APAC Credit Roundup: Weekly Review: Week ended July 31

Research evidence excerpt

APAC Credit Roundup: Weekly Review: Week ended July 31

m optimism is tempered by risks from rate

volatility, a likely outsized post-Labor Day supply surge, ongoing geopolitical uncertainty,

and political catalysts including US government funding deadlines, the midterms, and

possible Fed hikes.

Asia financials - China financials have returned 2.0% YTD

The sector performed largely in line with the broader market last week. JACI financial

spreads were unchanged at 81bp, versus a 1bp tightening in the JACI. On a total return basis,

Asia financials gained 0.15%, with 0.07% of the return attributable to moves in US Treasury

yields. Asia financials traded flat versus JULI financials, which tightened by 1bp w/w to

81bp. Hong Kong and Taiwan financials saw spreads tightening, with spreads coming in 2bp

and 1bp, respectively. India was the worst-performing sector, with spreads moving 3bp wider.

Markets continue to fret about the possibility of new supply repricing secondary markets.

Last week, HDFC Bank (bond ticker: HDFCB) announced (link) the conclusion of its internal

probe into inappropriate lending related to the Maharashtra roads department. The bank

penalized three senior officials, stating that their conduct constituted business overreach,

while finding no malicious intent. This may bring some internal closure, but class action

lawsuits are still being pursued in the US, and we believe there is a risk that questions about

governance will linger. More important for credit markets was the bank’s recent

announcement that it will redeem its 3.7% Additional Tier 1 (AT1) on the first optional call

date, 25 August. We have an Underweight recommendation on the 5.18% 2029 senior bond,

which is offered at z+88bp (SOT2+76bp, $100.4, 5.0%). China financials also lagged other