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Bond Market Insights - Tues, 5 July 2022

Slow days with holidays in Hong Kong on Friday and US on Monday. Asia credit underperformed equities and CDS as Monday opened and spreads widening. Sinopec (A+) and China National Chemical (BBB+) 10yr trading 10bps wider.

China AMC’s were also weak, China Great Wall (BBB+), one of the bad banks, was down between -0.5pt to 5pt as it delayed publishing their 2021 Annual Report for the second time. This sparked off fears of another Huarong type crisis, where the State orchestrated a bail-out of $6.3bn equivalent, after revealing a loss of CNY 102.9bn for 2020.

China HY was soft with not much in the way of good news. Shimao Group failed to redeem $1bn 4.75% July 3, 2022 Notes. The default was expected as the company had already failed on other debt facilities and private notes. It is remarkable that Shimao was an IG rated company as recent as Dec 2021. Admiralty Harbour Capital and Sidley Austin have been appointed as advisers:

Powerlong announced it was working with Haitong for solutions to its problems and an exchange offer has been announced. $200mm PWRLNG 4% 25/7/22 and $300mm PWRLNG 7.125% 11/8/22 will be rolled into 7/2023 and 7/2024 notes respectively, subject to investor approval.

Ronshine is also shuffling the deck according to REDD as they failed to dissuade bond holders from exercising puts on two onshore bonds with a variety of enticements.

REDD also reports on another interesting event. Greenland Holdings has long been thought of as a state owned enterprise. It was started in 1992 to develop green belts around Shanghai, expanding overseas in 2014, with developments in LA, London and Sydney. In 2014 it got a back-door listing and vaulted into the SSE 50 Index. Greenland Holdings recently appeared as a “publicly-owned company” in a PBOC list demanding commercial banks report property developer exposure. Could this distancing by state governments from perceived owned entities become more prevalent?

India IG was market wider by 5-10bps. The Indian Government imposed windfall tax on refined products, which has impact on RILIN and other downstream companies. This is in reaction to the inflated profit environment in refining currently and media reports suggest that these duties will be reviewed fortnightly.


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