ASIA CREDIT CLOSE: Credit in cautious trading, China AMCs wider

Asian credit markets continued on a cautious note on Wednesday as geopolitical concerns weighed on sentiment with Chinese names trading generally wider.

"Investment-grade China credits widened today with AMCs (asset-management companies), such as Huarong, losing the most ground," said a Hong Kong-based credit trader, citing potential heavy supply from mainland issuers, as well as growing concerns over financial risks in the country, as factors.

China's stock indices fell today for the fourth straight session with the Shanghai Composite down 0.8% amid worries that tighter regulations against speculation and shadow banking would hurt the country's credit-fuelled recovery.

The Asia ex-Japan iTraxx IG index was 0.12bp tighter at 102bp/103bp.

China Huarong's existing 2026s were quoted 7bp wider than yesterday's closing price, while State Grid's 2026s were bid 2bp wider. Both are meeting investors this week to discuss new issuance.

Korean names were also under pressure with Korea Resources' new 2022s seen bid 4bp wider than its reoffer price.

In the high-yield segment, China Hongqiao's 2017s were bid at 97.345 in cash price, little changed from yesterday's closing, but off last Thursday's 98.

China Hongqiao's notes "have recovered a few points after the company 'appealed' to the authorities for help, but may be under pressure again after the resignation of Weiqiao Textile's auditor", Lucror Analytics said in a note.

Yesterday, Weiqiao Textile, sister company of China Hongqiao, announced the resignation of its auditor, E&Y, as the company refused to engage an independent third party to investigate the audit findings that were raised in March.

Reuters News
April 19, 2017, 04:46:00 EDT

Reporting by Ina Zhou; Editing by Dharsan Singh