BPA Malaysia weekly bond market report 25 December 2016

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ta04866Following the Fed’s rate hike last week, yields of local sovereign bonds edge higher at the start of the week. However, the upward trend reversed towards mid-week as some buying interest were seen especially at the belly of the MGS curve amid thin liquidity.

The MGS curve shed two points to 11 basis points (bps) in the 3-year to 10-year region. As a result, the Thomson Reuters BPAM All Bond Index registered a gain of 0.187 per cent to close at 148.960 from 148.682 last week.

On December 21, 2016, the Department of Statistics Malaysia reported that Consumer Price Index (CPI) in November rose 1.8 per cent year-on-year, higher than market consensus at 1.6 per cent.

Inflation rate picked up in November partly due to F&B segment which showed a gain of 3.8 per cent y-o-y in November from 2.5 per cent y-o-y in October. This was a result of subsidy rationalisation for cooking oil in November.

On Thursday, Bank Negara Malaysia reported that the international reserves stood at US$96.4 billion (equivalent to RM399.7 billion) as at 15 December 2016.

The reserves position is sufficient to finance 8.3 months of retained imports and is 1.2 times the short-term external debt.

 

Top 10 most active bonds:

The total trade volume for the top 10 most actively traded bonds further decline to RM4.2 billion compared to RM5.4 billion last week. The 10-year benchmark MGS, maturing on November 30, 2026, topped the list for the week with RM782 million changed hands.

 

 

New Issuances:

On December 19, 2016, Sunway Bhd issued a 3.4-year Medium Term Notes (MTN) with a coupon rate of 4.750 per cent. The RM180 million tranche is rated AA- with a stable outlook by MARC.

Sunway Treasury Sukuk Sdn Berhad issued a 5.5-year Islamic Medium Term Notes (IMTN) with a profit rate of 4.900 per cent. The RM100 million tranche is rated AA-IS (CG) with a stable outlook by MARC.

On 21 December 2016, Putrajaya Holdings Sdn Bhd issued a five-year IMTN with an issuance size of RM200 million. The IMTN carries a profit rate of 4.360 per cent and is rated AAA IS with a stable outlook by MARC.

On 22 December 2016, Kinabalu Capital Sdn Bhd, a special purpose company incorporated for the purpose of raising financing on behalf of MRCB-Quill REIT, issued a 7-year MTN amounting to RM20 million with coupon rate of 4.300 per cent. The MTN is rated AAA with a stable outlook by MARC.

On 23 December 2016, Samalaju Industrial Port Sdn Bhd issued 4 tranches of IMTN with tenures ranging from 17 to 20 years. The total issuance amount is RM250 million with profit rates of 15.000 per cent to 25.500 per cent.

The said profit rates commence from the 15th year onwards while no profit payments will be paid from issuance date until the 14th year. The IMTNs are rated AA1(S) with a stable outlook by RAM Ratings.

 

Rating Actions:

On December 16, 2016, RAM Ratings placed Mudajaya Corporation Bhd’s (Mudajaya Corp) A2/P2 ratings on Rating Watch with a negative outlook.

The Rating Watch reflects RAM Rating’s concern over lingering uncertainties on the upcoming RM240 million repayment which is due on January 23, 2017 as well as the weak YTD September 2016 performance by Mudajaya Corp’s parent, Mudajaya Group Bhd.

On the same day, RAM Ratings reaffirmed the AA2 ratings of Projek Smart Holdings Sdn Bhd’s IMTN Facility of up to RM330 million in nominal value (2015/2032). Concurrently, the rating outlook was revised to negative from stable owing to traffic underperformance of the Stormwater Management and Road Tunnel Project.

On 19 December 2016, RAM Ratings placed both Hong Leong Bank Berhad’s (HLBB) and Hong Leong Islamic Bank Berhad’s (HLIBB) AA1/P1 financial institution ratings and the ratings of its outstanding debt instruments on a positive outlook.

The revision of the outlook on HLBB’s rating is premised on HLBB’s sustained track record of excellent asset quality throughout credit cycles, sturdy funding and liquidity profile, and strengthened capitalisation, as well as its strong domestic retail and SME business banking franchises.

Meanwhile, the outlook revision for HLIBB was due to a positive rating outlook on its parent, HLBB. As the Islamic banking arm, the ratings of HLIBB incorporates RAM Rating’s anticipation of ready parental support as well as close integration of operation with those of its parent.

On December 20, 2016, RAM Ratings upgraded the long-term ratings of ORIX Leasing Malaysia Berhad’s CP/MTN Programme of up to RM500 million and MTN Programme of up to RM500 million, from AA3/Positive to AA2/Stable.

The upgrade is premised on better-than-expected improvement of asset quality and leverage levels as well as lower exposure to real estate of its Japan-based holding company, Orix Corporation. ORIX Leasing is wholly-owned by ORIX Corporation.

RAM Ratings downgraded the rating of Al Bayan Holding Company RM1.0 billion Sukuk Wakalah issued via special-purpose vehicle, ABHC Sukuk Berhad, to D from C1(s). The rating downgrade reflects the failure of Al Bayan to redeem RM100 million outstanding sukuk on the maturity date of December 16, 2016.