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Bond Market Insights - Tues, Aug 30 2022

On Monday, amidst light activity due to a UK bank holiday, the market weakened after Friday’s Jackson Hole speech highlighting ongoing concern for US inflation. Investment grade SOE benchmarks were 2-3bps wider, TMT wider by 5-10bps. Bank AT1s slipped 0.25pt and while gaming names tumbled 1-2pts. HY markets were also sloppy.

News of possible enforcement of Sino Ocean Land’s (SINOCE) keepwell agreement for its domestic affiliate's debt led to a 10-12pt drop in their bonds. The rest of the property curve followed the decline, COGARD and CIFIHG fell 2-5pt; FUTLAN fell 2-3pt at one point but recovered slightly on the news of the domestic issuance of SOE guaranteed bonds. The rest of the HY space fell between 1-4pts

Today is proving more positive, although volumes are still subdued. Huarong Finance (HRINTH) rallying 1-2pt on results and the raising of capital via perps at 4.3% to bring the capital adequacy ratio to 12.7% which meets the regulatory requirement. The Ministry of Finance remains Huarong’s larges shareholder as of the end of 1H22, holding 27.76%. The anticipated transfer of 3% to CITIC Group has not yet been completed. CITIC currently owns 23.46% of the share capital.

CIFI announced 1H22 results. Core net profit declined 45.5% Y/Y, in line with expectations. They stayed in the “green”, according to the 3 red lines, with

· Stable asset to liability ratio (excl. sales deposits) at 67.7% (69.7% at end-2021), the cut off is 70%;

· Net gearing ratio rose to 78.5% (vs.62.8% at end-2021), this has to be less than 100%

· cash to short-term debt coverage at 1.6x (2.6x at end-2021), has to be more than 1x

India HY renewables sector is under pressure as Azure Power Global (AZUPOE) announced the resignation of CEO Harsh Shah with immediate effect. Harsh Shah was appointed CEO on 1 July 2022 after the resignation of the previous CEO (Ranjit Gupta) and COO (Murali Subramaniam) in April 2022. This follows the holding company's failure to release audited accounts and a whistleblower complaint back in May. AZUOPOE 5.65 24 and AZUPOE 3.575 08/26 slipped over 25 points and are now in the 45 - 53 range.


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