OCBC TREASURY RESEARCH - Asian Credit Daily Thursday, June 9, 2022
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
OCBC TREASURY RESEARCH Asian Credit Daily Thursday, June 9, 2022 Market Commentary ▪ The SGD SORA curve traded mostly higher yesterday, with shorter tenors trading 1-5bps higher, belly tenors trading 1bps higher and longer tenors traded 0-3bps higher. ▪ There were heavy flows in SGD corporates yesterday, with flows in OCBCSP 3.9%-PERPs, CS 5.625%-PERPs and CMZB 4.2%’28s. ▪ UST 10Y yields traded 5bps higher to 3.02% yesterday amidst a soft auction. The rise in yields was fueled by a continued increase in oil prices with inventory data highlighting the supply crunch, and in anticipation of May’s consumer price index release on Friday. Additionally, MBA mortgage applications fell to their lowest level in more than two decades at -6.5%, amidst rising interest rates. Separately, US Treasury Secretary Janet Yellen commented yesterday that while the Biden administration is looking to “reconfigure” tariffs on Chinese imports, these are not likely to be a “panacea” to easing high inflation. Credit Summary: ▪ Credit Suisse Group AG (“CS”) | Issuer Profile: Neutral (4): CS provided a trading update yesterday foreshadowing a loss for its 2Q2022 results driven by weaker performance at its Investment Bank, lower levels of capital markets issuance and wider credit spreads. We remain mindful of the challenging operating environment and elevated risk aversion at both the CS’ management and client levels with revenues to remain under pressure as upward cost pressures continue and further impacts to CS capital position may cause us to review the Neutral (4) issuer profile. ▪ Frasers Property Ltd (“FPL”) | Issuer Profile: Neutral (5) and Frasers Hospitality Trust (“FHT”) | Issuer Profile: Neutral (5): FPL and FHT have requested for a trading halt, though with no reason provided yet. We will not rule out a merger or corporate reorganization of FHT. ▪ StarHub Ltd (“StarHub”) | Issuer Profile: Neutral (3): StarHub announced the pricing of its English Premier League (“EPL”) offering at SGD24.99/mth for those with other StarHub plans (e.g. mobile, broadband or TV) that cost at least SGD15/mth and SGD39.99/mth for those without, with no lock-in period. Such prices are lower than that offered by Singapore Telecommunications Ltd (Singtel) and we think this implies that StarHub may gain subscribers relative to SingTel, with the potential to cross-sell to any StarHub subscriber. We continue to hold StarHub’s Issuer Profile at Neutral (3) for now.
OCBC TREASURY RESEARCH Asian Credit Daily Credit Suisse Group AG (“CS”) | Issuer Profile: Neutral (4): ▪ CS provided a trading update yesterday foreshadowing a loss for its 2Q2022 results driven by weaker performance at its Investment Bank. CS cited weaker customer flows and ongoing client deleveraging, particularly in APAC, as well as lower levels of capital markets issuance and wider credit spreads. Current market volatility and conditions also had a negative impact on CS’s 8.6% investment in wealthtech and fund distributor Allfunds Group while the bank’s advisory revenues were resilient. This would be CS’s third straight quarterly loss and sixth profit warning in the past seventh quarters. ▪ The trading update put pressure on CS’ shares which fell almost 8% however subsequent to the announcement was news from Swiss finance blog Inside Paradeplatz that US asset manager State Street Corp (“State Street”) may be looking to acquire CS imminently. State Street issued a non- definitive response that they would not be responding to the report and that their focus is on their current acquisition of investment bank Brown Brothers Harriman & Co's investor services business for USD3.5bn. Nevertheless, the news resulted in a retracement in CS’ share price which closed up ~4% for the day while State Street’s shares ended down ~5% in the US according to Bloomberg. The general market view is that such a combination does not immediately make sense from a strategic (business fit) or a financial (lingering concerns on litigation at CS) perspective. There may also be regulatory barriers given CS’ systemic importance. ▪ CS has indicated that it will provide further details on its current transitioning activities (reallocating risk from the Investment Bank to Wealth Management, CHF1-1.5bn in structural cost savings by 2024) at an Investor Deep Dive on 28 June 2022. For now, the bank appears focused on cost initiatives and operating at a CET1 ratio of around 13.5% in the near-term with a 2024 objective of reaching a CET1 ratio of more than 14% (before the planned Basel III reforms). Its CET1 ratio was 13.8% as at 31 March 2022 against 14.4% as at 31 December 2021. The ratio still remains above the Basel III minimum CET1 ratio of 8.0% and higher obligations for systematically important banks under Swiss legislation of 10.0%. Per management, there is CHF18.6bn and CHF24.1bn in buffers above conversion and write-down triggers respectively under its capital instruments. ▪ Market conditions are somewhat challenging against the backdrop of the Russia-Ukraine conflict, tighter financing conditions amidst inflation and rising interest rates, and lingering impacts from the pandemic. That said, CS’ troubles appear to be a mix of external and internal factors with its ongoing restructuring and corporate reorganisation and the planned and unplanned staff departures from losses tied to Archegos Capital Management and Greensill Capital Supply Chain Funds impacting client and investor confidence and CS’ existing business franchises. ▪ With regards to the ongoing process of recovering outstandings under the Greensill Capital Supply Chain Funds, CS is now allowed to pursue the winding up of three firms tied to Sanjeev Gupta’s GFG Alliance that owes CS around USD215mn. The recovery shortfall for the Greensill Capital Supply Chain funds as at 31 March 2022 was USD2.18bn with USD2.0bn in insurance claims currently underway however the timeframe to resolve these issues could be as long as five years. Management have flagged the potential for further provisions to be booked although these should be lower than those recognized in 1Q2022. (Continued on the next page) Page 2
OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Suisse Group AG (“CS”) | Issuer Profile: Neutral (4):
▪ We remain mindful of the challenging operating environment and elevated risk aversion at both the
CS’ management and client levels with revenues to remain under pressure as upward cost pressures
continue. While this could constrain earnings, we will continue to monitor how the transitioning
initiatives that CS is undertaking in 2022 under a new management team and new Chairman will
improve the stability of fundamentals in the midst of heightened market volatility and uncertainty.
Further impacts to CS capital position may cause us to review the Neutral (4) issuer profile.
(Company, Bloomberg, OCBC)
Frasers Property Ltd (“FPL”) | Issuer Profile: Neutral (5) and Frasers Hospitality Trust (“FHT”) | Issuer
Profile: Neutral (5):
▪ FPL and FHT have requested for a trading halt. No reason for the halt has been provided yet.
▪ We note that on 8 Apr 2022, FHT disclosed that it has received media queries concerning a strategic
option. While no written proposals were received then, FHT’s managers have been exploring such
strategic options.
▪ According to an article on Bloomberg, the TCC Group is seeking a SGD500mn loan to take FHT
private.
▪ As such, we will not rule out an acquisition or corporate reorganization of FHT. (Company, OCBC)
StarHub Ltd (“StarHub”) | Issuer Profile: Neutral (3):
▪ StarHub announced the pricing of its English Premier League (“EPL”) offering. This costs
SGD24.99/mth for those with other StarHub plans (e.g. mobile, broadband or TV) that cost at least
SGD15/mth and SGD39.99/mth for those without, with no lock-in period.
▪ Such prices are lower than that offered by Singapore Telecommunications Ltd to its subscribers at
SGD64.90/mth on TV and SGD49.90 via its video-streaming service Cast.
▪ According to StarHub, the Premier League games are the most watched live sports programme in
Singapore.
▪ While the amount paid for EPL is undisclosed, StarHub’s consumer business group chief Johan Buse
hopes that this will allow StarHub to add more users to the current base of 450,000 subscribers and
that ‘this is a very profitable business case’.
▪ We think this implies that StarHub may gain subscribers relative to SingTel, with the potential to
cross-sell to any StarHub subscriber.
