Primary issue dealflow was firm over the week, as Temasek Holdings re-entered the EUR markets after almost 4 years hiatus

New Issue Weekly Monitor

For the week beginning 11th Nov 2019
Asia ex-Japan G3

Summary

Asia G3 Year-to-date issuance: USD 315.223bn

Key Market Data (as at 12pm, 15 Nov 2019)
CT10 @ 1.839% (-7.1bps Week-on-Week)
S&P 500 @ 3096.63 (+0.37% Week-on-Week)
HSI @ 26,408.86 (-4.75% Week-on-Week)
JACI Index @ 241.48 (+0.08% Week-on-Week)

For the week beginning 11th Nov 2019, USD 5.43bn of bonds was issued from 15 deals.

Breakdown: USD 4.15bn of Investment Grade, USD 1.28bn of High Yield bonds.

** As of this Friday morning, Chinese LGFVs Danyang Investment Group and Zhenjiang Cultural Tourism Industry Group are out with 3yr offerings at IPG 7.0-7.5% levels. **

Commentary:
Markets seesawed from optimism to pessimism as President Trump’s latest pronouncements on ‘phase 1’ trade war resolution and a lack of concrete timelines sowed doubt over its successful conclusion. Escalating violence in Hong Kong also cast a pall on sentiment, despite new records set for ‘Singles’ Day’ shopping sales in China.  

Primary issue dealflow was firm over the week, with higher representation ex-China at 56.2% of total deal volume. Government of Singapore-owned Temasek Holdings re-entered the EUR markets after almost 4 years away with a dual-tranche benchmark-sized issues of 12 and 30-year bonds priced at MS+40bps and MS+80bps respectively. Interestingly, the Aaa 12yr issue priced flat (on a spread basis) to the Peoples’ Republic of China sovereign bond (rated A1) of the same tenor issued last week. 

Doosan Infracore, which manufactures construction machinery, printed a 3yr deal guaranteed by policy bank Korea Development Bank (KDB). The deal enjoyed ratings on par with KDB and the South Korean sovereign (Aa2) and priced at T + 60bps, 25bps below IPG. Compatriot and national rail operator Korea Railroad Corporation (Korail) also accessed the dollar markets with a 150mn 5yr FRN priced at 3mL+70bps.

Hong Kong lender Nanyang Commercial Bank came to market with a 10nc5 Tier 2 bond, rated 3 notches below issuer ratings at Baa3. The 700mn bond priced at T+218bps, or 67bps below IPG. Nanyang was acquired by China Cinda Asset Management in 2015 from Bank of China (HK) for HK$68bn.

India’s Tata Motors issued a 300mn 5.5yr senior bond at 5.875%, its first in 2 years after 2017’s 10yr issuance under the Jaguar Land Rover billing. Conglomerate Adani Group’s power transmission business, Adani Transmission, printed a senior secured sinkable bond with coupon 4.25% and priced at par. The bonds were rated BBB-, with full tenor 16.5yrs and an average life to par of ~9.5yrs.

LGFV Qingdao West Coast Development, via subsidiary Xi Hai An 2019, issued a debut 3yr 300mn bond at 3.9%.  As the sole SOE responsible for infrastructure construction in Qingdao West Coast New Area, and wholly owned by Qingdao SASAC, the Baa3 rated issuer performed well on its first outing, pricing 60bp south of IPG, with books over 7x oversubscribed and 940mn interest from leads alone.

Accessing the dollar market for the fourth time this year, Road King Infrastructure printed a senior perpetual nc5 at its corporate rating of Ba3. Unlike the company’s two existing perpetual deals, which sport fixed-for-life coupon features, the new 300mn deal that was issued at par with a coupon of 7.75% is resettable at first call date.

China Aluminium International Engineering (Chalieco) was also in the market to issue a perpetual, priced at 5% with a first call in 3.5yrs and step-up of 300bps if not called. Chalieco is 73.6% owned by state-owned Aluminium Corp of China (Chinalco), which also stood as keepwell deed provider of the notes. Unsurprisingly, the BB rated bond proved wildly popular especially with fund managers, garnering over 10x orders vis-à-vis issue size of 350mn, the proceeds of which will be used to redeem the company’s existing 5.7% perpetual.

For the week, 40 banks were involved either as Bookrunners or Lead Managers. BNP topped the dealboards this week, narrowly edging out HSBC by just 50mn in deal volume.

Eight new mandates were announced during the last two weeks.

Asia G3 Year-to-date issuance: USD 309.7133bn

Key Market Data (as at 12pm, 8 Nov 2019)
CT10 @ 1.910% (+21.4bps Week-on-Week)
S&P 500 @ 3085.18 (+1.57% Week-on-Week)
HSI @ 27,726.04 (+2.61% Week-on-Week)
JACI Index @ 241.29 (-0.27% Week-on-Week)

For the week beginning 4th Nov 2019, USD 14.372bn of bonds was issued from 25 deals.

