mashreq Fixed Income Trading Daily Market Update Market Update • • • • • • • Tuesday, April 14, 2015 World Cup plan amid slumping oil prods Qatar banks to sell bonds Qatari banks plan to borrow more than USD6 billion in the near term to finance a construction boom ahead of the 2022 soccer World Cup as slumping oil prices constrain government deposits. Shareholders in Al Khaliji Commercial Bank QSC approved a USD2.5 billion bond program on Feb. 25, and Qatar National Bank SAQ said March 17 it arranged a USD3 billion loan. Qatar International Islamic Bank may issue sukuk, or Islamic bonds, it said on Feb. 19. Government deposits at Qatar’s banks more than tripled in the five years ended February 2014 before declining 4% the following year, central bank data show. Qatar, a member of the Organization of Petroleum Exporting Countries, is spending USD182 billion, or 90% of its 2013 gross domestic product, on roads, stadiums and other facilities by 2019 to play host to the World Cup. Banks will probably boost lending to USD239 billion in 2018 to cater to a population that grew 9.5% last year, according to a Qatar National Bank report in February. (Bloomberg) OPEC seen wrong by Oman picking market share over oil price OPEC is making a mistake by seeking to preserve its share of global crude sales amid a global production glut instead of trimming output to prop up prices, according to Oman’s oil minister. “I think they are wrong, those who are sticking to market share and cutting their income by half,” Mohammed Al-Rumhy said at a news conference in Muscat on Monday. Al-Rumhy’s remarks about the Organization of Petroleum Exporting Countries follow similar comments by Samir Kamal, the group’s representative from Libya, who said on April 9 that OPEC should curb output to accommodate any possible lifting of oil sanctions on Iran. Oman on the Arabian Peninsula is the largest regional oil producer that’s not an OPEC member. The group’s members should meet with non-OPEC producers to discuss cutting output to redress oversupply, Al-Rumhy said. OPEC’s decision not to cut production is a “non-starter” for countries outside the organization, he said. Brent for May settlement advanced 51 cents to USD58.44 a barrel on the London-based ICE Futures Europe exchange on Tuesday. (Bloomberg) Saudi non-oil exports dropped 19.9% in February 2015 According to the Central Department of Statistics & Information (CDSI), Saudi Arabia’s imports rose 1.6% YoY in February 2015, while non-oil exports dropped 19.9%. Non-oil exports traditionally account for around 12% of the country’s overall exports. As per the latest report by Jadwa Investment, the value of non-oil exports declined in January 2015, reflecting an impact of lower prices, since volumes exported recorded a monthly increase to 3.9mn tons in January 2015 from 3.7mn tons in December 2014. Similarly, imports in January fell by 9.4% MoM and 9.1% YoY. During February 2015, government deposits and reserves fell by SR30bn and SR100bn, respectively. (GulfBase.com) Mubadala GE Capital: No plans to change shareholdings Mubadala GE Capital, a venture between Abu Dhabi state fund Mubadala and GE Capital, said that its ownership would remain unchanged despite General Electric's (GE) decision to divest from its finance unit. Earlier on April 10, 2015, GE said that it would shed most of GE Capital and return as much as $90bn to shareholders as it became a simpler industrial business instead of an unwieldy hybrid conglomerate of banking and manufacturing. (Reuters) DEWA to invest AED30bn to rise solar capacity, seeks involvement in Egypt The Dubai Electricity & Water Authority’s (DEWA) Managing Director & CEO, Saeed Al Tayer said that the company will invest AED30bn to increase the power capacity of Shaikh Mohammad Bin Rashid Al Maktoum Solar Park. Currently, the park is generating 13 megawatts (MW) of electricity. He said the solar park is one of the largest renewable energy projects in the region with a planned capacity of 1,000 MW by 2019 produced at a cost of AED12bn and by the completion phase in 2030, its capacity will be increased up to 3,000 MW at a cost of AED30bn. Meanwhile, DEWA is also is looking to participate in energy projects in Egypt and keen to lend its expertise. (GulfBase.com) India CPI unexpectedly eases, boosting odds of another rate cut India’s retail inflation unexpectedly slowed despite crop damage from unseasonal rains, boosting the possibility that central bank Governor Raghuram Rajan will cut rates outside the review cycle for a third time this year. Consumer prices rose 5.17% in March from a year earlier after a 5.37% increase in February, the Statistics Ministry said in a statement in New Delhi on Thursday. The median of 38 