20220620-招银国际-Fixed_Income_Daily_Market_Update_6页_780kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a detailed market update and analysis on the fixed income market, focusing on the performance of Chinese investment-grade (IG) and asset-backed (AT1) bonds, as well as specific insights into the Macau gaming sector and Fosun International's tender offer. It also includes macroeconomic news, key timelines for regulatory changes, and information on new offshore bond issues.

Main Points and Key Information

Market Performance

• IG and AT1 Space: Prices were largely unchanged this morning. GZRFRP bonds showed minimal movement after the company announced expected consent solicitations to extend the maturity of 10 USD bonds.
• Macau Gaming Bonds: The sector remained weak, with continued selling pressure on SJMHOL bonds due to rising COVID cases. Regulatory risks are diminishing, but the main drivers for performance are still the quarantine policy and visa approvals.
• Fosun International (FOSUNI): The company announced a tender offer for its 5.5% '23 and 3.3% '22 notes at par. The yield curve for FOSUNI bonds rose by 2-4 points this morning.

Trading Desk Comments

• Chinese IG Space: Continued weakness due to U.S. Treasury (UST) sell-off sentiment. Front-end high dollar price papers saw selling, while financials saw some buying.
• Chinese HY Space: Weak performance continued, with FOSUNI and COGARD bonds declining. However, some names like RONXIN and SHIMAO showed positive movement.
• Top Performers: GRNLGR, HPDLF, and others saw price increases of 1.2-2.4 points.
• Top Underperformers: FOSUNI bonds, particularly the 6.85% '24 and 5.95% '26 notes, declined significantly, with changes of -7.2 to -9.8 points.

Macroeconomic News

• U.S. Stock Markets: Closed with their worst week in two years, reflecting slower growth expectations. UST yields fell as investors moved into risk-free assets.
• European Inflation: Reached a record high of 8.1%, with markets closely watching the SNB and BOE's policy stances.
• Treasury Curve: Resumed bear-flattening, with yields at 3.17%, 3.34%, 3.25%, and 3.30% for 2, 5, 10, and 30-year maturities, respectively.

Macau Gaming Regulatory Update

• The final draft of the gaming law amendment bill is largely unchanged from the initial version.
• Key changes include:
  • Concessionaires must maintain a net asset value of at least MOP5bn.
  • Levies for public good increased to 5% from "not exceeding 5%", with potential waivers for concessionaires contributing to attract overseas tourists.
• License Renewal Timelines:
  • The Legislative Assembly will finalize the bill before 26 Jun'22.
  • Existing concessionaires may sign short-term extensions by 23 Jun'22.
  • The second read of the "Regime for the exploitation of games of chance" bill is expected before mid-Aug'22.
  • The tender process for new concessions is anticipated to finish by Nov'22.

Satellite Casinos and Regulatory Impact

• Concessionaires will have a 3-year grace period for satellite casinos, but the new bill may accelerate their phase-out.
• SJM is most affected, with 14 of 18 satellite casinos operated by it. Satellite casinos contributed 58% and 63% of SJM's gross gaming revenue in 1Q22 and FY21, respectively.
• Some operators have already ceased operations, but SJM has taken over some casinos to mitigate the impact. The sector is facing over-capacity, and the near-term impact of phasing out satellite casinos is manageable.

Fosun International Tender Offer

• Fosun International repurchased USD379.762mn of 5.5% '23 notes and EUR384.2mn of 3.3% '22 notes at par, with a total acceptance limit of USD200mn.
• The offer prioritizes 2023 notes first, then 2022 notes if the 2023 notes are fully accepted.
• The offer expires on 4 July 2022 at 4pm (London Time).

New Offshore Bond Issues

• Xi'an Weiyang Urban Construction Group: Issued USD96.5mn 3-year MTNs at 4.6% coupon.
• Linyi City Development International: No details on new issues yet.

Market Conditions and Color

• Onshore Primary Issues: 88 credit bonds issued worth RMB172bn.
• Indonesia: Imposed new export duty tariffs on palm oil.
• Shandong Commercial Group: Raised RMB300mn via 150-day super short-term bills at 5.8%.
• Shandong Iron and Steel Group: Proposed to issue RMB1bn 2+N-year MTNs.
• Sino-Ocean: Secured a new loan to refinance its July loan maturity.
• Guangzhou R&F: Announced consent solicitations to extend maturity of 10 USD bonds for 3-4 years, with a consent fee of 0.5 per 100. If consent is not secured, a 6-year extension is possible.
• Jingrui Holdings: Missed interest payments on senior notes.
• Logan Group: Proposed a 15-month extension for its RMB774mn ABS with weaker payment terms than earlier domestic note extensions.
• Shangrao City Construction Investment Development: Raised RMB2bn via 3-year MTNs at 3.95%.

Key Takeaways

• Macau Gaming Bonds: Regulatory clarity is improving, but performance remains tied to the resolution of quarantine and visa policies. Near-term default risk is low, but the sector is still vulnerable.
• Fosun International: The tender offer shows the company's commitment to managing its debt, but the market remains cautious.
• Bond Market: Chinese IG and HY bonds continued to show weakness, with some names performing better than others.
• Regulatory Timeline: Key dates for Macau gaming law amendments and license renewals are approaching, with potential implications for the sector.

Contacts

• Glenn Ko, CFA: (852) 3657 6235 | glennko@cmbi.com.hk
• Polly Ng: (852) 3657 6234 | pollyng@cmbi.com.hk
• James Wen: (852) 3757 6291 | jameswen@cmbi.com.hk
• CMBI Fixed Income Department: fis@cmbi.com.hk

Disclaimer

This report is for informational purposes only and does not constitute investment advice. CMBIS is not a registered broker-dealer in the U.S. and the report is intended for major U.S. institutional investors only. The report may not be distributed to others without prior consent. The information is based on publicly available data and is not guaranteed for accuracy or completeness. Investors are encouraged to consult with professional advisors before making any investment decisions.