ASIA CREDIT TRADING

This material has been prepared by a member of the Front Office department and does not constitute investment research. The material contained in this
commentary is intended solely for accredited, expert institutional investors and is provided for informational purposes onl y.

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CACIB Asia IG Rap

Monday, 26 September 2016

Maryellen.olson@ca-cib.com
+852 5544 7491

Switch Axe of the Week: Buy SUNSHG 21, Sell PINGLI 21

Sunshine Lifes (A3/S; bond: Baa1) SUNSHG 21s offers a 41 bp pickup over Ping An Lifes (A2/S; bond A3) PINANI
21 for a 1 notch lower credit rating.
th
Sunshines current market share of 2.1% ranks 12 in China life insurance market. Strong growth prospects exist for
Sunshine Life in the Chinese insurance market which ranks as the fourth largest in the world. Current insurance
premium penetration in China is low at 1.7% compared with developed economies like Singapore (5%) and Japan
(8.4%).
Sunshine Life has a stable credit profile. The company reported a good solvency ratio of 288% (end March 2016).
This compares favourably and Ping Ans of 219.7% (H116).

==> For investors interested in the switch we can:

==> Bid USD3mn PINGLI 2.875 21 @T5+124, 102.0, Z+125, to yield 2.38%
==>Offer USD3mn SUNSHG 3.15 21 @T5+166, 101.49, Z+166, to yield 2.79%
Investment Recommendation: Sell/Buy

Last Change: We last recommended the SUNSHG/PINGLI switch on May 6.

2016.

Credit Stories for the week ended Monday, 26 September 2016

Baosteel Group (Baa1/N; BBB+/S): Group announced on 22 September that it would merge with Wuhan Iron and Steel to create
the worlds second largest steel company with capacity of about 80mn tonnes. The merged entity will be renamed China Baowu
Steel Group. Baosteel will issue shares to acquire Wuhan in an all stock transaction valued at CNY3bn. The merger is viewed as part
of Chinas plan for restructuring SOE enterprises in industries with too much capacity. The Chinese government said to have a goal
of having the top ten steel companies in China account for 60% of output versus 40% currently. S&P place Baosteel Group on Credit
Watch Negative following the announcement while Moodys said the merger pressured the Groups credit ratings.

China Banks - S&P commented on 19 September that they see a 1 in 3 chance of lowering their anchor score on the China banking
systems to BB+ from Baa3, attributing their view to mounting credit risks. They also said they believe that the property market is
exposed to a risk of correction given the supply glut in small cities.

Greenland Holding Group (Ba1/N: ) On 20 September the Group announced that it has set up a financial services unit to engage in
global investment, management of overseas real estate and international asset investment. The unit also intends to establish an
overseas REIT with a scale of USD4-6bn. The announcement is a bit of a surprise as the Groups core expertise heretofore has been
in property management. Greenland is said to be one of Chinas top 3 property developers. According to Mingtiandi, Greenland
wants to add financial services and consumer/construction to its core business portfolio in addition to property development. The
securities business will initially offer advisory and asset management services in Hong Kong. In our view this is another example of
where China SOE reform is creating more complex corporates whose performance will be difficult to comp to sector peers.

Monday, 26 September 2016

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Indian Banks - Moody's published a comment on 19 September that asset quality in the Indian banking system was bottoming and
that the outlook on the sector was stable for the next 12-18 months. While asset quality is expected to remain negative in the near
to medium term the pace of deterioration is expected to slow. Moodys also said that the state-owned banks continue to require
significant capital while the private banks are well-capitalized thus driving divergence in credit quality between private and state
banks. The agency said that systematic support for state owned banks is expected to remain high.

Oil: S&P global Ratings announced on 20 September that it has raised its oil price assumptions for the rest of 2016 to 42.5 per barrel
from USD40 per barrel. The agency expects oil prices of USD45 per barrel in 2017, USD50 in 2018 and USD55 in 2019.

Sunshine Life (A3/S; NR) Company disclosed on 19 September that it had increased its stake in Inner Mongolia Yili Industrial Group
Co. to 5%. Sunshine said that it will not buy additional shares in Yili in the coming 12 months and was not seeking to make changes
at the company.
Woori Bank (A2/N; A/S): South Koreas planned sales of a 30% interest in Woori Bank to multiple investors began on 23 September.
Korea Investment and Securities and Hanwha Life are said to be bidders.