estimates in a Bloomberg survey of economists had predicted a 5.41% gain. Rajan refrained from lowering borrowing costs at a scheduled review last week as he waited for commercial lenders to pass on two previous cuts to customers. He said his next move would depend on data showing the balance of risks to inflation, which he’s mandated to keep below 6 % by January. While’s India’s inflation has slowed from an average of 6.7% last year, it is still the second-fastest in Asia after Indonesia. (Bloomberg) India's fiscal improvements vulnerable to shocks Standard and Poor's (S&P) warned that India's hard-won fiscal improvements could fail to withstand an external shock, given ‘less than rock solid’ public finances that pose a concern for its sovereign rating profile. The rating agency lauded India's efforts to increase capital expenditure by more than 25% in 2015-16, versus an average rise of 5.4% since 2011-12. However, it expressed concerns that the spending plans could also be hit if India failed to raise the amount targeted from the sale of stakes in state-run firms. India, constrained by a modest average income level and the government's weak fiscal position, has a BBB- rating from S&P, with a "stable" outlook. (Reuters) Page 1
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mashreqFixed Income Trading
Daily Market Update
Market Update
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Tuesday, April 14, 2015
World Cup plan amid slumping oil prods Qatar banks to sell bonds
Qatari banks plan to borrow more than USD6 billion in the near term to finance a construction boom ahead of the 2022 soccer World Cup as slumping oil
prices constrain government deposits. Shareholders in Al Khaliji Commercial Bank QSC approved a USD2.5 billion bond program on Feb. 25, and Qatar
National Bank SAQ said March 17 it arranged a USD3 billion loan. Qatar International Islamic Bank may issue sukuk, or Islamic bonds, it said on Feb. 19.
Government deposits at Qatar’s banks more than tripled in the five years ended February 2014 before declining 4% the following year, central bank data
show. Qatar, a member of the Organization of Petroleum Exporting Countries, is spending USD182 billion, or 90% of its 2013 gross domestic product, on
roads, stadiums and other facilities by 2019 to play host to the World Cup. Banks will probably boost lending to USD239 billion in 2018 to cater to a
population that grew 9.5% last year, according to a Qatar National Bank report in February. (Bloomberg)
OPEC seen wrong by Oman picking market share over oil price
OPEC is making a mistake by seeking to preserve its share of global crude sales amid a global production glut instead of trimming output to prop up prices,
according to Oman’s oil minister. “I think they are wrong, those who are sticking to market share and cutting their income by half,” Mohammed Al-Rumhy
said at a news conference in Muscat on Monday. Al-Rumhy’s remarks about the Organization of Petroleum Exporting Countries follow similar comments by
Samir Kamal, the group’s representative from Libya, who said on April 9 that OPEC should curb output to accommodate any possible lifting of oil sanctions
on Iran. Oman on the Arabian Peninsula is the largest regional oil producer that’s not an OPEC member. The group’s members should meet with non-OPEC
producers to discuss cutting output to redress oversupply, Al-Rumhy said. OPEC’s decision not to cut production is a “non-starter” for countries outside the
organization, he said. Brent for May settlement advanced 51 cents to USD58.44 a barrel on the London-based ICE Futures Europe exchange on Tuesday.
(Bloomberg)
Saudi non-oil exports dropped 19.9% in February 2015
According to the Central Department of Statistics & Information (CDSI), Saudi Arabia’s imports rose 1.6% YoY in February 2015, while non-oil exports
dropped 19.9%. Non-oil exports traditionally account for around 12% of the country’s overall exports. As per the latest report by Jadwa Investment, the
value of non-oil exports declined in January 2015, reflecting an impact of lower prices, since volumes exported recorded a monthly increase to 3.9mn tons in
January 2015 from 3.7mn tons in December 2014. Similarly, imports in January fell by 9.4% MoM and 9.1% YoY. During February 2015, government
deposits and reserves fell by SR30bn and SR100bn, respectively. (GulfBase.com)
Mubadala GE Capital: No plans to change shareholdings
Mubadala GE Capital, a venture between Abu Dhabi state fund Mubadala and GE Capital, said that its ownership would remain unchanged despite General
Electric's (GE) decision to divest from its finance unit. Earlier on April 10, 2015, GE said that it would shed most of GE Capital and return as much as $90bn
