A week fraught with event risk, LGFV credit concerns and lower liquidity at year end left the Asian G3 primary markets with no appetite for new issuance

New Issue Weekly Monitor

For the week beginning 9th Dec 2019
Asia ex-Japan G3

Summary

Asia G3 Year-to-date issuance: USD 339.2bn

Key Market Data (as at 12pm, 13 Dec 2019)
CT10 @ 1.917%(+11.9bps Week-on-Week)
S&P 500 @ 3117.43 3168.57 (+1.64% Week-on-Week)
HSI @ 27,551.46 (+4.37% Week-on-Week)
JACI Index @ 242.76 (+0.17% Week-on-Week)

For the week beginning 9th Dec 2019, USD 1.5bn of bonds was issued from 4 deals.

Breakdown: USD 300m of Investment Grade and USD 1.2bn of High Yield bonds

** As of this Friday morning, Chinese real estate developer Excellence Commercial announced a 3 year deal with IPG at 7% level. **

Commentary:
A week fraught with event risk, LGFV credit concerns and lower liquidity at year end left the Asian G3 primary markets with no appetite for new issuance. At the global macro level, the Fed’s last rate-setting meeting of the year concluded with no surprises (as expected), but all eyes were on trade war developments, with tension rising into the end of the week when an 11th hour ‘deal-in-principle’ was reached. Elsewhere, the UK held general elections and Christine Lagarde chaired her first meeting as head of the ECB.

Within the Asian bond market space, a missed domestic bond payment by a Chinese LGFV based out of Inner Mongolia did much to dampen enthusiasm for the sector, as witnessed by BBB- rated Jiangxi LGFV Shangrao Investment Holding Group’s postponement of its 200mn dollar bond deal priced at just under 4%.

In contrast, BBB+ rated Hebei Iron and Steel Group (HBIS) successfully priced a 3yr 300mn issue by offering a more generous yield (for its rating) of exactly 4%. HBIS is wholly owned by the Hebei provincial government and is the second largest steelmaker in China by volume.

Hydoo International Holding came to market with a new 2yr deal at a minimum yield of 15% and minimum coupon 14%, engineered to accommodate the exchange of the entirety of their existing 157mn 12% 20s bond. However, the new B- rated bond, with redemption price 102.236, had a final issue size of only 81.827mn. Hydoo’s principal business is the development and operation of trade and logistics centers in lower-tier Chinese cities.

72% owned by US casino operator Wynn Resorts, BB+ / B1 rated Wynn Macau issued 1bn worth of 10nc5 senior bonds at 5.125%, 25bps under IPG. The bonds came attached with an investor put at par should Wynn Macau’s gaming license not be renewed, where next upcoming renewal is June 2022.

For the week, 19 banks were involved either as Bookrunners or Lead Managers, with BNP in the lead.

Two new mandates were announced during the last two weeks.

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