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Cachet's Insight 13/01/2020

Updated: Feb 19, 2020

Market Outlook

Three major US indices bounced back last night, where hit a new high. President Trump's remark against declaring war at Iran watered down apprehension about geopolitical tension. Hang Seng Index closed higher for the sixth straight week on Friday as investors remained upbeat in the run up to the geopolitical tension is cooling down and the signing of the Phase 1 trade deal between China and the United States.

Hang Seng Index is expected to defend 28,000 and even to test 28,800 in coming week.

Hot Topic

Gold surged to its highest since 2013 as rising tensions in the Middle East stoked demand for Havens. Palladium extended gains to a fresh record. Bullion neared $1,600 an ounce after Tehran said it would no longer abide by any limits on its enrichment of uranium following the killing of General Qassem Soleimani. President Donald Trump said he’s prepared to strike Iran “in a disproportionate manner” if it retaliates against any U.S. target.

Bullion is building on the largest annual climb since 2010, which was driven by the U.S.-China trade war’s drag on global growth, easier monetary policy across the world’s leading economies and sustained buying from exchange-traded funds and central banks.

Palladium has also benefited from the optimism surrounding havens, as well as its own positive fundamentals. The metal is in a multiyear deficit as demand rises in auto catalysts amid stricter emissions standards. Spot palladium hit a record $2,030.28 an ounce.

Chart of the Week

This chart shows the strong momentum that dollar is oversold against the yuan, yuan price drops significantly. It shows the yuan has been gaining against the greenback since early September. Dollar got huge rebound for 3 times after hitting the CNY 14-day relative-strength index level of around 20 in 2019, a significant rebound may come in the first quarter of 2020.

Global Indices

  • SSE Composite Index was up 0.28% last week.

  • Hang Seng Index was up 0.66% last week.

  • Dow Jones Industrial Average index was up 0.66% last week.

  • NASDAQ Composite Index was up 1.75% last week.

  • S&P 500 Index was up 0.94% last week.

Investment Idea

We are launching the following Credit Linked Note which is linked to Chinese state-owned enterprises. Wanted to highlight this given the high lending value and yield-focus/investment-grade credits.

The headline indicative yield is at 3mL + 1.87% (currently at 3.72%) with a high lending value of 90%. We are comfortable with the credit given state-related status and high credit rating. This offers a yield pick-up on similarly rated securities and at 90% lending value, the indicative Return on equity works out to be about 3mL + 10.60% p.a. on a monthly loan rollover.

*assuming COF spread @ 0.15%, loan spread 0.75%

*assuming 3mL~ 1.85% p.a.

Underlying Credit Details

ChemChina is the largest chemical company in China and 3rd largest chemical company globally with ~RMB446bn in revenues in 2018.The company is wholly owned by the central SASAC and is expected to have continued strong support from the Chinese Government. It is currently the only central SOE focusing on the chemical industry, and was ranked #167 on the Fortune Global 500 list in 2018. ChemChina’s credit profile is supported by its larger scale operations, diversified product profile, and globally leading market position in select products.

China Huarong is 63.4% owned by China's Ministry of Finance and enjoys extraordinary state support given the policy role of the group and majority ownership of the state. It has a track record of getting capital funding and support from Government. The company’s credit profile is supported by diversified revenue stream with 57% of revenue contribution coming from distressed asset management, while financial and investment services contribute to the remaining. China Huarong, along with other AMCs, is likely to benefit from expected growth in distressed market. On the other hand, the company has seen significant decline in its profitability over the past year. In addition, its debt leverage continues to be at an elevated leverage, with total assets/equity attributable to equity holders at 14.2x as of year-end 2018.

Structure Risks

  1. Issuer Risk

  2. Credit Risk linked to Reference

  3. Entities Mark to Market Risk

  4. Liquidity Risk

Asset Allocation

Analyst Recommendation

  • Daiwa Securities gave its price target on Tencent Holding LTD (0700.HK) to $450, maintained the buy rating.

  • Huatai Research gave its price target on Times China Holding LTD (1233.HK) to $19.4, maintained the buy rating.

  • Jefferies gave its price target on Jiangsu Yanghe Brewery Joint-Stock Co Ltd (002304.CH) to $135 a share, maintained the buy rating.

  • Deutsche Bank gave its price target on BlackRock Inc (BLK.US) to $570 a share, maintained the buy rating.

