Markets weaker, but funds still holding cash

SINGAPORE - Another weak day in credit kept the offshore market closed, as the Asia ex-Japan iTraxx investment-grade index widened 3bp to 158bp/160bp.

Greater China equity markets had another day to forget, with the Shanghai index down 6 per cent at time of writing and the Hang Seng more than 2 per cent lower.

Sovereign CDS for South Korea and the Philippines were the biggest movers today, widening 7bp and 6bp, respectively.

Australia was unchanged as Australia Day brought activity there to a halt, while the Japanese iTraxx conversely tightened 2bp to 76.25bp/79.25bp.

Asian credit moved out 7bp last week, putting it 25bp wider year to date, with Indian credits the worst performers at 50-60bp wider.

One analyst noted that Asia-focused credit funds were holding large levels of cash, meaning, even if their clients exited, the funds would not need to liquidate their holdings to repay them.

Coupons and redemptions are expected to total US$75bn this year, which will provide some support to secondary prices, especially if primary issuance continues at the subdued rate seen so far.

There was a continued sell-off in Future Land Development Holdings' dollar. Its 2017s lost more than a point today and were bid at 92.6, nearly three points lower than Monday morning.

Its 2019s fell three-quarters of a point to 97.0, having been bid as high as 99.5 on Monday.

Moody's yesterday lowered the outlook to negative on its B1 rating for Future Land's senior unsecured bonds, after the developer announced that the authorities in Changzhou were investigating its chairman, Wang Zhenhua.