OCBC TREASURY RESEARCH - Asian Credit Daily Tuesday, May 17, 2022
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OCBC TREASURY RESEARCH Asian Credit Daily Tuesday, May 17, 2022 Market Commentary ▪ The SGD SORA curve traded higher on Friday, with shorter tenors trading 2-4bps higher, belly tenors trading 5-6bps higher, and longer tenors trading 7-8bps higher. ▪ There were heavy flows in SGD corporates on Friday, with flows in CS 5.625%-PERPs, SINTEC 4.2%-PERPs and MAPLSP 3.7%-PERPs. ▪ UST 10Y yields traded 4bps lower to 2.88% yesterday, as inflation concerns continued to weigh on investors. Former Federal Reserve Chair Ben Bernanke expressed his views that in retrospect the Federal Reserve had made a “mistake” in its slow response to surging inflation, resulting in the stagflation risks now. Separately, the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York came in lower-than- expected at -11.6 for May, compared to Bloomberg median estimates of 15.0 and the prior month’s 24.6. Credit Summary: ▪ StarHub Ltd (“StarHub”) | Issuer Profile: Neutral (3): StarHub announced that it will not be exercising the call of STHSP 3.95% PERP on the first call date. We think this implies that StarHub sees perpetuals as a permanent part of the capital structure and may refinance the existing perp only when new perpetuals can be priced at a rate around or lower than the existing perp. We see that other perpetuals with mismatched first call and reset date may face similar first call risk. We continue holding StarHub at a Neutral (3) Issuer Profile.
OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
StarHub Ltd (“StarHub”) | Issuer Profile: Neutral (3):
▪ StarHub announced that it will not be exercising the call of STHSP 3.95% PERP on the first call date.
This is due to three considerations:
o Diversification of sources of funding and prudent management of capital structure.
o New perpetuals cannot be issued at a lower yield than 3.95%.
o StarHub retains the option to redeem the perp on subsequent call dates.
▪ We think this implies that StarHub sees perpetuals as a permanent part of the capital structure and
may refinance the existing perp only when new perpetuals can be priced at a rate around or lower
than the existing perp. As such, unless there is a change in the current environment (where rates
have risen and are rising), the chance is low for StarHub to redeem its existing perp before the reset
date in 2027.
▪ We note that this decision is made despite StarHub having SGD821.5mn in unrestricted bank
balances as of Dec-2021 which exceeds the current borrowings and lease liabilities of SGD255.4mn,
size of the outstanding perpetual (SGD200mn) and planned capex (~SGD300mn).
▪ We continue holding StarHub at a Neutral (3) Issuer Profile.
▪ Potentially, other perpetuals with mismatched first call and reset date may face similar first call risk.
(Company, OCBC)
Page 2OCBC TREASURY RESEARCH
Asian Credit Daily
Key Market Movements
1W chg 1M chg
17-May 17-May 1W chg 1M chg
(bps) (bps)
iTraxx Asiax IG 130 -2 19 Brent Crude Spot ($/bbl) 114.23 11.49% 2.26%
iTraxx SovX APAC 37 0 9 Gold Spot ($/oz) 1,826.02 -0.67% -7.73%
iTraxx Japan 74 -1 15 CRB 315.59 5.39% 1.17%
iTraxx Australia 105 -3 19 GSCI 776.40 7.35% 1.50%
CDX NA IG 86 -1 12 VIX 27.47 -20.95% 21.01%
CDX NA HY 100 0 -4 CT10 (%) 2.899% -9.23 7.10
iTraxx Eur Main 93 -3 15
iTraxx Eur XO 449 -16 76 AUD/USD 0.700 0.85% -4.79%
iTraxx Eur Snr Fin 103 -3 16 EUR/USD 1.044 -0.85% -3.17%
iTraxx Eur Sub Fin 198 -8 31 USD/SGD 1.390 0.09% -1.99%
iTraxx Sovx WE 6 0 2 AUD/SGD 0.972 -0.74% 2.93%
USD Swap Spread 10Y 7 1 3 ASX 200 7,104 0.74% -5.58%
USD Swap Spread 30Y -25 1 -3 DJIA 32,223 -0.07% -6.47%
US Libor-OIS Spread 12 -3 -4 SPX 4,008 0.42% -8.76%
Euro Libor-OIS Spread 9 1 5 MSCI Asiax 642 -0.03% -8.79%
HSI 20,321 3.50% -5.56%
China 5Y CDS 82 -3 14 STI 3,208 -2.05% -3.83%
Malaysia 5Y CDS 100 -2 21 KLCI 1,550 0.03% -2.48%
Indonesia 5Y CDS 130 -2 29 JCI 6,688 -3.21% -7.57%
Thailand 5Y CDS 51 -1 7 EU Stoxx 50 3,685 4.49% -4.24%
Australia 5Y CDS 26 0 8 Source: Bloomberg
Page 3OCBC TREASURY RESEARCH
Asian Credit Daily
New Issues
▪ There were no new issuances yesterday.
Temporary Suspension
▪ Do note that our official coverage on City Developments Limited is temporarily suspended due to
OCBC’s other business.
Page 4OCBC 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 5
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