US markets ended mixed with August retail sales coming higher while the weekly jobless claims increased slightly – Nasdaq ended 0.1% higher while S&P finished 0.2% lower. Eight out of eleven sectors ended in the red. Materials and Energy down more than 1%, led the losses while Consumer Discretionary up 0.4% contributed to the gains. European stocks finished higher – CAC closed the day 0.6% higher while DAX and FTSE were up 0.2% each. Brazil’s Bovespa added another 1.1% to the week’s losses. In the Middle East, UAE’s ADX and Saudi TASI gained 0.8% and 0.1% respectively. Asian markets have started mixed as investors keenly watch HSI which has already dropped 6% in the week – HSI was down 1.5% in early trade, Shanghai and Singapore’s STI were down 0.1% while Nikkei was up 0.3%. US 10Y Treasury yields added another 4bp reaching 1.34%. US IG and HY CDX spreads tightened 0.04bp and 0.1bp respectively. EU Main CDS spreads were 0.2bp tighter and Crossover CDS spreads tightened 1.7bp. Asia ex-Japan CS spreads tightened 0.2bp. 0.4bp. Asia ex-Japan CDS

US retail sales for August 2021 were up 0.7% MoM, much better than estimates of a decline of ~2%, indicating resilient demand. The gain came despite a sharp 3.6% drop at motor vehicle and parts dealers amid ongoing shortages and supply chain issues. That resulted in a 1.8% rise in retail sales ex-auto. Meanwhile, the latest unemployment insurance weekly data showed a 332k increase in jobless claims last week vs. estimates of 320k.

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New Bond Issues

  • Weifang Urban Construction and Development $ 3Y at 3.3% area
  • Chengdu Aerotropolis City Development $ 300 mn 3Y @ 3.4% area
  • Wuxi Hengting Industrial $ 3Y SBLC-backed bond final 2.05%

New Bond Issues 17 Sep (1)

ICBC raised over $6bn via a PerpNC5 AT1 deal priced on Thursday. Scroll for details of the issuance.

Frasers Property AHL raised S$200mn via a 7Y sustainability bond at a yield of 3%, 25bp inside the initial guidance of 3.25%. The bonds are unrated, and received orders over S$400mn, 2x issue size. Proceeds will be used for financing or refinancing of new or existing qualifying projects under Frasers Property Australia’s sustainable finance framework. Singapore accounted for 95% with others making up 5%. Private banks took 74% of the deal, while asset managers and hedge funds took 24% and corporates took 3%.

Bank Negara Indonesia raised $600mn via a Perp NC5.5 AT1 bond at a yield of 4.3%, 40bp inside the initial guidance of 4.7% area. The bonds have expected ratings of Ba3 (Moody’s), and received orders over $2.95bn, 4.9x issue size. Proceeds will be used to replenish AT1 capital and to optimise the bank’s long-term fund structure as well as for general funding purposes to strengthen the bank’s capital base and loan disbursements. The bond has a first call date on 24 March 2027, and if not called, will reset on 24 March 2027 to the US 5Y Treasury + 346.6bp. The AT1s have a dividend stopper, and will be written down permanently if Indonesia’s Financial Services Authority deems the bank would fail without an injection of public funds or a writedown.

Ayala raised $400mn via a Perp NC5 bond at a yield of 3.9%, 40bp inside the initial guidance of 4.3% area. The unrated bonds received orders over $1.75bn, 4.4x issue size. Proceeds will be used to refinance its existing dollar bonds. The bonds will be issued by wholly owned subsidiary AYC Finance and guaranteed by Ayala. The bond will have non-deferrable coupons and will not have equity accounting treatment.  Asia, excluding the Philippines, took 67%, the Philippines 31% and EMEA 2%. Asset managers and fund managers bought 52%, banks and financial institutions 26% and private banks and corporates 22%.

Pinghu State-owned Assets Holding raised $300mn via a 3Y bond at a yield of 2.2%, 45bp inside the initial guidance of 2.65% area. The bonds have expected ratings of BBB– (Fitch), and received orders over $2.8bn, 9.3x issue size. Pinghu State-owned Assets Holding Group is a state-owned investment, construction and operating entity in Pinghu, in China’s Zhejiang province.

Beijing Environment Sanitation Engineering Group raised $230mn via a 3Y green bond at a yield of 1.65%, 40bp inside the initial guidance of 2.05% area. The bonds have expected ratings of BBB/BBB+ (S&P/Fitch), and received orders over $1.5bn, 6.5x issue size. The bonds will be issued by wholly owned subsidiary Beijing Environment (BVI) International and guaranteed by Beijing Environment Sanitation Engineering Group, which is an environmental services provider under Beijing SASAC.

