Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

<a href="https://www.smartkarma.com/entities/25987" target="_blank" data-smartkarma-citation="entities:25987:1">Hna Group (HNAGRZ CH)</a> announced on 6-November that it has repaid USD300m of principal in SANYPH 11/18s which matured on the same date. The event has unfolded as per our prediction and we believe the SANYPH 11/18 repayment increases the likelihood that SANYPH 12/18s, which will mature on 3-December, will also be redeemed.
As such, we remove SANYPH 11/18s from our coverage and maintain our OVERWEIGHT recommendation on SANYPH 12/18s and HONAIR 1/19s. We also initiate our coverage of <a href="https://www.smartkarma.com/entities/24023" target="_blank" data-smartkarma-citation="entities:24023:1">Hainan Airlines Co (600221 CH)</a>'s HAIAIR 10/20s with an UNDERWEIGHT recommendation. We also maintain our UNDERWEIGHT recommendation on the rest of HNA-related bonds (GRCHAR 3/19s, SANYPH 8/19s, the new Hainan Airlines' HAIAIR 10/20s, and HONAIR perp).

Hna Group (HNAGRZ CH) announced on 6-November that it has repaid USD300m of principal in SANYPH 11/18s which matured on the same date. The event has unfolded as per our prediction and we believe the SANYPH 11/18 repayment increases the likelihood that SANYPH 12/18s, which will mature on 3-December, will also be redeemed.
As such, we remove SANYPH 11/18s from our coverage and maintain our OVERWEIGHT recommendation on SANYPH 12/18s and HONAIR 1/19s. We also initiate our coverage of Hainan Airlines Co (600221 CH)'s HAIAIR 10/20s with an UNDERWEIGHT recommendation. We also maintain our UNDERWEIGHT recommendation on the rest of HNA-related bonds (GRCHAR 3/19s, SANYPH 8/19s, the new Hainan Airlines' HAIAIR 10/20s, and HONAIR perp).

<a href="https://www.smartkarma.com/entities/25987" target="_blank">HNA Group Ltd. (HNAGRZ CH)</a> (HNA)’s SANYPH 11/18s will mature on November 6 (next Tuesday) and we believe there is a likelihood that HNA will repay the bonds, based on the group’s credit facilities, on-going asset sales, and additional new debt the group has raised so far since July
We note that it will be difficult to buy SANYPH 11/18s since the maturity date is already next week. Our liquidity analysis puts more confidence in HNA’s cashflow until the end of June 2019 and we revise our recommendation on SANYPH 11/18s, SANYPH 12/18s, and HONAIR 1/19s to a tactical OVERWEIGHT (from Underweight). We are less confident in GRCHAR 3/19s as the bonds do not represent HNA’s reputation as much, in our view.  
Over the longer term, we do not believe that the group's financial situation is sustainable. The group’s liquidity situation remains tight and deteriorating reputation (from negative headlines) has hit the group’s profitability. As such, we maintain our UNDERWEIGHT recommendation on GRCHAR 3/19s, SANYPH 8/19s, SANYPH 10/20s, and HONAIR Perp.

HNA Group Ltd. (HNAGRZ CH) (HNA)’s SANYPH 11/18s will mature on November 6 (next Tuesday) and we believe there is a likelihood that HNA will repay the bonds, based on the group’s credit facilities, on-going asset sales, and additional new debt the group has raised so far since July
We note that it will be difficult to buy SANYPH 11/18s since the maturity date is already next week. Our liquidity analysis puts more confidence in HNA’s cashflow until the end of June 2019 and we revise our recommendation on SANYPH 11/18s, SANYPH 12/18s, and HONAIR 1/19s to a tactical OVERWEIGHT (from Underweight). We are less confident in GRCHAR 3/19s as the bonds do not represent HNA’s reputation as much, in our view.  
Over the longer term, we do not believe that the group's financial situation is sustainable. The group’s liquidity situation remains tight and deteriorating reputation (from negative headlines) has hit the group’s profitability. As such, we maintain our UNDERWEIGHT recommendation on GRCHAR 3/19s, SANYPH 8/19s, SANYPH 10/20s, and HONAIR Perp.

<a href="https://www.smartkarma.com/entities/25987" target="_blank" data-smartkarma-citation="entities:25987:1">HNA Group Co Ltd (HNAGRZ CH)</a> ("HNA") has gone through a series of negative news since last year and, to us, it is almost akin to the "Spanish" inquisition in Mel Brooke's movie. We have fielded a lot of questions with the press and our clients since we have launched our coverage on HNA ( <a href="https://www.smartkarma.com/insights/hna-huge-national-aggressive" target="_blank" data-smartkarma-citation="insights:14462">HNA: Huge,National, &amp; Aggressive</a> and <a href="https://www.smartkarma.com/insights/hna-no-happy-new-answers" target="_blank" data-smartkarma-citation="insights:15561">HNA: No Happy New Answers</a>) and would like to share our answers with Smart Karma's readers. Here we go:<div class="content-highlight">
<h2>1. What is your take on today (19-January)'s sell-offs on HNA-related</h2>…</div>

HNA Group Co Ltd (HNAGRZ CH) ("HNA") has gone through a series of negative news since last year and, to us, it is almost akin to the "Spanish" inquisition in Mel Brooke's movie. We have fielded a lot of questions with the press and our clients since we have launched our coverage on HNA ( HNA: Huge,National, &amp; Aggressive and HNA: No Happy New Answers) and would like to share our answers with Smart Karma's readers. Here we go:
1. What is your take on today (19-January)'s sell-offs on HNA-related…

HNA has grown so Huge it has become a National interest, in our judgment. Its Aggressive acquisitions backed by rising leverage have raised execution as well as refinancing risks. The group's reliance on shadow banking to reach its global aspiration leads us to question the management's long-term strategy.  Questionable corporate governance makes it difficult to measure the company's willingness to pay. Though we believe HNA's importance to the Chinese economy could mean an implicit support from the central government or government-owned banks, near-term refinancing risk toward August 2019 pose asymmetric downside risk and we are UNDERWEIGHT on the SANYPH and HONAIR complexes as well as GRCHAR 19s.

HNA has grown so Huge it has become a National interest, in our judgment. Its Aggressive acquisitions backed by rising leverage have raised execution as well as refinancing risks. The group's reliance on shadow banking to reach its global aspiration leads us to question the management's long-term strategy.  Questionable corporate governance makes it difficult to measure the company's willingness to pay. Though we believe HNA's importance to the Chinese economy could mean an implicit support from the central government or government-owned banks, near-term refinancing risk toward August 2019 pose asymmetric downside risk and we are UNDERWEIGHT on the SANYPH and HONAIR complexes as well as GRCHAR 19s.

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

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