Primary markets remained buoyant in the new year and pre-CNY rush to secure financing. Alongside mainstay China, Indonesian bonds had a strong showing with 6 names tapping the markets for a total of 3.2bn issuance

New Issue Weekly Monitor

For the week beginning 13th Jan 2020
Asia ex-Japan G3

Summary

Asia G3 Year-to-date issuance: USD 38.9bn

Key Market Data (as at 12pm, 17 Jan 2020)
CT10 @ 1.828%(-3.9bps Week-on-Week)
S&P 500 @ 3316.81 (+1.29% Week-on-Week)
HSI @ 28870.29 (+1.03% Week-on-Week)
JACI Index @ 245.62 (+0.47% Week-on-Week)

For the week beginning 13th Jan 2020, USD 20.306bn of bonds was issued from 33 deals.

Breakdown: USD 8.145bn of Investment Grade and USD 6.025bn of High Yield bonds, USD 6.136bn of Non Rated.

** As of this Friday morning, Sun Hung Kai Properties is out with a tap of its 2.875% 30s launched beginning of week at T+110bps and now reoffered at T+130bps.**

Commentary:
The Dow pierced 29,000 last week, and the US and China’s ‘phase 1’ trade deal was finally signed. Trade tariffs, however, are set to remain in place at least until ‘phase 2’ is inked, which most market observers opine is where the ‘hard work’ of resolving more contentious issues begins.

Primary markets remained buoyant in the new year and pre-CNY rush to secure financing. Alongside mainstay China, Indonesian bonds had a strong showing with 6 names tapping the markets for a total of 3.2bn issuance. The largest issuance by far came from national oil and natural gas champion Pertamina, which printed a dual-tranche 1.5bn offering of 10 and 30-yr bonds at 3.1% and 4.175% respectively. The Baa2-rated bonds came with investor change of control put options at 101% if the bonds are downgraded or if the Indonesian government ceases to control more than 50% of the issuer.

60% government-owned PT Bank Tabungan Negara (BTN) came back to the dollar markets after a hiatus of 20 years with a modest 300mn Tier 2 issue priced at 4.2%. Demand for this rare 5yr paper was such that it tightened 50bps from IPG and was over 10x oversubscribed. While BTN’s issuer rating is on par with the sovereign’s at Baa2, the subordinated issue was given a haircut of 4 notches.

Following a radical revamp of group operations under the Lippo Group umbrella, property development subsidiary Lippo Karawaci (rated B-) issued a 5nc3 325mn senior bond at 8.125%. In contrast, fellow Indonesian issuer Tower Bersama (in the business of cellphone tower construction and rental) paid only 4.25% to issue an unrated bond of similar maturity and (approximately) the same size.

On this point, it should be worth noting that Chinese HY issuers, for a variety of fundamental and technical reasons, have to pay up compared to their Asian peers. For example, Kaisa Group’s 5.5yr B/B2 rated new issue priced at 9.95% while Redsun Properties (rated B3/B+ at issue level) issued a 3.25yr bond at 10.25%. No wonder the latter boasted the fattest margins for tightening at 62.5bps and largest oversubscription of the week at 15.8x.

Variation in pricing even within the sector was evidenced with Evergrande’s dual-tranche outing of 3yr and 4nc2 bonds, both priced 50bps south of IPG at 11.5% and 12% respectively. Massive refinancing needs called for massive issuance in this 2bn dual-tranche deal, rated B/B2 at the issue level.

Chinese policy bank China Development Bank (CDB) printed the first Asian deal in GBP of the year with 1bn issuance, priced at UKT+85bps, or an absolute yield of 1.332%. The 3yr issue was rated on par with the sovereign at A1 with the use of proceeds stated as being for working capital and general corporate purposes.

It was somehow not an auspicious time for Vietnam’s B1-rated Southeast Asia Commercial Joint Stock Bank (SeABank) to issue bonds, as its benchmark 3yr senior offering priced at 7.875% was postponed. Within the context of Asia-Pacific financial institutions, SeABank was ranked #368 in The Asian Banker’s 2019 Strongest Banks by Balance Sheet list, behind 15 other Vietnamese banks.

Conversely, it was all smiles for Jollibee Worldwide’s unrated 600mn perpetual nc5, which priced at 3.9% from IPG 4.25% and was issued primarily to refinance short-term debt from the recent acquisition of US chain The Coffee Bean and Tea Leaf (CBTL). From its home base in the Philippines, the company has spread its (Chicken)joy into Asia, the Middle East, Europe and North America.

For the week, 69 banks were involved either as Bookrunners or Lead Managers. HSBC topped the dealboards this week with 8.045bn in volume.

3 new mandates were announced during the last two weeks.

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