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Thursday,
30th July 2015
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HIGHLIGHTS: Ivory Coast plans debut Sukuk
roadshow – MBSB considering merger with Bank Muamalat – Iran passes terrorism
financing prevention bill
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Monday, August 3, 2015
MALAYSIA: Sukuk forms over 93% of independent power producer bonds in Malaysia; power sector to drive Sukuk growth moving forward
RHB FIC Credit Market Update - 30/7/15
30 July 2015
Credit Market Update
DBS
Printed Covered Bonds in Cautious Market; Strong Bid for Ezion’s SGD120m New
5y; Value in Malakoff Power 2/21
APAC USD CREDIT MARKETS
¨
Cautious
market as credits ended flat; US GDP expected to rebound in 2Q15. Risk sentiments improved as Chinese equity
markets recovered despite initial volatility with the iTraxx AxJ IG relatively
flat at 109.3. Overnight, the UST widened as global stocks markets, commodities
prices stabilized, and the FOMC statement providing little on the timing of the
rate hike.
¨
Most
IG Corporates were unchanged except for notable changes such as long ended
CNOOC 32-39s and NOBLSP 18-20s. We observed that yields of internet companies
like BIDU 18-25s widened 4-5bps following disappointing results while its peers
such as TENCNT 15-25s and BABA 17-34s rose 3-4bps. In the HY space, Chinese HY
real estate names saw strong interests on LNGFOR 19, COGARD 19-23s and GRNLHK
16s.
¨
On
primaries, DBS Bank (Aaa/NR/AAA) priced its new USD1bn 3y Covered Bond
offering at MS+37bp (IPT: MS+40bps), it was mainly up by banks (62%) and fund
managers (19%) with a BTC of 1.37x.
¨
On
economic data, US GDP figures are expected to be released today (consensus:
2.5%; prior -0.2%) followed by the jobs data.
SGD CREDIT MARKETS
¨
Good
response to EZISP DBS-guaranteed note. We saw mild steepening in the short-to-mid curve, with the 3y and
5y closing at 1.77% (-1bp) and 2.21% (-0.75bps) respectively. Names like
OLAMSP, BTHSP and CENCHI trade a couple of bps tighter, while selling was seen
in the O&G space on names such as EZRASP, SWIBSP and VALSZP as Brent oil
prices continued to stay lowly at c.USD54/bbl.
¨
In
the primaries, Ezion Ltd (NR) printed a SGD120m 5y at a final price of
3.65%, around 35bps inside initial guidance, with good BTC at over 8x. The
issuance is backed by DBS via a Committed Funding Backed Note (CFBN). This is
the second bank-guaranteed issuance from the O&G services space this year,
with the previous issuance by Logindo Samadramakmur (LEADIJ 2.93% 2/20) which
had a Standby Letter of Credit (SBLC) from UOB. In lieu of the good response
for this guaranteed-paper, more supply from the weaker O&G space can be
expected.
MALAYSIA CREDIT MARKETS
¨
Handful of
activities in Ringgit corporate bonds, volume surged to MYR1.2bn; Edaran SWM lead the pack for second day in a row.
Ringgit bonds maintained the strong momentum from Tuesday with volume surging
+45% as players looked for opportunities in the secondary market due to the
lack of fresh issuances in July. Edaran SWM complex ended flat with total of
MYR455m transacted. On FI, HLBB 4.8% 24c19 was the top gainer as yield narrowed
25bps to 4.711% with total of MYR100m changing hands, while Malaysia Airports
perps – MAHB Pc24 gain 7 cents to 105.33 to yield 5.029% on MYR100m transacted.
¨ In govvies, MGS8/15 was the most active as yield rose
16bps to 3.263%, with total
transaction of MYR2.687bn, or more than half yesterday’s volume of MYR5.007bn.
MGS 3/17 move in the opposite direction, having seen yield fell 4bps to 2.999%
in the mixed and counterintuitive movement. Benchmark curve closed mixed, with
3y ended at 3.15% (-1bp), 5y at 3.51% (+5bps), 7y at 3.84% (-2bps) and 10y at
3.98% (+1bp).
¨ West Coast Expressways (WCE) to meet investors on
Monday, 3 August. In view of the
upcoming MYR1bn Sukuk Murabahah issuance, WCE is arranging meetings with
investors, together with Danajamin and Bank Pembangunan as the financial
support providers.
¨
TRADE IDEA: MYR
Bond(s)
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Malakoff Power (“MPower”)
MPower 12/21 (MARC: AA-) (Last trade: 22-Jun; Price: 102.55;
Yield: 4.788%; 10y-MGS+ c. 81bps (Amount O/S: MYR500m)
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Comparable(s)
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YTL Power International (“YTL Power”)
YTL Power 10/21 (RAM: AA1) (Last trade: 2-Jul; Price: 101.64;
Yield: 4.481%; 10y-MGS+ c. 51bps (Amount O/S: MYR300m)
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Relative Value
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We see
value in MPower 12/21 as it offers pick-up of 30bps over YTL
Power 10/21. We opine that yields of MPower will
tighten once Tanjung Bin Energy’s 1000MW power plant able to achieve actual
commercial operations date (COD) eliminating construction risk.
