20220718-招银国际-Fixed_Income_Daily_Market_Update_6页_792kb

CMBI Credit Commentary Summary

Core Content

This document provides a comprehensive market update and analysis from the Fixed Income Department of CMBI, covering recent market movements, macroeconomic developments, and key corporate updates in the Chinese fixed income market. It also includes important disclosures and disclaimers related to the distribution and use of the report.

Main Market Observations

• Fixed Income Market Trends:

  • Selling flows continued in the morning, particularly in the LGFV (Local Government Finance Vehicle) space in weak regions.
  • Low ball bids from onshore accounts were observed on selective names.
  • AT1 (Additional Tier 1) bonds remained heavily sold, with names like BCHINA down another 0.5pt.
  • Macau gaming sector was +/-0.5pt due to the extension of operations suspension to 22 July.
  • SOE (State-Owned Enterprise) names saw generally unchanged spreads.
  • TMT (Technology, Media, Telecommunications) names like TENCNT and XIAOMI tightened by 3-5bps.
  • In HY (High Yield) space, property sector was mixed, with some names rising and others falling.
  • CSCHCN and CIFIHG marked down by 0.5-3pts, while WESCHI declined by 0.5-1pt.

• Top Movers:

  • Top Performers: YLLGSP, CENCHI, LOGPH, KWGPRO, CENCHI (different tenor).
  • Top Underperformers: CSCHCN, LOGPH, CIFIHG, COGARD, CSCHCN (different tenor).

Key Corporate Updates

• CSCHCN:

  • Entered into an equity transfer agreement with SZCDG to sell 50% of its property management stakes for HKD1.46bn.
  • Recent funding exercises, including the sale of 50% stakes, along with existing cash reserves and new credit facilities, should provide adequate liquidity to meet 2H22 bond maturities.
  • The performance guarantee for the property management operations is set at HKD264.5-298.1mn over the next three years, which is more aggressive than FY22's HKD89.488mn.

• China Economy Overview:

  • China reported low GDP growth for 2Q22, with a YoY increase of only 0.4%.
  • The market consensus was higher (1.1%), suggesting a slowdown.
  • The government may have revised its 2022 growth target downward to around 4%, as the 5.5% target is unachievable due to the Ukraine crisis and Shanghai lockdowns.
  • Economic resumption is expected in 2H22-1H23, but at a slower pace compared to previous cycles due to zero-Covid policy, weak consumer confidence, and a correction in the housing market.
  • GDP growth is projected to rise to 5.2% in 1Q23 and 9.8% in 2Q23, with a full-year growth of 6.6% in 2023.

• Consumption and Housing:

  • Retail sales improved in June to a 3.1% YoY growth, but consumer confidence remains weak.
  • Auto, communication equipment, and home appliance sales rose significantly in June.
  • Housing-related sales, such as construction & decoration materials and furniture, continued to decline.
  • Housing starts and land purchases also declined sharply in June.

• Infrastructure & Social Services:

  • Urban fixed asset investment (FAI) rose 5.8% YoY in June, up from 4.7% in May.
  • Manufacturing and infrastructure sectors showed stronger growth, with FAI increasing to 9.9% and 12% respectively.
  • Public utility, water conservancy, and health & social welfare services maintained strong FAI growth.

Market Conditions and New Issues

• Onshore Primary Issuances:

  • 55 credit bonds were issued last Friday, totaling RMB42bn.
  • Month-to-date, 656 credit bonds were issued for RMB703bn, representing a 5% YoY decrease.

• Offshore Asia New Issues:

  • No new issues were priced today.
  • A pipeline includes Lenovo Group Ltd exploring a USD bond refinancing through a syndicated loan.

Important Disclosures

• The report is for informational purposes only and not investment advice.
• CMBIS does not provide individually tailored investment recommendations.
• There are risks involved in trading securities, and past performance does not guarantee future results.
• The report may be subject to change without notice.
• CMBIS may have conflicts of interest and is not liable for any losses incurred from reliance on the report.
• The report is distributed only to specified investors in different jurisdictions (UK, US, Singapore) and may not be reproduced or shared without consent.

Disclaimer

• United Kingdom: The report is only for persons falling under Article 19(5) or Article 49(2) of the Financial Promotion Order 2005.
• United States: CMBIS is not a registered broker-dealer, and the report is only for major US institutional investors.
• Singapore: The report is distributed by CMBISG, an exempt financial adviser, and may be provided only to certain investors as defined in the Securities and Futures Act.

Contact Information

• Glenn Ko, CFA: (852) 3657 6235 | glennko@cmbi.com.hk
• James Wen: (852) 3757 6291 | jameswen@cmbi.com.hk
• CMBI Fixed Income Department: Tel: 852 3761 8867 / 852 3657 6291 | fis@cmbi.com.hk