Events This Week

Date

Economic Data

Pipeline

26-Sep US - 1st Presidential Debate

27-Sep
28-Sep
TWD - CBC Benchmark Interest Rate, CZK - CNB rate decision, MXN 29-Sep O/n rate decision
30-Sep CNY Caixin China PMI Meeting

Great Wall AM, Jinana West City, RHB

ICBC Leasing, Wharf

Korea National Oil, Industrial Bank Korea
Korea Housing

Asia USD Issuance for the week ended Monday, 26 September 2016
Issuer
China Cinda At1
Sinopec

Dongxing Securities
Country Garden
Woori Bank AT1

Date
24-Sep
21-Sep
21-Sep
21-Sep
21-Sep
20-Sep
20-Sep

Bond
Perp
3yr
5yr
10yr
3yr
7NC4
PerpNC5

IPG
4.50%
T3+115
T5+120
T10+150
T3+170
5.38%
4.75%

Priced
4.45%
T+98
T+95
T+125
T3+145
5%
4.50%

Book
Issued
(USDbn) (USDbn) Comments
3.2
2
1.1
3
1.3
1.5
0.6
2.1
0.3
1.75
0.65
0.85
0.5

Asia

Europe USA

48.0%
77.0%
57.0%
92.0%
80.0%
60.0%

20.0%
17.0%
19.0%
8.0%
20.0%
20.0%

Asia Rating Changes for the week ended Monday, 26 September 2016
Company
Baosteel
Baosteel

Date
Agency
9/23/2016 S&P
9/23/2016 Moody's

Rating

Outlook

BBB+
Baa1

Watchneg Rating on CreditWatch Neg on Wuhan merger

Negative Ratings under pressue on announced merger with Wuhan Iron and Steel

Comment

Research Contacts
Mary Ellen Olson, CFA Senior Desk Analyst Asia Credit Trading Crdit Agricole CIB, Hong Kong Branch Desk: +852 2826-1542
Maryellen.olson@ca-cib.com

Monday, 26 September 2016

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32.0%
6.0%
24.0%

20.0%

DISCLAIMER

I.1.1.

General Sales and Trading Communications

Crdit Agricole CIB prepares and disseminates market information and the current bids and offers for those investments
and securities for which it is a market maker to its clients (General Sales and Trading Communications). These are
prepared by sales, trading, capital markets or other non-research functions, including but not limited to runs, axes, pricing
indications, and macro commentary which are for factual information purposes only. These are not intended to assess the
individual merits of a particular investment or strategy, are not investment recommendations to buy or sell any financial
instrument or to participate in any trading strategy and should not be construed as such.
General Sales and Trading Communications do not constitute investment advice. Certain information contained in our
General Sales and Trading Communications has been obtained from third party sources and while such information is
believed by Crdit Agricole CIB to be correct and reliable however it has not been independently verified by Crdit
Agricole CIB and Crdit Agricole CIB shall not be responsible or liable, directly or indirectly, for any damage or loss
caused or alleged to be caused by or in connection with the use of or reliance on such third party information.
Furthermore the information may not be current due to, among other things, changes in the financial markets or economic
environment. Crdit Agricole CIB does not, and has no obligations to update any such information contained in its
General Sales and Trading Communications. Any prices or quotations contained herein are indicative only, do not
represent firm quotes as to either price or size and should not be used for valuation purposes.
General Sales and Trading Communications are not intended to forecast or predict future events. Past performance is
not a guarantee or indication of future results. Crdit Agricole CIB does not assign ratings of Buy, Hold or Sell to its
General Sales and Trading Communications. General Sales and Trading Communications are produced by nonresearch functions, including sales and trading, and does not constitute independent investment research and are not
prepared under conditions designed to promote the independence of investment research.
Crdit Agricole CIB may make markets, provide liquidity and effect transactions in the financial instruments mentioned or
described in its General Sales and Trading Communications or enter into a trading strategy in those instruments and may
also perform or seek to perform investment banking, brokerage, or other services for any entities which may be contained
within the subject or narrative of any such communications.
The General Sales and Trading Communications are proprietary to Crdit Agricole CIB and may not be quoted, altered in
any way, circulated, transmitted to, copied or distributed to any other party or otherwise referred to without the prior
written consent of Crdit Agricole CIB.