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Fundamentals
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TBEI’s
credit profile is supported by the following:
1)
Diversified portfolio of 5 independent
power producers (IPP). MPower is the operator of 4 IPP in Segari,
GB3, Prai Power, Tanjung bin Power and TBEI.
These IPPs have a combined generating capacity of more than 4800MW.
2)
Stable cash and recurring cash generating
capacity. These IPPs have predictable
stream of cashflows as they are backed by long term PPA agreements with TNB,
the sole counterparty risks.
TBEI’s
credit positives are mitigated by:
1)
Construction risks. TBEI’s
construction is still in progress; therefore it remains vulnerable to further
delays in construction or cost overruns. Construction delay of the plant is
still behind schedule and it may still miss it’s August 2016 COD deadline.
Further delays and costs will definitely affect projected cash flows.
2)
High gearing profile. MPower’s
consolidated gearing ratio remains high at 4.37x (end-Mar15) however, with
the listing of MPower earlier in the year, its consolidated gearing is
expected to decrease to 3.9x with the proceeds from the IPO being used to
redeem its junior bonds.
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RHB FIC Rates & FX Market Update - 30/7/15
30 July 2015
Rates & FX Market Update
US Rate Hike Remains Data Dependent
Without Confirmation of a Rate Hike in September; BoK to Discuss Alternative to
Rigid CPI Target
Highlights
¨
¨ The
FOMC statement released overnight continued to indicate that a FFR hike
remains data-dependent but did not provide any signs of a firm rate hike in
September. The committee’s assessment of the US economy remains optimistic
where they steered attention to the diminishing underutilization of resources
and added their preference to see “some further improvements” in labour data.
Fed further removed reference to energy prices despite the recent weakness,
suggesting that US’ inflation trend remains well within their purview for now.
The initial selling of the USD earlier in the session saw investors adding USD
exposure opportunistically given that a rate hike remains on the cards; stay
long USD/Asia. We look ahead to US 2Q15 GDP due later today, with Bloomberg
estimates signaling 2.5% q-o-q ann. versus -0.2% prior. Meanwhile, JPY weakened
despite the strong rebound in Japan’s June IP which added on to optimism from
the expansionary manufacturing PMI released earlier; maintain mildly bearish
view on JPY. In UK, mortgage approvals rebounded to 66.6k in June (May:
64.8k) following the better 2Q15 GDP print; maintain our tactical long
GBPUSD call on hawkish BoE expectations and improving fundamentals.
¨ Over
in S.Korea, BoK minutes revealed discussions of a possible alternative gauge
to the rigid triennial CPI target which could be a positive development.
That aside, the likelihood for another 25bps BoK rate cut fuelled by
concerns of the slowing exports and domestic consumption remains relevant,
supporting further KRW weakness. Elsewhere, Thai Finance Minister commented on
the low efficacy of further BoT rate cuts, emphasizing their dependence and
priority on public investment spending to underscore growth in 4Q15; THB to
weaken.
¨ EUR
fell below 1.10/USD amid strong two-way activity. The close below its 100day MA
(1.1017) opens up further downside EUR pressure. Our longer term EUR outlook
remains bearish on the divergent policy outlook. Over a shorter horizon, we
expect an upbeat US GDP print to drive further FFR hike speculations for
September, strengthening the USD.
CIMB Daily Fixed Income Commentary - 03 Aug 2015
Market Roundup
- US Treasury yields fell substantially by 3-9bps across the curve, guided by the lower-than-expected gain in employment cost index, which recorded +0.2% in second quarter of the year, against +0.6% projected earlier. On top of that, the crude oil slump also weighed on the UST yields, as the Brent crude oil fell by about 18% during the month of July.
- Ringgit govvies was under heavy selling pressure heading toward weekend, driven by the higher USD/MYR, which surpassed 3.8300 late Friday. Meantime, trading volume was heavy and amounted to RM5.3 billion.
- Thai govvies ended pretty much unchanged on Friday, after market reopened post Asarnha Bucha Day holiday a day prior. Highlight was on LB196A and LB206A, which contributed combined volume totalling Bt8.5 billion throughout the day.
- Indonesia government bond closed mixed on Friday amid weakening IDR and short supply in the market. We expect price to continue to be under pressure ahead of Tuesday auction. Elsewhere, trading volume was flat amounting IDR9 trillion.
- Asian dollar credits suffered losses, amid lacklustre buying interest by end of the month. Aside, Malaysia CDS widened by about 6bps to 149bps alongside the weakening MYR on Friday.
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