▪ We continue to hold StarHub’s Issuer Profile at Neutral (3) for now. (Company, Business Times,
Straits Times OCBC)
Page 3OCBC TREASURY RESEARCH
Asian Credit Daily
Key Market Movements
1W chg 1M chg
9-Jun 9-Jun 1W chg 1M chg
(bps) (bps)
iTraxx Asiax IG 108 -2 -24 Brent Crude Spot ($/bbl) 124.27 5.66% 17.30%
iTraxx SovX APAC 30 -1 -7 Gold Spot ($/oz) 1,852.96 -0.84% -0.07%
iTraxx Japan 68 1 -8 CRB 329.13 2.85% 9.91%
iTraxx Australia 93 -4 -11 GSCI 818.63 3.17% 11.57%
CDX NA IG 84 4 -5 VIX 23.96 -6.73% -31.05%
CDX NA HY 101 -1 1 CT10 (%) 3.038% 13.05 0.43
iTraxx Eur Main 90 2 -7
iTraxx Eur XO 453 8 -16 AUD/USD 0.718 -1.20% 3.25%
iTraxx Eur Snr Fin 99 1 -9 EUR/USD 1.071 -0.31% 1.45%
iTraxx Eur Sub Fin 191 1 -18 USD/SGD 1.377 -0.44% 1.02%
iTraxx Sovx WE 5 0 -1 AUD/SGD 0.988 0.74% -2.18%
USD Swap Spread 10Y 8 0 2 ASX 200 7,027 -2.08% -1.32%
USD Swap Spread 30Y -22 -1 5 DJIA 32,911 0.30% 2.06%
US Libor-OIS Spread 10 -3 -8 SPX 4,116 0.35% 3.12%
Euro Libor-OIS Spread 19 3 10 MSCI Asiax 692 2.04% 6.85%
HSI 22,015 3.38% 10.06%
China 5Y CDS 69 -1 -18 STI 3,220 -0.22% -1.70%
Malaysia 5Y CDS 79 -1 -21 KLCI 1,526 -1.79% -1.53%
Indonesia 5Y CDS 104 -1 -27 JCI 7,193 0.62% 4.10%
Thailand 5Y CDS 48 -1 -4 EU Stoxx 50 3,789 0.78% 7.43%
Australia 5Y CDS 23 -2 -2 Source: Bloomberg
Page 4OCBC TREASURY RESEARCH
Asian Credit Daily
New Issues
▪ ASB Bank Ltd priced a USD600mn 10NC5 subordinated tier 2 bond at T+225bps, tightening from an
IPT of T+250bps.
▪ Kyobo Life Insurance Co Ltd priced a USD500mn 30NC5 subordinated sustainability bond at 5.9%,
tightening from an IPT of 6.3% area.
▪ Oversea-Chinese Banking Corp Ltd priced a USD750mn 10NC5 subordinated tier 2 bond at
T+157.5bps, tightening from an IPT of T+200bps area.
▪ NWD MTN Ltd (Guarantor: New World Development Company Limited) priced a USD200mn 5-year
senior unsecured social bond at T+290bps, tightening from an IPT of T+325bps.
▪ NWD Finance BVI Ltd (Guarantor: New World Development Company Limited) priced a USD500mn
PerpNC3 guaranteed senior green bond at 6.15%, tightening from an IPT of 6.5% area.
▪ Guohui International Bvi Co Ltd (Guarantor: Shandong Guohui Investment Holding Group Co., Ltd)
priced a USD500mn 3-year senior unsecured bond at 4.7%, tightening from an IPT of 5.05% area.
▪ Xinjiang Transportation Construction Investment Holding Co Ltd priced a USD70mn 3-year senior
unsecured bond at 5.8%, tightening from an IPT of 6.2% area.
▪ Qingdao Jiaozhou Bay Development Group Co Ltd priced a USD300mn 3-year senior unsecured bond
at 4.9%, tightening from an IPT of 5.3% area.
▪ Bangkok Bank PCL/Hong Kong priced a USD750mn 5-year senior unsecured bond at T+130bps,
tightening from an IPT of T+175bps area.
▪ Lianyungang Port Group Co. has arranged investor calls commencing 8 June for its proposed USD
green bonds offering.
▪ Shandong Hi-Speed Group Co. has arranged investor calls commencing 8 June for its proposed USD
green bonds offering.
