20221116-招银国际-Fixed_Income_Daily_Market_Update_6页_719kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a comprehensive summary of the fixed income market activity in China and offshore Asia, along with macroeconomic insights and new issue updates. It highlights the market sentiment, price movements, and economic outlook for 2023, focusing on credit markets, yield trends, and policy implications.

Market Activity Summary

Fixed Income Market Update

• Overall Stability: Markets were stable in the morning, with short coverings in LGFV (Local Government Financing Vehicles) and onshore RM (RMB) showing buying interest in due-2024 names with a 10% yield.
• SOE Perps: Profit taking occurred when yields narrowed below 6%.
• AT1s: ICBCAS 3.2/3.58 were actively traded and rose 0.25pts by mid-day.
• Sector Movements:
  • IG (Investment Grade): Financials spreads tightened by 5-10bps, with AMC closed or slightly higher.
  • TMT (Technology, Media, Telecommunications): TMTs tightened by 5-10bps, with notable moves in TENCNT, TME, and LENOVO.
  • Industrial: FOSUNI/CHIOIL 23s up 0.5pt, HONGQI '24 up 6pts.
  • Macau Gaming: STDCTYs/SANLTDs up 1-2pts.
  • HY (High Yield): China HYs calmed down after a four-day rally, while low cash price papers remained active.
  • New Issues:
    • AGILE: Raised HKD783mn (cUSD100mn) via share placement, with AGILE '26 surging 18pts.
    • COGARD: Opened 5pts higher but generally moved lower than last close.
    • CICCHK 3yr: Issued at T3+125 (Re-offer price), traded at T2+108.

Top Movers

• Top Performers:
  • AGILE 5 1/2 05/17/26: +18.4pts
  • SHUION 5 3/4 11/12/23: +10.7pts
  • DALWAN 7 1/4 01/29/24: +8.0pts
  • DALWAN 6 7/8 07/23/23: +7.9pts
  • AGILE 5 3/4 01/02/25: +6.9pts
• Top Underperformers:
  • NWDEV L 4 1/2 05/19/30: -6.0pts
  • NBHSDC 2.2 12/02/24: -3.5pts
  • SHYUCD 3.3 11/19/26: -3.3pts
  • COGARD 5 5/8 01/14/30: -2.2pts
  • COGARD 4.8 08/06/30: -2.0pts

China Economic Outlook

2022 GDP Forecast

• Revised down from 3.4% to 3.3% due to weaker economic activity in October.

2023 GDP Forecast

• Revised up to 4.9% from 4.8%, driven by a lower base and faster economic reopening.

Key Assumptions

1. Economic Focus: China will prioritize growth in 2023, with "zero-Covid" being the focus in 2022.
2. Policy Support: Proactive fiscal policy and prudent monetary policy with easing bias.
3. Credit Easing: Strong support for manufacturing, hard technology, infrastructure, and SMEs; moderate easing for the property sector.
4. Interest Rates: Possible further moderate cuts in RRR and LPRs.
5. Housing Market: Expected to gradually resume in 2023 with eased credit policies.
6. Consumer Demand: Durable consumption and retail sales weakened in October but may improve with economic reopening.
7. Exports: Expected to decline YoY in 2023 due to global slowdown and domestic demand issues.

Macro News Recap

• U.S. Markets: Rebounded with S&P +0.87%, Dow +0.17%, and Nasdaq +1.45% due to lower-than-expected U.S. PPI (8.0% YoY).
• U.S. Treasury Yields: Dropped, with the yield curve flattening. 2/5/10/30-year yields at 4.37%/3.93%/3.80%/3.98%, respectively.
• China's Economy: Expected to gradually recover in 2023, with limited impact on labor participation and service inflation from reopening.

News and Market Color

• Onshore Primary Issuances: 70 credit bonds issued yesterday with RMB47bn raised. Month-to-date total: RMB857bn, a 22.7% YoY decrease.
• New Home Prices: 1.6% YoY decline in 70 major cities, with 58 cities reporting MoM drops.
• Company News:
  • AGILE raised HKD783mn for refinancing.
  • CHIYBK fully redeemed USD250mn AT1.
  • GEMDAL downgraded by S&P to BB- and later withdrawn.
  • GRNLGR downgraded to SD for missed repayment.
  • JINKE Property extended payment on RMB1bn notes.
  • KWG redeemed RMB320mn bonds.
  • Longfor completed RMB20bn MTNs registration.
  • Midea Real Estate accepted RMB15bn MTNs registration.
  • REDPRO missed coupon payment on REDPRO 9.9 02/17/24.

Important Disclosures

• The report is not investment advice and should not be relied upon for decision-making.
• CMBIGM does not provide individually tailored recommendations.
• Information is based on public data and may be subject to change.
• CMBIGM may have conflicts of interest and is not liable for reliance on the report.
• Distribution is restricted to specific investors, including major U.S. institutional investors, UK Article 19(5) persons, and Singapore Accredited Investors.

Conclusion

The market showed a constructive tone in fixed income, with notable movements in AGILE, COGARD, and DALWAN. The economic outlook for China in 2023 is cautiously optimistic, with a revised GDP growth forecast and potential credit easing. However, the housing and durable consumption sectors remain weak, and high-beta names still require higher yields. The report serves as a market update and analysis, with important disclosures regarding its use and limitations.