Bond Market Insights - Thurs, 15 Sept 2022

China IG remained firm tone despite CPI on Wednesday. Fast money accounts were trying to short 10-year papers initially, to hedge overall risk, but reversed as real money stepped in as buyers, pulling spreads back to unchanged.


In the property sector KWG front end continued to rally after news of the exchange offer, up 20 points. Roadking was up 3pts on persistent buying from private banks and retail. The Property sector is doing well this morning on the back of a ReDD article citing President Xi approving homebuying relaxation in most of China’s cities.


Through August monthly returns on the Markit iBoxx USD China Real Estate Index were 9.16%, split 14.39% for HY and 5.29% for IG. Onshore, Longfor Group issued Rmb1.5bn 3yr MTNs at 3.3%, thanks to credit enhancement provided by China Bond Insurance. Binjiang Real Estate and Midea Real Estate Holding issued 2Y MTNs at 4.8%, slightly higher than their last financings.

The only offshore USD bond in August was a US$250mn 3yr bond at 5.2% from Red Star Macalline Group, backed by a standby letter of credit (SBLC) from Bank of Shanghai (Beijing branch). Redemptions vastly exceeded supply, by a nett amount of -US$3.69bn. If one widens that to include onshore issuance and trusts the nett redemptions add up to CNY90bn, around US$12.9bn.


Real estate redemptions will continue at quite a pace this month with around US$5bn of US$ bonds and a total of around CNY80bn of onshore bonds and trusts maturing. Onshore puttable bonds could add to this number (Seazan and Agile in particular)


Fosun was under pressure throughout Wednesday’s session, closing down another 4-6pts, with the long end trading below $40, despite reassurances and denials from the group CFO, saying that rumours of it being under scrutiny by the biggest banks were completely false


Gaming gave back some of the recent gains, down between 1-3pts. There were better buyers of Wynn Macau and Melco.

Submission for Macau’s gaming concession tender closed with 7 bids for Macau's 6 gaming concessions, the current incumbents being joined by GMM Limited. Although 8 bids are required for the tender to proceed it’s expected that Macau’s Chief Executive Mr Ho, not THE Mr Ho, will waive this to allow the bid process to commence.

Results are expected in November, concessions will expire 31/12/22. GMM was incorporated this July in Macau and has a strong line up of Genting personnel, including the Chairman, President and CFO. This should be an interesting battle.