to shareholders as it became a simpler industrial business instead of an unwieldy hybrid conglomerate of banking and manufacturing. (Reuters)
DEWA to invest AED30bn to rise solar capacity, seeks involvement in Egypt
The Dubai Electricity & Water Authority’s (DEWA) Managing Director & CEO, Saeed Al Tayer said that the company will invest AED30bn to increase the
power capacity of Shaikh Mohammad Bin Rashid Al Maktoum Solar Park. Currently, the park is generating 13 megawatts (MW) of electricity. He said the
solar park is one of the largest renewable energy projects in the region with a planned capacity of 1,000 MW by 2019 produced at a cost of AED12bn and by
the completion phase in 2030, its capacity will be increased up to 3,000 MW at a cost of AED30bn. Meanwhile, DEWA is also is looking to participate in
energy projects in Egypt and keen to lend its expertise. (GulfBase.com)
India CPI unexpectedly eases, boosting odds of another rate cut
India’s retail inflation unexpectedly slowed despite crop damage from unseasonal rains, boosting the possibility that central bank Governor Raghuram Rajan
will cut rates outside the review cycle for a third time this year. Consumer prices rose 5.17% in March from a year earlier after a 5.37% increase in
February, the Statistics Ministry said in a statement in New Delhi on Thursday. The median of 38 estimates in a Bloomberg survey of economists had
predicted a 5.41% gain. Rajan refrained from lowering borrowing costs at a scheduled review last week as he waited for commercial lenders to pass on two
previous cuts to customers. He said his next move would depend on data showing the balance of risks to inflation, which he’s mandated to keep below 6 %
by January. While’s India’s inflation has slowed from an average of 6.7% last year, it is still the second-fastest in Asia after Indonesia. (Bloomberg)
India's fiscal improvements vulnerable to shocks
Standard and Poor's (S&P) warned that India's hard-won fiscal improvements could fail to withstand an external shock, given ‘less than rock solid’ public
finances that pose a concern for its sovereign rating profile. The rating agency lauded India's efforts to increase capital expenditure by more than 25% in
2015-16, versus an average rise of 5.4% since 2011-12. However, it expressed concerns that the spending plans could also be hit if India failed to raise the
amount targeted from the sale of stakes in state-run firms. India, constrained by a modest average income level and the government's weak fiscal position,
has a BBB- rating from S&P, with a "stable" outlook. (Reuters)
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mashreqFixed Income Trading
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Tuesday, April 14, 2015
Lira slides to record amid bets election may weaken AKP majority
The lira fell to a record and Turkish bonds and stocks declined on speculations that June elections may diminish the AK Party’s majority adding to selling
pressure driven by the prospect for higher U.S. interest rates. The currency lost as much as 1.1% to 2.6573 per dollar, bringing this year’s rout to 12%, the
third-worst performer among 24 emerging-market peers tracked by Bloomberg. Opinion polls in the past three weeks have shown waning support for the AK
Party, from which President Recep Tayyip Erdogan hails. Yields on two-year government notes climbed for a fifth day to a four-week high of 8.89%, while
the Borsa Istanbul 100 Index lost 0.9%. The AKP’s three-term limit will bar Deputy Prime Minister Ali Babacan, viewed by some as integral to the country’s
economic management, from running for parliament. This is contributing to selling pressure as prospects for the Federal Reserve to start raising interest
rates for the first time since 2006 damped demand for emerging-market currencies this year, leaving the lira vulnerable to outflows. One opinion poll showed
the main Kurdish party, the People’s Democratic Party, poised to attain the 10% vote it needs to enter parliament. The AK Party has managed a single-
party government for 13 years. (Bloomberg)
China junk bonds pose most risk since ’04 on credit-quality dips
Investors in Chinese junk bonds are taking the biggest gamble in at least a decade. Leverage for speculative-grade Chinese companies is at its highest since
at least 2004, whether measured by earnings relative to interest expense or total debt to a measure of cash- flow, according to data compiled by Bloomberg
using a Bank of America Merrill Lynch index. Borrowers have also piled on the most debt relative to their assets since 2007. The deterioration in credit
quality coincides with the slowest annual growth since 1990 for Asia’s biggest economy, and helps explain why Fitch Ratings Ltd. predicts defaults will climb.
