Conduit Bond Snapshot - 04 Oct 2021

Updated: Oct 19, 2021

Today's Market Snapshot from Conduit Securities Pte Ltd.



 

Commentary


The bond market is stressing over the Evergrande’s US$ bonds, which have a total face value of around US$4.2bn. The story of a small regional bank exposes a far larger risk. Evergrande is alleged to have US$20 bn in “direct and indirect” loans to Shengjing Bank, a small local bank that in 2Q21 had stated equity of around US$12.6bn. The SOE Shenyang Shengjing Finance Investment Group was quick to jump in. This pushes local government funding structures to the fore. Local government funding vehicles have been used by successive CCP Presidents to boost GDP. From President Hu after the GFC to President Xi as Covid 19 hit. LGFV’s stood at around US$8.2 trillion as of the end of 2020, up from $2.47 trillion in 2013. Will this bubble of borrowing burst? Who knows, but with shrinking avenues for financing or re-financing due to the the crackdown on shadow banking there will be more stress in the sector. GDP is slowing once more. August retail sales, industrial production and FAI all surprised to the downside the current power outages and continued shutdowns will exacerbate the situation. Where will the authorities turn?


In Europe time inflation weighed on equities on Friday as Eurostat announced September Eurozone inflation rate at 3.4%, up from 3% last month and the highest level in 13 years. Core inflation surged to 1.9%, flirting with the ECB target of 2%. That all changed when news that a pill, Molnupiravir, produced by Merck significantly reduced the risk of serious Covid in trials. The road to getting this to the general population will be long, but markets jumped at the good news. The inflation story is not going to go away though. IG Metal, an ogre of old, is threatening strikes unless its demands for 4.5% wage increases is met. Being Europe’s biggest union others are bound to follow.


In this morning's news a regulatory filing with HKSE said that shares in Evergrande and Evergrande Property Services Group and all structured products relating to the company will be halted from trading. EVERRE 25's are priced around 24.00, while TIANHL are around 18.00.


Sovereign Benchmarks

Sovereign Benchmarks


Fixed Income Total Return Indices

Fixed Income Total Return Indices


Credit Indices

Credit Indices


FX & Commodities

FX & Commodities


Equity & FX Volatility

Equity & FX Volatility

 
Disclaimer
The information and data contained herein are strictly confidential and for information purposes only, and shall not be construed as investment advice, an offer, or solicitation, to deal in any securities. The information is not to be reproduced or transmitted, in whole or in part, to third parties, without the prior consent of the Company. This information is not directed at or intended for distribution to any person or entity who is a citizen or resident of, or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject the Company to any registration or licensing requirement. This information has not been reviewed or authorized by the Monetary Authority of Singapore, or any regulatory authority elsewhere. Consequently, you should not act or rely upon the information contained herein without seeking professional counsel. The information contained herein may contain statements that are not purely historical in nature, but are “forward-looking statements”. This includes, among other things, projections, forecasts, targets, samples or proforma investment structures, portfolio composition models and hypothetical investment strategies. These forward-looking statements are based on certain assumptions and actual events may differ from those assumed. Neither the Company nor any of its respective affiliates make any representations as to the accuracy of these forward-looking statements or that all appropriate assumptions relating thereto have been considered or stated and none of them assumes any duty to update any forward-looking statement. Accordingly, there can be no assurance that estimated returns or projections can be realized, that forward-looking statements will materialize or that actual results will not be materially different or lower than those presented. Please note that the Company and/or its related companies, and investment staffs, may from time to time hold direct or indirect economic interests via non-controlling stakes into underlying Funds’ Investment Advisory Companies that control the Funds into which the Conduit Partners’ Capital Fund invests. Past performance is no guarantee of future results, and there is no assurance that the investment’s objectives will be achieved. In addition, certain financial information is contained herein. While the Company has made reasonable efforts to include information from sources that it believes to be reliable, the timeliness, accuracy and completeness of the underlying information, and any computations based thereon, cannot be assumed. While the Company has attempted to minimize errors, it has not verified, nor does it guarantee or warrant, the accuracy, validity, timeliness, completeness or suitability of such information and data. The Company is not responsible for any trading decisions, damages or other losses related to the information or its use. Please note that our references to a “Tradeflow USD/EUR Series” herein is made specifically to the CEMP – USD/EUR Tradeflow Fund, ISIN NUMBER: KYG1988M6375/KYG198751300. Conduit Pte. Ltd. is a part owner the referenced commodity trade finance fund’s investment advisor, Tradeflow Capital Management. The Company is currently invested in, and receives compensation for referenced Fund distribution and rebates on direct Fund investments from the Conduit Partners’ Capital Fund into the CEMP – USD/EUR Tradeflow Fund. For references to “VPAM Asian Macro” herein is made specifically to the “Vantage Point Asian Macro Fund”, the Company received compensation for the referenced Fund distribution and rebates from Vantage Point Asset Management Pte. Ltd.