Application-opened IPO

  • 1601.HK Zhongguancun Science-Tech Leasing Co., Ltd. -H shares (2019/12/31 - 2020/01/14)

Newly Listed:

  1. 2528.HK Forward Fashion (International) Holdings Company Limited (2020/01/13)

  2. 8646.HK China Hongguang Holdings Limited (2020/01/13)

  3. 1802.HK Wenye Group Holdings Limited (2020/01/14)

  4. 8500.HK Icon Culture Global Company Limited (2020/01/14)

  5. ANPC.US AnPac Bio-Medical Science Co., Ltd. (2020/01/14)

  6. 1416.HK CTR Holdings Limited (2020/01/15)

  7. 1650.HK Hygieia Group Limited (2020/01/15)

  8. 3718.HK Beijing Enterprises Urban Resources Group Limited (2020/01/15)

  9. 9922.HK Jiumaojiu International Holdings Limited (2020/01/15)

  10. 0301.HK SANVO Fine Chemicals Group Limited (2020/01/16)

  11. 1412.HK Q P Group Holdings Limited (2020/01/16)

  12. 1525.HK Shanghai Gench Education Group Limited (2020/01/16)

  13. 1740.HK Values Cultural Investment Limited (2020/01/16)

  14. 1925.HK Kwung’s Holdings Limited (2020/01/16)

  15. 9919.HK Activation Group Holdings Limited (2020/01/16)

  16. 9968.HK Huijing Holdings Company Limited (2020/01/16)

  17. 1937.HK JiaChen Holding Group Limited (2020/01/17)

  18. 9938.HK Wah Wo Holdings Group Limited (2020/01/17)

  19. VEL.US Velocity Financial, LLC (2020/01/17)

  20. LIZI.US LIZHI INC. (2020/01/17)

  21. DNK.US Phoenix Tree Holdings Ltd (2020/01/17)

  22. IMAB.US I-Mab (2020/01/17)

Result Announcement:


  1. Quarter: 8383.HK Linocraft Holdings Limited

  2. Quarter: SJR.US Shaw Communications Inc

  3. Semi-annual: 8256.HK Netel Technology (Holdings) Ltd.

  4. Semi-annual: 8412.HK BCI Group Holdings Limited


  1. Quarter: 8013.HK ECI Technology Holdings Limited

  2. Quarter: WFC.US Wells Fargo & Co

  3. Quarter: JPM.US JPMorgan Chase & Co

  4. Quarter: C.US Citigroup Inc

  5. Quarter: DAL.US Delta Air Lines Inc


  1. Quarter: GS.US Goldman Sachs Group Inc/The

  2. Quarter: UNH.US UnitedHealth Group Inc

  3. Quarter: AA.US Alcoa Corp

  4. Quarter: BAC.US Bank of America Corp

  5. Quarter: USB.US US Bancorp


  1. Quarter: BLK.US BlackRock Inc

  2. Quarter: TSM.US Taiwan Semiconductor Manufacturing Co Ltd

  3. Quarter: BK.US Bank of New York Mellon Corp/The

  4. Annual: 0626.HK Public Financial Holdings Ltd.

  5. Annual: 8169.HK Eco-Tek Holdings Ltd.


  1. Quarter: FAST.US Fastenal Co

  2. Quarter: SLB.US Schlumberger Ltd

  3. Quarter: RIO.US Rio Tinto PLC

  4. Quarter: SBNY.US Signature Bank/New York NY

  5. Semi-annual: 8067.HK Oriental University City Holdings (H.K.) Limited

Asia Bond Market

The primary Asia dollar bond market fired on all cylinders again Thursday, with a large bunch of issuers from around the region looking to price deals, after U.S.-Iran tensions appeared to de-escalate.

Chinese issuers including Bank of China led deal flow, but Aboitiz Equity Ventures from the Philippines, Japan’s Nomura, Thailand’s PTT Exploration and Australia’s Westpac were also set to price their offerings.

Indian shadow lender Shriram Transport launched a social bond.

Asia IG dollar bond spreads were indicated 2-4bps tighter in early trading, with yield premiums on the notes at the lowest since mid-March 2018.


  • $1b 2Y FRN/$600m 5Y FXD bonds at 3mL+58bp/+78bp, IPT3mL+85bp /+110bp area

  • Expected issue ratings: A1 / A / A (Moody’s / S&P / Fitch)

  • Reg S, Registered (Cat 2)

  • JGCs/JLMs/JBRs: Bank of China, Credit Agricole CIB2 and JPMorgan (B&D)

Central China Real Estate

  • $200m 4.5NC2 bond at 7.5%, IPT 8% area

  • Expected issue ratings: B1 / BB- (Moody’s / Fitch)

  • Reg S only, Cat 1, Registered form

  • JBRs and JLMs: BNP Paribas (B&D), BofA Securities, DBS Bank Ltd., Deutsche Bank, Haitong International and Morgan Stanley

Nomura Holdings

  • $1.5b 5Y/$1.5b 10Y USD bonds +100bp/+125bp, IPT +120bp/+145bp area

  • Expected security ratings: BBB+ / Baa1 (S&P / Moody’s)

  • SEC-registered

  • Bookrunners: Nomura (B&D) / Citi


  • $750m 3Y FXD at +42bp, IPT +60bp area

  • $750m 3Y FRN at 3mL+39bp, IPT 3mL equiv.

  • $750m 10Y FXD at +80bp, IPT +100bp area

  • Expected security ratings: Aa3 / AA- (Moody’s / S&P)

  • SEC-registered global notes

  • Bookrunners: Citi, HSBC, JPMorgan, RBCCM, TD Securities, Westpac

  • Westpac is also marketing a 5Y USD covered Bond, MS+ 45 area

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