20220120-招银国际-Fixed_Income_Daily_Market_Update_6页_915kb

CMBI Credit Commentary Summary

Core Content

This document is a Fixed Income Daily Market Update by CMBI Fixed Income Department, providing insights into the performance of Chinese high yield (HY) property bonds and broader market conditions. It includes market movements, macroeconomic updates, exchange offer results, and new issue information, with a focus on the credit environment and liquidity dynamics in the Chinese property sector.

Main Market Movements

• HY Property Sector: The market showed relative stability in the morning but turned positive in the afternoon following news of potential easing on escrow accounts for developers.
• Top Performers: SUNAC, COGARD, LOPGH, KWGPRO, and others saw price increases of more than 10 points.
• Top Underperformers: JIAYUA, REDSUN, FTHDGR, and others declined by 1-3 points.

Key Developments

• Escrow Account Easing: MOHURD is reportedly drafting rules for developers to have easier access to pre-sale funds. This is seen as a key factor in improving liquidity and mortgage approvals.
• LPR Cuts: The PBOC cut 1-year and 5-year LPR by 10bps and 5bps respectively, in line with expectations following MLF and reverse repo rate cuts.
• Yuzhou Exchange Offer: Yuzhou successfully completed an exchange offer with 82% of its January 2021 bonds tendered. The company plans to relaunch the offer for hold-outs on or around 26 January 2022.

Exchange Offer Details

• Yuzhou:
  • 82% of bonds due in January 2021 were validly tendered.
  • The company will issue USD453.4mn in new notes due January 2023.
  • Hold-outs will retain their original bonds with no changes to key terms.
  • Cross default clauses were removed, indicating Yuzhou may not pay holdouts on maturity.

New Issue Information

Priced Issues

Pipeline Issues

Macro News Recap

• U.S. Markets: S&P, Nasdaq, and Dow fell by 1-1.1% overnight.
• Oil Prices: Continued to rise, with Brent crude reaching USD88.44, up 1.1%.
• U.S. Treasury Yields: The 10Y Treasury yield dropped to 1.83%, while 1/5/30Y yields fell to 0.57 / 1.62 / 2.14%.
• Credit Environment: A loosening credit environment is expected to improve liquidity for developers and boost home sales via lower mortgage rates.

Key Insights from Analysts

• The benefits of escrow account easing are likely to be skewed towards larger and stronger developers.
• Developers with higher contract sales and lower maturity debt in FY22 are expected to gain more from the easing.
• The mortgage approval process is also being normalized, which is a key factor in liquidity improvement.
• Yuzhou is seen as a case study where the easing has been applied, and the company is attempting to relaunch the exchange offer to cover hold-outs.

Onshore China Conditions

• Credit Bonds Issued: 86 credit bonds were issued yesterday, totaling RMB120bn.
• Month-to-Date: 1179 credit bonds were issued, raising RMB1274bn, a 28.2% YoY increase.
• Specific Actions:
  • CAPG will not repay the January 2022 Notes on maturity.
  • CIFIHG repurchased RMB20mn of its 6.7% senior notes due April 2022.
  • GRNCH issued 3-yr USD bonds backed by SBLC, with IPT at 2.4%.
  • TSINGH's Hong Kong winding up proceedings were adjourned to 14 Mar'22.

Author Certification

• The content of the report reflects the personal views of the author.
• The author has no financial interest in the securities discussed and has not traded them in the 30 days prior to the report's release.
• The report is not intended as investment advice and should be used with caution.

Important Disclosures

• The report is for informational purposes only and should not be construed as an offer to buy or sell securities.
• CMBIS is not a registered broker-dealer in the U.S. and the report is only for "major US institutional investors."
• The report may contain conflicts of interest due to potential investment banking relationships with the issuers.
• Recipients in Singapore must be Accredited Investors, Expert Investors, or Institutional Investors.

Disclaimer

• The report is subject to legal and regulatory restrictions depending on the jurisdiction.
• It is not intended for distribution to non-qualified investors in the U.S. or Singapore.
• CMBIS is not liable for any losses or damages arising from reliance on the report's content.

Contact Information

• 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: fis@cmbi.com.hk

This summary highlights the key market dynamics, regulatory changes, and investment implications for the Chinese property sector, as well as relevant macroeconomic and new issue developments.