m dealt at 5.04% (+9.9bps) and 5.36% (-0.4bps) respectively. Bank Islam subdebt callable 11/22 traded relatively well at MYR50m which saw yields rose to 5.04% (+0.9bps). Other notable trades include BPMB 09/21 and YTL 06/19 saw MYR30m change hands each to close at 4.07% and 4.32% respectively while the AAA-rated SARAWAKHIDRO 08/22 and 08/25 recorded combined trades of MYR30m to settle at 4.40% (+10.2bps) and 4.55% (+2.8bps) respectively.

¨      The primaries was strong as nine (9) issuances were printed. Financial names led the issuances as CIMB Group Holdings Berhad and CIMB Bank Berhad issued MYR1.5bn each of AA rated 10nc5 T2-subdebt and AA2/AA+ rated subdebt. Tapping their A1 rated MYR10bn AT1 Secuity Programme, A1 rated MYR25bn AT1 Security Programme, and A1 rated MYR2bn AT1 Sub Sukuk Programme, Hong Long Bank Berhad, Hong Leong Financial Group Berhad, and Hong Leong Islamic Bank Bhd drew down MYR400m respectively at 5.13%, 5.23% and 5.13% respectively. Perbadanan Kemajuan Negeri Selangor (PKNS) issued MYR100m in two tranches of 1y and 3y sukuks at 4.50% and 4.80%. This brings a total drawdown of MYR1.1bn from its MYR1.7bn MTN Programme. Southkey Megamall issued MYR100m 4y FRNs at 5.06% while Projek Lintasan Sungai Besi-Ulu Klang Sdn Berhad (PLSUKE) printed an additional MYR130m, this time from its AAA rated, Danajamin guaranteed, MYR500m Sukuk Murabahah Programme issued at 5.10%.

 

APAC USD Credit Market:

¨      Tax reform bill progress and GDP data push USTs weaker. The Senate version of the Tax Reform Bill passed through the Senate Budget Committee and is now on the Senate floor with expectations strong that it will be voted through within the week raising expectations of a finalized version after reconciliation within the year.  The economic news flow also remained positive as the 3Q GDP reported at 3.3% QoQ annualized (3.0% prior) with assumptions it could have reached 3.9% if not for the two hurricanes which occurred in the quarter. Core PCE on the other hand saw a pick up to 1.4% QoQ 3Q17 (1.3% 2Q17). The USTs yield curve steepened as the 2y and 10y USTs weakened to 1.76% (+1.6bps) and 2.39% (+6.0bps) respectively. The 30y USTs saw a stronger fall as yields +6.7bps to 2.83%. The DXY Index on the other hand saw a pause, as it fell -0.11% to 93.16. Markets will be monitoring the outcomes of the Senate tax reform bill and the OPEC meeting later today.

¨      IG credit outperformed HY credit. The Asia ex Japan IG credit spreads rallied -1.0bps to 161.6 whereas the Asia ex Japan HY bond yields widened +2bps to 6.75%. The IG iTraxx AxJ continued to rally to end the day at 72.91bps (-0.91bps).  The CDS levels of Indian and South Korean FIs saw a rally as the CDS levels of State Bank of India, Bank of India, Woori Bank, Kookmin Bank, ICICI Bank Ltd and Industrial Bank of Korea edged down between -1.8 to -3.4bps. The CDS levels of the Indonesian sovereign tightened close to -1.5bps. The CDS of Export-Import Bank of China on the other hand saw CDS levels widen nearly +1.9bps.

¨      Moody's upgrades GPT Group to A2/Sta from A3/Sta. The upgrade reflects its demonstrated commitment to a conservative financial profile over time, and its ownership of a large portfolio of assets across the office and retail sectors, with further diversification into the industrial sector. The assets are well-diversified, expected to benefit from consistently strong occupancy rates and comparable net operating income growth while expected to exhibit greater resilience in a downturn. Annualised net debt/EBITDA was at 5.0x Jun-17, while EBITDA/interest expense was at 4.9x. Debt/assets remained at 24.1% Jun-17. Though financial leverage is expected to increase, Moody's opines the conservative financial profile and predictable earnings generated should enable the group to remain within the rating category.

¨      Following removing it from rating watch negative. Fitch reaffirms AquaSure Finance Pty Ltd at A-/Sta. This follows the completion of repairs on the electrical equipment and the subsequent strong operating performance of AquaSure's water desalination plant in Victoria, with a subsequent review reporting an outage is unlikely to reoccur. The concession ending 2039 provides stable cash flow from the state of Victoria, its financially strong counterparty with contracts allowing it to pass through operating and lifecycle costs and revenue abatement to contractors. The rating case forecasts an average DSCR of 1.33x and minimum projected DSCR of 1.28x.  Fitch also removed the rating watch negative on Baidu Inc affirming it at A/Sta. This reflects the continued strong cash generation from core search services and its commitment to manage exposures to its riskier Financial Services Group (FSG). Baidu still continues to enjoy 80% of search engine revenue market share of 80% in 2Q17, according to Analysys International. Baidu is committed to limit exposures to its riskier FSG business to current levels of 16% of total assets as at 3Q17, which is expected to contain business and financial risks.

 

 

 

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