Page 5OCBC TREASURY RESEARCH
Asian Credit Daily
Date Issuer Size Tenor Pricing
8-Jun-22 ASB Bank Ltd USD600mn 10NC5 T+225bps
8-Jun-22 Kyobo Life Insurance Co Ltd USD500mn 30NC5 5.9%
8-Jun-22 Oversea-Chinese Banking Corp Ltd USD750mn 10NC5 T+157.5bps
NWD MTN Ltd
8-Jun-22 USD200mn 5-year T+290bps
(Guarantor: New World Development Company Limited)
NWD Finance BVI Ltd
8-Jun-22 USD500mn PerpNC3 6.15%
(Guarantor: New World Development Company Limited)
Guohui International Bvi Co Ltd
8-Jun-22 (Guarantor: Shandong Guohui Investment Holding Group USD500mn 3-year 4.7%
Co., Ltd)
Xinjiang Transportation Construction Investment Holding
8-Jun-22 USD70mn 3-year 5.8%
Co Ltd
8-Jun-22 Qingdao Jiaozhou Bay Development Group Co Ltd USD300mn 3-year 4.9%
8-Jun-22 Bangkok Bank PCL/Hong Kong USD750mn 5-year T+130bps
Source: OCBC, Bloomberg
Temporary Suspension
▪ Do note that our official coverage on City Developments Limited and China Construction Bank
Corporation are temporarily suspended due to OCBC’s other business.
Page 6OCBC TREASURY RESEARCH Asian Credit Daily This publication is solely for information purposes only and may not be published, circulated, reproduced, or distributed in whole or in part to any other person without our prior written consent. This publication should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities/instruments mentioned herein. Any forecast on the economy, stock market, bond market and economic trends of the markets provided is not necessarily indicative of the future or likely performance of the securities/instruments. Whilst the information contained herein has been compiled from sources believed to be reliable and we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee and we make no representation as to its accuracy or completeness, and you should not act on it without first independently verifying its contents. The securities/instruments mentioned in this publication may not be suitable for investment by all investors. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. This publication may cover a wide range of topics and is not intended to be a comprehensive study or to provide any recommendation or advice on personal investing or financial planning. Accordingly, they should not be relied on or treated as a substitute for specific advice concerning individual situations. Please seek advice from a financial adviser regarding the suitability of any investment product taking into account your specific investment objectives, financial situation, or particular needs before you make a commitment to purchase the investment product. OCBC and/or its related and affiliated corporations may at any time make markets in the securities/instruments mentioned in this publication and together with their respective directors and officers, may have or take positions in the securities/instruments mentioned in this publication and may be engaged in purchasing or selling the same for themselves or their clients, and may also perform or seek to perform broking and other investment or securities-related services for the corporations whose securities are mentioned in this publication as well as other parties generally. There may be conflicts of interest between Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), Bank of Singapore Limited, OCBC Investment Research Private Limited, OCBC Securities Private Limited or other members of the OCBC Group and any of the persons or entities mentioned in this report of which OCBC Bank and its analyst(s) are not aware due to OCBC Bank’s Chinese Wall arrangement. This report is intended for your sole use and information. By accepting this report, you agree that you shall not share, communicate, distribute, deliver a copy of or otherwise disclose in any way all or any part of this report or any information contained herein (such report, part thereof and information, “Relevant Materials”) to any person or entity (including, without limitation, any overseas office, affiliate, parent entity, subsidiary entity or related entity) (any such person or entity, a “Relevant Entity”) in breach of any law, rule, regulation, guidance or similar. In particular, you agree not to share, communicate, distribute, deliver or otherwise disclose any Relevant Materials to any Relevant Entity that is subject to the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID”) and the EU’s Markets in Financial Instruments Regulation (600/2014) (“MiFIR”) (together referred to as “MiFID II”), or any part thereof, as implemented in any jurisdiction. No member of the OCBC Group shall be liable or responsible for the compliance by you or any Relevant Entity with any law, rule, regulation, guidance or similar (including, without limitation, MiFID II, as implemented in any jurisdiction). Co.Reg.no.:193200032W Page 7
You can also read