Breakdown: USD 6.373bn of Investment Grade, USD 2.309bn of High Yield bonds, USD 5.69bn of Non Rated bonds.

** As of this Friday morning, there are no new issues in play. **

Commentary:

Last Friday’s ISM saw manufacturing activity contracting for the third month in a row. This, however, could not dampen the keen optimism reflected by rising Treasury yields of a successful conclusion to trade talks between the US and China.

So despite a big picture backdrop of slowing sales growth and tighter funding regulations, debt issuance by Chinese property players remained undented. If last week’s issuance was a rain shower, this week’s was a torrential deluge, with no less than 14 deals, or an astonishing 56% of total deals done. Kaisa Group got the ball rolling with a new issue + tap combo fund-raise of 450mn total just after last week’s 200mn tap of the 11.95% 22s. On average, the B2-rated company paid ~12% for 3.5-4yr funding. Illustrative of the individual credit specificity of the single-B China space, real estate developers Powerlong, Redsun Property and Dafa Group issued bonds (latter two taps) at widely-differing yields of 7.3%, 12.7% and 14% for 3.0, 2.5 and 1.7yr paper respectively.   

Established Chinese property giants Vanke, Greentown and Greenland Holdings also entered the primary market fray this week. Vanke, China’s biggest listed property developer, issued a 723mn dual-tranche deal at T+160bps and T+183bps for 5.5 and 10yrs respectively.  Greenland Holdings, whose large minority shareholder is the Shanghai government, printed a 3yr deal at 5.6% for 370mn size. A 1yr note sufficed for SOE-related Greentown China Holdings, which paid 4.55% or 45bps below IPG for borrowings of 600mn. The third ‘green’ to issue was China-focussed Shui On Land, flagship subsidiary of HK’s Shui On Group, with a 4yr unrated ‘green bond’ paying 5.75%.

Chinese LGFVs from Shandong (Qingdao City Construction), Henan (Zhengzhou Urban Construction), Hunan (Changsha Pilot Investment) and Sichuan (Chengdu Jiaozi Financial Holding Group), all falling within the BBB bucket, took the opportunity to issue smallish (<350mn) bonds at sub-4% levels for 3yrs. The operator of Guangzhou’s subway system (Guangzhou Metro), however, parlayed its A1 rating and city’s first-tier status to issue a 200mn 5yr bond at T+97.5bps. At the other end of the tenor spectrum, Beijing Capital Group issued a senior perpetual (with a first call in year 5) at 5.75% rated BB+ or two notches below issuer-level ratings.

State-owned colossus Sinopec Group (via subsidiary Sinopec Group Overseas Development (2018)) issued a multi-tranche deal amounting to 2bn at pari passu ratings to the sovereign. A 700mn 2.5% 5yr tranche and 1bn 2.95% 10yr tranche were priced at T+93bps and T+122.5bps, well inside initial guidance of 120bps and 150bps respectively. The 300mn 30yr tranche saw a final yield of 3.44% from IPG 3.65%.

The highest profile deal of the week, however, was that of the Chinese sovereign itself. After a hiatus of 15 years, the People’s Republic of China (PRC) re-entered the EUR markets with a multi-tranche 4bn deal. The 7, 12 and 20yr tranches priced at MS+30bps, MS+40bps and MS+58bps respectively, which translated to absolute yields of 0.197%, 0.618% and 1.078% at issue. Besides satisfying a natural demand for the currency of China’s largest trading partner, the sovereign was viewed by market participants as having further expanded its global presence in the international bond markets and obtained cheap funding in one fell swoop.

Greater-China financial services were also present in the new issue lineup this week. Baa1/ A rated AMC Huarong Asset Management issued 1bn worth of bonds in the 5 and 10yr tranches, pricing at T+160bps and T+200bps respectively. Both tranches saw spread compression of 30bps from IPG. HK’s Sun Hung Kai & Co. (often confused with better known Sun Hung Kai Properties) with unrated status issued a 5yr 350mn bond at 5.75%, while HK-based Haitong International (BBB) printed a 400mn deal for 5.5yrs at T+160bps.

It was a lonely week for Korean steelmaker POSCO as the only non greater-China credit to issue bonds. Scarcity had its advantages as books were 5.6x covered for their BBB+ rated 3yr benchmark-sized offering priced at T+97.5bps.

For the week, 54 banks were involved either as Bookrunners or Lead Managers. With the absolute dominance of Chinese deals this week, naturally it was two Chinese banks (Haitong International and Bank of China) that topped the dealboards.

Nine new mandates were announced during the last two weeks.

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