20230822-招银国际-Fixed_Income_Daily_Market_Update_6页_1mb

Market Rebound and Trading Activity

Markets rebounded today, with Asian IG bonds tightening by 5-10bps this morning. Buying flows were skewered toward better names, such as CIC, CHK, and HRINTH, which were up 1-2 pts, and Chinese AT1s saw increased demand. In contrast, USTs widened by 5-8bps yesterday, with Asian IG and ex-JP IG spaces opening 5-20bps wider, coupled with heavy selling across sectors. Certain high-beta stocks, like Chinese TMTs and industrials, continued to underperform, with declines ranging from 5-15 to 22-250 points depending on the name, indicating overall market fragility and sentiment-driven fluctuations.

Macau Gaming Sector Analysis

SJM Holdings Limited (SJMHOL) turned around with a 0.25 pt gain this morning, driven by strong financial performance. In H123, revenue, gross gaming revenue, and adjusted EBITDA increased by 126.7%, 124.3%, and 139.2% YoY to HKD93.6bn, HKD98.4bn, and HKD461mn, respectively. The recovery momentum remains robust, with AdjEBITDA surpassing pandemic levels and stabilizing in GLP operations. Overall, the 7M23 gross gaming revenue rebounded 263%, reflecting a significant tourism market recovery, which supports the Macau gaming sector's improving credit fundamentals. bonds are favored for their contained capex and potential rating actions, with a preference for SJMHOL and MPEL due to better risk-return profiles.

China Policy Dilemma with LPR Cut

The one-year LPR was cut by 10bps from 3.55% to 3.45%, while the five-year LPR remained unchanged at 4.2%. This modest cut was expected to be larger but was constrained by policymakers' dilemma involving banking NIM pressures (average commercial bank NIM at 1.74%, a constraint at 1.8%) and RMB exchange rate volatility. The central bank faces balancing domestic support for the slow real estate market with global dollar strength, potentially limiting further policy easing. Future measures may include deposit rate reductions or mortgage rate cuts to support the economy.

Trading Desk Insights

Analysts noted overall market fragility, with Asian markets showing mixed demand. While some Asian IG bonds saw slight interest, others declined due to heavy selling. Chinese properties remained soft, despite short-covering lifts. In Macau gaming bonds, key names like SJMHOL performed better than others, but industrial and utility names saw markdowns. Onshore China trading was quiet, with subdued sentiment for MAC names. US Treasuries surged, influenced by higher inflation forecasts.

Key Macro News and Developments

Macro news from August 22, 2023, included mixed US stock movements (SP 0.69p higher, Nasdaq 1.56% up, Dow down 0.11%), with NY Fed data showing wage expectations at record highs. US Treasury yields rallied, with 10-year yields reaching the highest level since 2008. Policy-wise, the yield hike signaled Fed's potential intent shift, but inflation data would dictate decisions. A significant development was the disappointing modestness of the LPR cut, complicating the central bank's policy path.

Analyst Recommendations and Commentary

Analysts recommend Macau gaming bonds for their credit story recovery, with细分 op数据分析 showing strong prospects for operators like SJMHOL and MPEL, while smaller names like WYNMAC are considered for yield pickup. Chinese policy indecision poses risks. On new issues, SHANGHANG development bond detailiated, and policy responses are under review. News highlights include mainland China credit bond advancements and potential losses reported by developers like SUNAC amid the real estate downturn.

New Bond Issues and Market Dynamics

Offshore Asia saw a Shandong Commercial Group 3yr 8% bond priced. Pipeline includes a Hangzhou urban development bond. These are part of broader market trends: 97 onshore bonds issued yesterday with RMB75bn raised. High demand for resilient sectors contrasts with softer performances in high-risk areas.

Author Certification and Disclosures

The author certifies personal views and adherence to compliance rules, including no dealings in covered securities within specified periods. A full disclaimer outlines publishing limitations, inversions of policy signals, and the inherent risks in financial markets. This report uses analyses and forecasts based on assumptions, limitations, and standard disclaimers apply.