20220517-招银国际-Fixed_Income_Daily_Market_Update__6页_1mb

CMBI Credit Commentary Summary

Core Content

This document provides a comprehensive overview of the fixed income market dynamics in China, including trading updates, macroeconomic developments, and new issue activity. It is issued by the Fixed Income Department of CMB International Securities Limited (CMBIS), a subsidiary of China Merchants Bank.

Market Update

• COGARD: Mixed flows observed, with better buying in the 22/23/24 series and selling in the long end. The AMC space experienced a widening of 15-20 bps, while SOE names fluctuated within 1-2 bps, with some higher beta names showing better selling.
• CIFIHG, KWGPRO, and CHINCE saw price increases of around 1 point.
• Macau gaming sector: Continued better selling pressure after tax reduction and travel restrictions.

IG Market Activity

• The Chinese IG market was generally quiet.
• TMT sector: Benchmark names like MEITUA, TENCNT, and XIAOMI widened by 2-4 bps.
• Financial sector: AT1 names showed better buying.
• CCB'25: Recently issued bonds tightened by 1-2 bps.

China South City (CSC) Update

• Equity Injection: Completed the issuance of new shares to SEZCDIH, a subsidiary of SZCDG (Shenzhen SASAC's wholly-owned entity).
• Ownership Increase: SZCDG now holds 29.28% of CSC's enlarged capital, enhancing its funding access.
• Financial Impact: CSC received HKD1.9bn (cUSD240mn) from the sale, improving financial flexibility.
• Bond Performance: CSCHCN'22 and 23 bonds are trading at mid-high 90s with YTM in the high teens to low-20s.
• Recommendation: Maintain a "Buy" rating on CSCHCNs, viewing them as low-beta and carry plays.

ZHLGHD Exchange Offer and Consent Solicitation

• Exchange Offer: 90.47% of ZHLGHD 8.5% '22 and 83.66% of ZHLGHD 9.5% '22 were validly tendered.
• New Notes Issuance: USD201.4mn and USD428.4mn new notes due Apr'23 and Dec'23 respectively.
• Split Ratio: 32/68, close to the company's indication of 30/70.
• Consent Solicitation: Cross-default trigger was carved out, and the company will not pay remaining hold-outs.

China Economy Outlook

• Economic Contraction: April saw a sharp contraction due to the pandemic and lockdowns, with retail sales down 11.1% YoY and industrial output down 3% YoY.
• Regional Impact: Yangtze River Delta and Northeast regions experienced the most severe declines in industrial and service output.
• Auto Industry: Hit hardest, with output down 31.8% YoY.
• Consumer Discretionary: Suffered significant declines, while staples like food and medicine showed positive growth.
• Recovery Outlook: The worst is over, but recovery is expected to start in mid-May, with gradual resumption in 2H22-2023.
• Factors Affecting Recovery:
  1. Continued enforcement of the "Covid-zero" policy.
  2. Limited room for monetary policy easing due to the Fed's tightening.
  3. Weak consumer and business confidence, leading to a hard landing in the property market.

Offshore Asia New Issues

• Priced Today: No new offshore Asia issues were priced.
• Pipeline: Shandong Gold Group is planning a USD-denominated issuance, though details are not yet available.

Market Conditions and Color

• Onshore Primary Issuances: 36 credit bonds issued yesterday with RMB52bn raised; month-to-date total of RMB319bn, down 18.4% YoY.
• Notable Announcements:
  • AVIC International Leasing announced a USD3.5bn guaranteed MTN and perpetual capital securities programme.
  • Country Garden confirmed plans to issue RMB500mn domestic bonds.
  • Chuang's China sold USD8mn of CSC's 11.5% 2022 senior notes for USD7.78mn.
  • Longfor unit plans to issue six-year notes to raise up to RMB500mn.
  • Midea Real Estate plans to issue up to RMB1bn corporate bonds.
  • Sunac was downgraded to Ca/C by Moody's due to weak recovery prospects and a negative outlook.

Important Disclosures

• The report is not investment advice and should not be relied upon for decision-making without consulting a financial advisor.
• CMBIS may have conflicts of interest and does not assume responsibility for any reliance on the information provided.
• The report is intended for specific investors and may not be reproduced or distributed without prior consent.

Disclaimer

• UK Recipients: The report is only for persons within Article 19(5) or Article 49(2) of the Financial Services and Markets Act 2000.
• US Recipients: Intended solely for major US institutional investors; not for general distribution.
• Singapore Recipients: Distributed by CMBISG, an exempt financial adviser, with legal responsibility only to the extent required by law.

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

• CMBIS: CMB International Securities Limited, a subsidiary of CMB International Capital Corporation Limited.