Zensun raised $160mn via a 1.55Y bond at a yield of 12.5%. The bonds have expected ratings of B3 (Moody’s), and are guaranteed by parent company Zensun Group. Proceeds will be used for offshore debt refinancing. Earlier this month, Zensun raised a total of $200mn of 12.5% 2023s, including $142.42mn under a tender offer for its existing 12.8% 2021s.

Yincheng International raised $110mn via a 364-day bond at a yield of 13.75%, unchanged from final guidance. The bonds have expected ratings of B+ by local credit rating agency Lianhe Global. The new bonds are priced 64bp wider to its existing 11.8% Mar 2022s that yield 13.11%.


New Bonds Pipeline

  • Oxley Holdings hires for S$ tap of 6.9% 2024s bond
  • Maldives’ HDC hires for $ 3Y sustainability bond
  • Clover Aviation Capital hires for $ bond
  • Apicorp hires for $ 5Y green bond
  • Dat Xanh Group hires for $ debut bond


Rating Changes


Term of the Day

Convertible Bonds

As the name suggests, convertible bonds are debt instruments issued by a company where the bonds can be converted into equity shares of the company by the bondholders at a particular ratio and at particular points in time. Thus, it is a hybrid security as it has characteristics of both debt and equity. Convertibles generally carry a lower coupons and sometimes tax advantages for the issuer.

Indiabulls Housing Finance is planning a convertible bond sale in just the fifth deal from an Indian issuer in more than three-and-a-half years as equity markets trade at record highs. The shadow bank seeks to raise $200mn, the third convertible bond from India this year, and just the fifth since November 2017


Talking Heads

On China’s Property Curbs Sending Economic Tremors

Mark Williams, chief Asia economist at London-based research house Capital Economics

“Regulators are trying to deal with the amount of leverage among developers, and there is no pain-free way to do that…If they push too hard, then it can become destabilizing”

Nomura chief China economist Ting Lu 

“Markets should be prepared for what could be a much worse-than-expected growth slowdown, more loan and bond defaults, and potential stock market turmoil”

Shujin Chen, a banking analyst with Jefferies

“We haven’t seen such a high level of bad property loans in more than a decade”

Alicia Garcia-Herrero, chief economist in the Asia Pacific region at Natixis

“The overall credit risk for banks is increasing…worried about mortgage repayments if home prices drop
and the economy keeps slowing”

On investors bracing for the great fall in China – Sid Dahiya, head of EM corporate bonds at abrdn, formerly Aberdeen Standard

“We will have to see what happens…They are probably working on a deal in the background, but we don’t have any clarity and we don’t really have any precedents, so it is uncharted water. It remains to be seen the scale of loss that investors will face.”

On the nightmare Evergrande scenario

Shen Meng, director of Chanson & Co., a Beijing-based boutique investment bank

“As a systemically important developer, an Evergrande bankruptcy would cause problems for the entire property sector. Debt recovery efforts by creditors would lead to fire sales of assets and hit housing prices. Profit margins across the supply chain would be squeezed. It would also lead to panic selling in capital markets”

Yu Yong, a former China Banking and Insurance Regulatory Commission regulator

“The government has to be very, very careful in balancing support for Evergrande. Property is the biggest bubble that everyone has been talking about in China. So if anything happens, this could clearly cause systematic risk to the whole China economy.”

Hao Hong, chief strategist at Bocom International

“If Evergrande had to dump its inventory onto the market it would drag down property prices substantially”

Fraser Howie, an independent analyst and co-author of books on Chinese finance

“Given that the bulk of people’s wealth is already in property, even a 10% correction would be a serious knock to many people…It would certainly knock their hopes and dreams and expectations about what property is.”

On veteran ESG investor snubbing UK Green Debt – William de Vries, director of impact equities and bonds at Triodos

“The U.K. green bond framework is the first one we consider not to be green enough according to our standards… We have a serious problem with these types of projects because we don’t think carbon capture projects will add to carbon reduction in the end…We have had doubts and questions with other green bond frameworks, for instance the Belgium one, but after consulting with them we decided to give them the benefit of the doubt. The U.K.’s allocation to carbon capture solutions makes this not possible.”


Top Gainers & Losers – 17-Sep-21*

BondEvalue Gainer Losers 17 Sep (1)

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