20220616-招银国际-Fixed_Income_Daily_Market_Update_6页_630kb

CMBI Credit Commentary Summary

📌 Core Content Overview

This document provides a comprehensive market update and analysis from the Fixed Income Department of CMBI, covering market movements, regulatory updates, and macroeconomic trends in the Chinese and Macau markets. It also includes details on new bond issues, consent solicitations, and corporate developments affecting credit risk and investor sentiment.

📊 Market Movement Summary

✅ Top Performers

• ZENENT 12 1/2 04/23/24: +4.2
• COGARD 4.8 08/06/30: +3.9
• COGARD 8 01/27/24: +3.5
• MOLAND 9.8 04/11/23: +3.4
• COGARD 5.4 05/27/25: +3.4

❌ Top Underperformers

• FOSUNI 5.05 01/27/27: -4.8
• CSCHCN 11.95 02/09/23: -4.7
• CSCHCN 10 7/8 10/26/22: -4.5
• CSCHCN 10 3/4 04/11/23: -4.4
• FOSUNI 5 05/18/26: -3.9

📚 Key Market Developments

🇨🇳 Macau Gaming Sector

• The final draft of the Gaming Law is largely unchanged from the January 2022 version, with key provisions such as maximum 6 concessionaires and concession terms of up to 10+3 years remaining the same.
• New requirements include maintaining net asset value of at least MOP5bn and cash capital requirements of MOP5bn.
• Levies for public good are now set at 5%, up from "not exceeding 5%", and Macau CE may waive or lower them if concessionaires attract more overseas tourists.
• Tax and levies could rise to 40% (35% gaming tax + 5% levies), up from the current 38-39%.
• The final read of the Gaming Law is scheduled for 26 June 2022.
• Key drivers for Macau gaming bonds remain quarantine policies and visa approvals for mainland travelers.
• The recently relaxed quarantine period of 10+7 days still poses a challenge due to the short average tourist stay of 1.6 days.

🇨🇳 CSCHCN (China South City)

• Consent solicitation for its 5 USD bonds.
• Proposed amendments:
  • Include SZCDG as a permitted holder.
  • Raise COC threshold from 20.0% to 29.9%.
• SEZCDIH, a subsidiary of SZCDG, acquired 29.28% of CSC’s enlarged capital for HKD1.9bn (cUSD245mn) on 16 May 2022.
• SEZCDIH has become CSC’s largest shareholder, and CHENG Chung Hing’s stake was diluted to 20.16%.
• Current permitted holders control 49.44% of CSC’s stakes.
• The consent fee is 0.05 per 100, with expiration on 28 June 2022.
• Hefei asset sales of RMB1.7bn (cUSD250mn) are expected to be completed by end of July 2022.
• Onshore loan facilities are being finalized, and proceeds from equity injection are expected to enhance CSC’s ability to repay USD bonds due in 2H22.
• Buy recommendations are issued for CSCHCN.

🇨🇳 Greenland Holding (GRNLGR)

• Maturity extension and covenant waiver for GRNLGR 6.75% due 25 Jun 2022.
• Consent represented over 66% of the outstanding principal.
• Expected upfront cash repayment and accrued interest.
• Management cited short-term liquidity issues in Shanghai due to lockdowns.
• Uncertainty remains over repayment of GRNLGR 5.75% due Sep 2022, due to limited overseas cash inflow and uncertain property sales recovery.

🇨🇳 Country Garden (COGARD)

• Tender offer for COGARD 4.75% bond due 25 Jul 2022 at par.
• Purchase price: 100%
• Expiration deadline: 22 Jun 2022
• Settlement date: 24 Jun 2022
• The offer is seen as a response to recent bond price declines.

📈 Macroeconomic Outlook

🇨🇳 China Economy

• Gradual resumption cycle is underway, with factory restarts and policy easing.
• GDP growth is expected to rise to 4% in 3Q22 and 5% in 4Q22, following a 0.2% decline in 2Q22.
• Resumption pace is expected to be slower than 2Q20-2H20 due to zero-COVID policy, weak consumer confidence, and global economic slowdown.
• Consumer confidence remains weak, despite slightly improved consumption.
• Retail sales declined 6.7% YoY in May, compared to 11.1% in April.
• Staples saw improvement (food, beverage, etc.), while durables and home appliances continued to deteriorate.
• Property market remains slump, with GFA sold down 31.8% YoY in May and average sales price down 8.7% YoY.
• Fixed asset investment in mining, infrastructure, and health services remains strong.

🇺🇸 U.S. Economy

• The Fed issued a less hawkish statement, signaling no outsized rate hikes expected.
• Stock market rebound occurred, with S&P 500 up 1.46%, Nasdaq up 2.50%, and Dow up 1.00%.
• Treasury yields retreated, with 2/5/10/30 yields at 3.20/3.38/3.33/3.39% respectively.
• GDP growth in the U.S. is expected to slow, with policy tightening posing downside risks.

📋 New Issues and Pipeline

✅ Priced Issues

• Yangzhou Jiangdu Yanjiang Development: issued USD30mn 3-year notes at 3.2% coupon and 3.2% yield.

📋 Pipeline

• Linyi Investment Development: proposed USD4.5mn 3-year notes with IPG of 5.6.
• Korean Western Power: proposed USD notes with tenor of 3/5 years and IPG of -.
• Kunming Traffic Investment: proposed USD notes with tenor of 366 days and IPG of 7.

📋 Risk and Regulatory Notes

• SKYFAM faces unprecedented liquidity pressure, and failure to resolve debts may result in acceleration of obligations and cross-defaults.
• ZHLGHD had its Fitch rating withdrawn due to non-participation in the rating process.
• GRNCH proposed to issue RMB2bn medium-term notes.

📌 Analyst Recommendations

• Buy recommendations are issued for CSCHCN due to improved governance and refinancing updates.
• Reservations are expressed regarding GRNLGR's ability to meet 2H22 maturities.

📌 Disclaimer and Risk Notes

• Investment risks are highlighted, including uncertainty in macroeconomic conditions and credit risk.
• CMBIS is not a registered broker-dealer in the U.S. and not subject to U.S. regulations.
• Recommendations are not tailored to individual investors.
• Investors are advised to consult professional financial advisors and independently evaluate investment decisions.

📌 Summary

The CMBI Fixed Income Department highlights moderate market activity in the Chinese and Macau fixed income markets, with bond price fluctuations influenced by regulatory updates, liquidity concerns, and economic recovery trends. The Macau Gaming Law remains a key regulatory focus, with bond performance tied to quarantine policies and visa approvals. CSCHCN and COGARD are noted for refinancing efforts and rating changes, while GRNLGR faces liquidity and repayment concerns. The Chinese economy is in a gradual resumption phase, but growth remains constrained by zero-COVID policy, weak consumer confidence, and global economic uncertainty. The U.S. market showed rebound following less hawkish Fed comments, while Chinese bond markets remain vulnerable to economic and policy risks.