That’s bad timing for bond investors who swallowed a record USD209.2 billion of Chinese-company notes denominated in either dollars, euros or yen last
year, Bloomberg data show. The typical high-yield company in China earned an average 2.7 times the interest they paid in 2014 and has about 35.5 times
more debt than their yearly operating income, according to data compiled by Bloomberg using Bank of America Merrill Lynch index data. Average debt taken
out by the 65 companies in the index climbed to 34.3% of assets. (Bloomberg)
Malaysia raising USD2 billion as worst Asia currency saps reserves
Malaysia is tapping the USD bond market for the first time in four years as it burns through foreign-exchange reserves defending Asia’s worst currency. The
government is poised to sell as much as USD2 billion of Islamic notes this week, one month after state-owned Petroliam Nasional Bhd. issued a record USD5
billion of sukuk and conventional debt in the U.S. currency. Malaysia’s foreign currency holdings fell 9.4% this year, the steepest first-quarter loss since the
1997 Asian financial crisis. The ringgit dropped 5.4%, compared with a 4.6% slump in the Indonesian rupiah. Malaysia, Asia’s only major oil-exporter, has
seen the cost of insuring its debt soar the most in the region this year as a slump in crude prices forced the government to raise its 2015 budget deficit
target. The yield premium on its existing dollar bonds over Treasuries has jumped 23 basis points this year to 123, as Fitch Ratings Ltd. warned it may cut
the nation’s debt ranking and state investment company 1Malaysia Development Bhd. was reorganized to curb its liabilities. (Bloomberg)
Petrobras board to review delayed 2014 audited results on April 22
Petroleo Brasileiro SA plans to release 2014 audited financial results April 22 after a five-month delay, averting a potential acceleration of debt payments.
The Rio de Janeiro-based oil producer, at the center of Brazil’s largest corruption scandal, said Monday it will present the long-delayed financial results to its
board and release them after approval. “The company expects to release these financial statements after the meeting, subject to a decision by the Board of
Directors,” Petrobras said in a regulatory filing. A lack of consensus over graft-related writedowns has delayed the release of earnings and temporally shut
Petrobras out of international bond markets at a time of slumping oil prices, threatening the company’s spending plans. If approved, the company will meet
an end-May deadline that, if missed, could potentially trigger an acceleration of payments on some debt. The board will review the 2014 third-quarter and
full-year results at the meeting, Petrobras said. Petrobras didn’t mention if a meeting previously set for April 17 will proceed. (Bloomberg)
Emerging market ETF inflows top USD2 billion, best week in a year
Investors added USD2.1 billion to U.S. exchange-traded funds that buy emerging-market stocks and bonds last week, the most in a year. Total deposits into
emerging-market ETFs that invest across developing nations as well as those that target specific countries compared with USD561.5 million in the previous
week and were the most since USD3.4 billion during the week of April 7, 2014, according to data compiled by Bloomberg. Stock funds collected USD1.8
billion and bond funds advanced by USD253.9 million. The MSCI Emerging Markets Index climbed 4% in the week. The biggest change was in China and
Hong Kong, where funds collected USD594.8 million, compared with USD320.5 million of inflows the previous week. Investors contributed USD595.8 million
to stock funds and removed USD900,000 from bonds. The Shanghai Composite Index advanced 4.4%. The yuan weakened 0.23% against the dollar and
implied three-month volatility is 2.1%. India had the next-biggest change, with ETF investors adding USD335.7 million, compared with USD65.2 million of
inflows the previous week. Stock funds grew by USD335.6 million and bond ETFs increased by USD100,000. The S&P BSE Sensex gained 2.2%. The rupee
appreciated 0.28% against the dollar and implied three- month volatility was at 6.7%. (Bloomberg)
ECB bond-buying slows as QE enters second month
The European Central Bank (ECB) bought €9.159bn worth of government bonds in the fifth week of its quantitative easing (QE) program, a slower pace than
a week earlier and below the average amount needed to keep the program on track. Having made a smooth start to its QE program, the lackluster amount
purchased this week is unlikely to set alarm bells ringing. Under the QE program, which started in early March 2015, the ECB aims to purchase €60bn of
securities a month (bonds, ABS and covered bonds) until September 2016 or beyond, that if needed to see a sustained adjustment in the inflation path back
toward the ECB's target of just under 2%. (Reuters)
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mashreqFixed Income Trading
Daily Market Update
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Rating Update
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New Issue Update
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Fitch Affirms Indian Oil Corporation at 'BBB-'/Stable
Fitch Ratings has affirmed Indian Oil Corporation Ltd's (IOC) Long-Term Foreign-Currency Issuer Default Rating (IDR), its senior unsecured rating and
ratings on its outstanding senior unsecured debt at 'BBB-'. The Outlook is Stable.