I.1.2.

Investment Recommendations

In addition, sales and trading personnel also produce and disseminate credit strategy pieces, sales notes, trading and
market commentary (Sales and Trading Commentaries) which can be regarded as investment recommendations
under the European Market Abuse Regulation N 596/2014 of 16 April 2014.
The sales and trading staff who produce investment recommendations have received compensation based upon various
factors, including individual performance competitive factors, firm revenues, their sales including remuneration from client
enquiries arising from the distribution of any trader axes and overall global market revenues.
Sales and Trading Commentaries do not contain a personal recommendation and do not take into account the individual
financial circumstances, needs or objectives of the recipients. Recipients should therefore seek their own financial, legal,
tax or other advice before deciding to invest in any of the instruments mentioned in such documents. Investments in
financial instruments carry significant risk, including the possible loss of the principal amount invested. Financial
instruments denominated in a foreign currency are subject to exchange rate fluctuations, which may have an adverse
effect on the price or value of an investment in such products.
The information provided does not originate from our independent credit research team which undertake Investment
Research and provide recommendations on an independent basis and located outside Crdit Agricole CIBs sales and
trading organisational structure.
Crdit Agricole CIB may make markets, provide liquidity and effect transactions in the financial instruments mentioned in
its investment recommendations or pursue a trading strategy including any investments mentioned or described in our
Sales and Trading Commentaries and may also perform or seek to perform investment banking, brokerage, or other
services for any entities which may be contained within the subject or narrative of any such communication including
entering into transaction with them.
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Crdit Agricole CIB may make markets, provide liquidity and effect transactions in the financial instruments mentioned or
described in its Sales and Trading Commentaries or enter into a trading strategy in those instruments and may also
perform or seek to perform investment banking, brokerage, or other services for any entities which may be contained
within the subject or narrative of any such communications. Certain information contained in our Sales and Trading
Commentaries may have been obtained from third party sources and while Crdit Agricole CIB deems/consider such
information to be reliable, it has not been independently verified by Crdit Agricole CIB and Crdit Agricole CIB shall not
be responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection
with the use of or reliance on such third party information. Furthermore the information may not be current due to, among
other things, changes in the financial markets or economic environment. Crdit Agricole CIB does not, and has no
obligations to update any such information contained in its Sales and Trading Commentaries. Any prices or quotations
contained herein are indicative only, do not represent firm quotes as to either price or size and should not be used for
valuation purposes.
The recommendations incorporate estimated values (relative value) and the authors fundamental view on the
security. The fundamental credit view of an issuer may be based on criteria such as the companys underlying credit
trends, overall creditworthiness and our opinion on whether the issuer will be able to service its debt obligations when
they become due and payable. We may review, among other things, the companys cash flow capacity and trends and
standard credit ratios, such as gross and net leverage, interest coverage and liquidity ratios. We may also review
profitability, capitalization and asset quality, among other variables, when assessing financials. We can also consider
management strategy, financial policy and the overall competitive landscape in relevant industries insofar as these may
impact credit quality. We may also assess market technical aspects such as the likely future supply of bonds or fund
flows into the broader asset class. The Sales and Trading recommendations remain valid and only at the point of
publication, as they are not updated in real time to take account of changes in the financial markets or new news about
the issuer or instruments.
Crdit Agricole CIB will make available its investment recommendations since the latest change or up to for the preceding
12 months upon request.
The Sales and Trading Commentaries are proprietary to Crdit Agricole CIB and may not be quoted, altered in any way,
circulated, transmitted to, copied or distributed to any other party or otherwise referred to without the prior written consent
of Crdit Agricole CIB.

I.1.3.

Summarised Distribution Information

This material is not directed at, or intended for distribution to or use by, any person or entity domiciled or resident in any
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or consequential) that may arise from any use of this material.
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in Rule 15a-6 under the Securities and Exchange Act of 1934 and who deal with Crdit Agricole Corporate and
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This report may not be independent of the proprietary trading interests of Credit Agricole Securities (USA) Inc., the
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Monday, 26 September 2016

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