FW: Credit Market Watch: Summary for week ending 19-Jan

 

 

Credit Market Watch: Summary for week ending 19-Jan

·         MYR Credit:

Ø  MGS yields along the 5y15y retraced upwards by 7-11bps WoW due to some profit taking by local investors ahead of the MPC meet this Thursday (25 Jan). Corporate bond trading activity picked up with volume totalling MYR2.8b (MYR2b previous week), though yields remained largely unchanged WoW. Notably, Southern Power Generation bonds were well sought after.

Ø  MRCB Southern Link: Its BB3 rating was placed on negative rating watch by RAM due to the abolishment of toll collection at the Eastern Dispersal Link, which will be taken over by the government. Near term senior sukuk obligations are expected to be satisfied by MYR17.5m cash balance and FSRA BG, but if ongoing settlement negotiations extend beyond Jun 2018, liquidity and default risks will intensify resulting in downgrades.

Ø  Plantation: The EU Parliament decided to ban the use of palm biodiesel from 1 Jan 2021 onwards. This is expected to reduce some 3.3m MT palm biodiesel demand over the next 3 years, or roughly 5% of global palm oil consumption in 2016. Negative for the sector over the medium term but recent slowdown in new plantings and replanting needs of older estates may help buffer the impact. Additionally, the industry has 3 years to seek alternative markets.

Ø  Relative value: BEWG 2020-2023 dealt 28-48bps above our fitted AA2/AA line seem to offer value compared to Bright Focus, which carries a negative outlook and its 2030 last traded at 5.14% or 19bps wider than the line. AA3-rated SPG (51%-TNB owned) may have more room to tighten, being 14-16bps above similarly rated JEP (70%-TNB owned).

·         Asian Credit:

Ø  UST curve bear steepened along the 2y10y with yields increasing 7-11bps WoW as the selling continued amid signs of pickup in global growth. The 2y UST yield was up 7bps to 2.06% while the 10y UST yield rose 11bps to 2.66%, the highest since 2014. The US government entered into a partial shutdown over the weekend and negotiations for a stopgap funding measure remains in a stalemate as we write. The Senate will meet again on Monday morning (US time), dragging the shutdown for a 3rd day.

Ø  In Asian credit spreads, JACI composite and JACI IG tightened -3bps each while JACI HY tightened -6bps. Sovereigns all widened with INDON, PHILIP and KOREA up 2-8bps WoW, while CHINA and MALAYS curves rose 5-11bps WoW.

Ø  Rating change: 1) Parkson Retail Group Ltd’s rating was raised to B- from CCC by Fitch with a stable outlook after the company secured refinancing arrangements for USD500m bonds maturing in May 2018; 2) Fosun International Ltd rating was upgraded to Ba2/stable from Ba3/positive by Moody’s, citing improved business profile with more stable and asset-light businesses which will reduce volatility of future performance; 3) Sunac China Holdings Ltd outlook changed to stable from negative by Moody’s after the company deleveraged through equity issuances and strong sales growth.

·         CDS: EM Asia 5y CDS spreads generally wider by 2-3bps WoW except for Thailand which stayed firm WoW.

 

 

 

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