Tuesday, April 14, 2015
EU working with Italy to solve bad loan issue
The European Commission (EC) Vice President Valdis Dombrovskis said that the commission is helping Italy find solutions to its bad bank loans, raising hopes
that Rome's efforts to solve one of its biggest economic problems is not being ignored in Brussels. He said the EU's executive body was also working with
other capitals over how to help the region's banks offload piles of non-performing loans. Italy has around €186bn of bad loans. Meanwhile, he said Greece is
not moving fast enough to draw up and implement structural reforms and there is limited time to prevent it running out of cash. An April 9 meeting of
deputy finance ministers, called the Euro Working Group, gave Athens a deadline of six working days to present a revised economic reform plan, before
eurozone finance ministers meet on April 24 to decide whether to unlock emergency funding to keep Greece afloat. (Reuters)
BoJ sees economy improving region by region, keeps upbeat view
The Bank of Japan (BoJ), in a quarterly report, raised its economic assessment for three of Japan's nine regions, signaling that the benefits of its stimulus
program was broadening. The central bank kept its optimistic assessment for the remaining six regions intact, stressing that solid demand at home and
overseas are underpinning the output and job market. The BoJ Governor Haruhiko Kuroda said that Japan's economy is likely to continue recover moderately
as a trend. The central bank will issue fresh long-term economic and inflation forecasts at the next rate review on April 30, 2015. (Reuters)
Fitch affirms US AAA rating on financial flexibility
Fitch Ratings has affirmed the AAA credit rating for the US, citing the strength of the nation’s economy, capital markets and status as the issuer of the
world’s reserve currency. Fitch said the outlook for the rating is stable. The rating agency said that the economic growth in the US has been faster than that
in most of the developed economies, and the nation benefits from its diversity and technological advancements, bolstered by strong institutions and a
favorable business climate. Fitch added that the budget deficit, which has narrowed from a peak of $1.4tn in 2009 to $483.3bn in 2014, is expected to
continue to shrink in 2015 and 2016, though reforms for mandatory spending and taxation measures will be needed to prevent increases after 2018.
(Bloomberg)
Fitch Downgrades Yancoal to 'BB-'; Outlook Negative
Fitch has downgraded Yanzhou Coal Mining Company Limited's (Yancoal) Long-Term Issuer Default Rating (IDR) to 'BB-' from 'BB+'. The Outlook is
Negative. Simultaneously, Fitch has downgraded the rating on the USD1bn dual-tranche notes issued by Yancoal International Resources Development Co.,
Ltd and guaranteed by Yancoal to 'BB-' from 'BB+', and the ratings on the US dollar senior perpetual capital securities issued by Yancoal International
Trading Co., Ltd and guaranteed by Yancoal to 'B+' from 'BB'.
Ahli United Bank announces roadshows for a new Tier 1 issue
Ahli United Bank B.S.C., rated BBB+/BBB+ by S&P/Fitch (both with a stable outlook), has mandated Goldman Sachs International, HSBC and Morgan
Stanley as Joint Lead Managers and Bookrunners, to arrange a series of fixed income investor meetings in Europe, Asia and the UAE commencing on 16 April
2015. A Reg S USD Additional Tier 1 Capital issuance may follow, subject to market conditions.
Roadshow Schedule
16th April - Singapore
17th April - Hong Kong
19th April - Abu Dhabi / Dubai
20th April - London
21st April - Zurich / Geneva
PT Pelabuhan Indonesia II appoints arrangers for a new bond issue
PT Pelabuhan Indonesia II (Persero), expected to be rated Baa3 (Stable) by Moody’s / BB+ (Stable) by S&P / BBB- (Stable) by Fitch, has appointed ANZ,
BNP PARIBAS, Citigroup, Bahana Securities and Danareksa Sekuritas to arrange a series of fixed income investor meetings in Asia, Europe and the U.S.
commencing on April 15, 2015. IPC is 100% owned by the Government of Indonesia and is the largest container port operator in the country. An offering of
144A/Reg S USD-denominated senior unsecured notes may follow subject to market conditions.
FirstRand Bank Limited appoints arrangers for a new bond issue
FirstRand Bank Limited, rated Baa2 (stable) by Moody’s, BBB- (stable) by Standard & Poor’s and BBB (negative) by Fitch, has mandated Bank of America
Merrill Lynch, BNP Paribas, Rand Merchant Bank and Standard Chartered Bank to arrange on its behalf a series of fixed income investor meetings in Asia, the
Middle East and Europe, commencing on Friday 17th April. A USD denominated Reg S only Senior Unsecured transaction may follow subject to market
conditions.
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mashreqFixed Income Trading
Daily Market Update
Change Change USD EUR AED
Spread Day YTD Last 1d Chg Last 1d Chg Last 1d Chg