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Bond Market Insights - Mon, 19 Sept 2022

Asia Credit was muted today with Japan is out for Respect for the Aged Day and ahead of the UK’s break for the funeral of Her Majesty Queen Elizabeth II. There was some profit taking in China property, down around 1pt. Macau Gaming was down as much as 3pts following headlines that GMM’s (Genting) bid had been conditionally accepted by the Macau government on Friday.

Vedanta front end rallied 1pt on the back of REDD’s “Vedanta Resources considers October tender for USD bonds due in 2023” and of a meeting on 11th Oct which could boost dividends

China and Korea IG was 2-3bp wider this morning.. Real money was quiet but ETFs were sellers of risk versus small buying from retail. AT1s and Perps slid 0.25-.375pt on the rates move and names like HKAA were as much as 0.5pt lower with sellers in control.

Chinese megacity of Chengdu exited its lockdown, allowing its 21 million people to leave their homes and resume most aspects of normal life for the first time since Sept. 1. Dalian is also exiting restrictions. Hong Kong may this week reveal plans to end hotel quarantines for inbound travelers in favor of self-monitoring according to the Oriental Daily. Will this be enough to boost consumption? The economy narrowly avoided contraction in the second quarter with consumer spending accounting for more than half of China's GDP.

Lockdowns, high youth unemployment and a faltering property market have dented the confidence of young Chinese, who are cutting costs and boosting savings. Youth unemployment hit a record 20% in July, pulling back to 19% in August. The average salary in 38 major Chinese cities fell 1% in the first three months of this year, according to data collated by online recruitment firm Zhilian Zhaopin.

Almost 60% of people are now inclined to save more, rather than consume or invest more, according to the most recent quarterly survey by the People's Bank of China. Chinese households added CNY 10.8 trillion yuan (US$1.54 trillion equiv) in new bank savings in the first eight months of the year, up from 6.4 trillion yuan in the same period last year, prompting a cut in official interest rates and in personal deposit rates by state-owned banks.


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