ASIA CREDIT CLOSE: Quiet trading day due to holidays in US and UK; Thai Banks widen

Mon May 26, 2014 5:09am EDT

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SINGAPORE, May 26 (IFR) - There was little trading activity in Asia today with both the US and UK markets closed for national holidays.

Yields on Thai banks widened 5bp following a Moody's release this morning that the military coup is credit negative for Thai banks. The release said this is "because it [the coup] adds pressure to already weakened investor and consumer confidence and risk stalling loan growth and undermining asset quality".

In the first quarter of 2014, Thai bank lending grew just 1.2% quarter-on-quarter, the slowest pace since the third quarter of 2010. Moody's expects Thai bank loan growth to be lower than its forecast of 7%-8% before the coup, much lower that the average increase of 13% for 2011 and 2013.

In contrast, Indonesia's longer-dated sovereign paper rose a further 25 cents to 37.5 cents. The 2044s were indicated at bid-117.25, up 25 cents. Pertamina's newly printed bonds also inched up 25 cents to bid-101.25, according to a Singapore-based trader.

In the high-yield segment, Chinese property bonds are still being closely watched, although there was little trading.

"Investors are waiting for more stimulus policies from the central government before taking actions," said another Singapore-based trader.

Yet, a Hong Kong-based trader believes the central government is not likely to announce any concrete loosening measures. "Developers in certain Chinese cities with excess supply will suffer and there is little the central government could do. Still, demand in top-tier cities is still strong," he said.

Premier Li Keqiang said last week that China would fine-tune policy when needed to solve problems, such as tight funding conditions for the real economy, especially for small companies.

The market is still digesting Sunac China Holdings' acquisition of a 24% stake in Greentown China Holdings announced last Thursday.

Greentown's 2018s, quoted at 98.5/99 today, still have not bounced back to the par level before the rumour about the acquisition initially came out two weeks ago. Market players generally believe the stake sale is neutral for Greentown.

"As Sunac and Greentown have been cooperating for a long time, there should be little operational risk," said the Hong Kong-based trader.

The stake buy is considered credit negative for Sunac, however, as the Tianjin-based company is not in a strong financial position to begin with. Sunac's 2018s were indicated below the around par level when the news first leaked. They were quoted at 98/99 this afternoon, with little trading.

Overall, investors are worried that, post acquisition, Greentown will become operationally more aggressive as Sunac is more managed in such a way.

Greentown chairman Song Weiping will retire as company chairman from March 2015, while Sunac chairman Sun Hongbin will act as co-chairman before the date and then become the sole head.

The lack of information on what Wharf Holdings will do with its 24% in Greentown did not offer investors any comfort either.

"If Wharf ultimately sells its stake to Sunac, it will definitely be credit negative for Greentown," said the Hong Kong-based trader.

Lianting.tu@thomsonreuters.com

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