SGD Corporate Bonds – You Call This Junk ?
Do not jump the gun. The S$5bn high yield deals mentioned in the Singapore – Destination Junk article are mostly in the USD arena even if they were originated in Singapore. Stuff like the Vedanta Resources Plc (BB/Ba3) 6% 2019 USD 1.2 bio issue already covers 25% of the S$5 bio.
http://finance.yahoo.com/news/singapore-becomes-destination-junk-061716943.html
What a wonderful idea, I thought. Far sighted indeed. Originating in Singapore would also boost the legal industry by leaps and bounds during default litigation, arbitration and what not. We would need more lawyers and more bankers, create jobs for their army of assistants.
It got me to thinking what would pass off as junk in SGD space. If Vedanta is trading at 7% in its own right as a GBP2.8 billion company rated BB/Ba3 and listed in London, our little Mencast and beloved Oxley’s have it so good, don’t they ?
Not only do they pay near investment grade coupons and get away with it, customers ask for more of the same and we have Oxley re-openings !!
These are USD high yield.
| COUPON | MATURITY | MID YIELD | |||
| BANK RAKYAT INDONESIA | 2.95% | 2018 | 4.5 | BB+ | Baa3 |
| PT ADARO INDONESIA | 7.63% | 2019/callable | 6 | N.A. | Ba1 |
| INDOSAT PALAPA CO BV | 7.38% | 2020/callable | 5.75 | BB+ | Ba1 |
| COMFEED FINANCE BV | 6% | 2018/callable | 7.8 | BB- | N.A. |
| LONGFOR PROPERTIES | 6.75% | 2023/callable | 7.7 | BB | Ba2 |
| AGILE PROPERTY HLDGS LTD | 9.88% | 2017 | 6.9 | BB | Ba2 |
| COUNTRY GARDEN HOLDINGS CO | 7.50% | 2023/callable | 7.9 | BB- | Ba2 |
| SHIMAO PPTY HLDNG LTD | 6.63% | 2020/callable | 7.2 | BB- | B1 |
| EVERGRANDE REAL ESTATE | 13% | 2015 | 6.6 | BB- | B2 |
| SUNAC CHINA HOLDINGS LTD | 9.38% | 2018/callable | 9.1 | B+ | B1 |
| CIFI HOLDINGS GRP | 12.25% | 2018/callable | 10 | B | B2 |
| CITIC PACIFIC LIMITED | 6.80% | 2023 | 7.75 | BB | Ba1 |
| CHINA SHANSHIO CEMENT | 10.50% | 2017/callable | 8.15 | B+ | N.A. |
| WEST CHINA CEMENT | 7.50% | 2016/callable | 7.15 | B+ | B1 |
| MIE HOLDINGS CORP | 6.88% | 2018/callable | 9.25 | B+ | N.A. |
| FUFENG GROUP LTD | 7.63% | 2016/callable | 6.65 | BB | N.A. |
| VEDANTA RESOURCES PLC | 6% | 2019 | 7 | BB | Ba3 |
These are what I would categorise as high yield in SGD space for the issues this year. I consider their market cap and issue size in my rough assessment. Do note that this is a personal assessment and not a formal categorisation.
What high yield ? They are trading respectably for some lack of liquidity.
This is written from a personal investment perspective and when I read things like this below, I feel a sense of tragedy for the market.
“Foreign names come to Singapore because they know it is a viable and accessible market,” said a syndicate head of a foreign bank. “The Singapore bond market is still substantial, and getting along quite healthily despite the last few months of volatility.”
Viable and accessible = ignorant and uninformed and unsophisticated ?
substantial = alot of fools and their money to be parted ?
getting along quite healthily = illiquid so no one can sell and prices remain stable ?
Excuse me for being a tad cynical.
Actually, not rated doesnt mean ‘junk’ right? Some of the names there are quite reputable eg. CWT. People may associate these familiar names with lower yields… Big names like Courts are well known on the streets and thus there may be people simply buying based on the belief that they wont default?
Yes, agreed. I stand corrected that they are not to be considered junk. Compiled the list based on their small mkt cap as well.
Haha, yeah, I think the dick head of the foreign bank meant these exactly.
But he is true to certain extent. Many singaporean investors (I am one of these) are ignorant and so used to living in an artificially safe envionment maintained by a strong government…..
You are not bad. I have people ask me if all bonds are guaranteed by MAS. I wonder where his bank advisor is from.
Are HNW investors dumb too? Why are they snapping up unrated high yield bonds? Because of the yield? One of my friend was saying that more than 70% of these bonds are snapped up by private investors. The rest goes to the next tier of clients.. privileged banking customers or whatever they call it. How true is this?
No, they are not dumb. Buying bonds is a plain process and default probabilities are actually pretty low even for high yield. What we should be concerned about is if the pricing is fair. If the banks will lend money to “junk companies” at 7%, there is no reason for them to sell the bonds to the public at 5% ? Yet this is prevalent practice now (i will not make any accusations here to avoid trouble). And banks throw in the sweetener of leverage. That is mighty irresponsible, in my opinion, and essentially passing on the risk to the customer. But if everything goes as plan, everybody gets richer in the end.
My point exactly. When I say dumb I am referring to the way the HNWs snapped up these high yield bonds. The yields for some of these issues could have been higher if not these yield hungry investors snapping them up. The low interest rate environment n easy access to loans have perpetuated these problems. Fantastic times for not companies to raise money.
Only the rich gets richer as the poor does not have access to these bonds.
Btw, how’s your bond directory going?