Economic events

Financial markets have opened on an optimistic note ahead of the Phase One US-China trade deal as investors load up on risk before the partial agreement between the world’s two largest economies is signed this week.

“But phase one was – is a phenomenal deal. Could be up to $50 billion in farm product. We will start right away negotiating phase two … But phase one was – is a phenomenal deal. Could be up to $50 billion in farm product,” US President Donald Trump told reporters at The White House.

Also in the week ahead, China will announce its trade data on Tuesday and Q4 2019 GDP statistics on Friday. The consensus on growth is 6%, which would be unchanged from Q3. But ING economists expect a faster pace of growth.

“Trade, manufacturing and consumption (retail sale) gained traction, investment growth was stable, and industrial profits started to rise – all pointing to faster GDP growth,” ING analysts said in a report.

Before that China will announce trade data on Tuesday with Barclays analysts expecting 5% growth in December exports, versus -1.3% in the previous month and imports to rise 15% from 0.3% in November as domestic demand improves.

Policymakers of the US Federal Reserve will be closely monitored after the Vice-Chairman of the central bank Richard Clarida said last week the US economy remains in a “good place” and “there are some indications that headwinds to global growth may be beginning to abate.” Fed board member Michelle W Bowman, Philadelphia Federal Reserve Bank President Patrick T Harker and John C Williams, the president of Federal Reserve Bank of New York, are due to speak to the public this week. Markets will hang on to their words ahead of the January 29 FOMC meeting.

“Last Friday’s payroll (actual: 145k, consensus: 160K) and hourly earnings (actual: 2.9% YoY, consensus: 3.1%) misses suggests that the US economy is not overheating,” DBS analysts said.

“Yields are no longer overly low and it would probably require firmer data in the US and the rest of the world before market participants become willing to remove the downside bias to Fed policy (the market is pricing in an 80% chance of a cut by the end of 2020),” they said in a report.

 Corporate events

The risk-on sentiment means several bond issuers are in the market this week with Philippine fast-food restaurant operator Jollibee (not rated) on the road to meet up with fixed income investors starting Monday for a potential Reg S $-perpetual bond, according to CreditSights.

Indonesian oil & gas explorer PT Medco Energi (Expected bond ratings: B+/B1/NR) will also commence its roadshow on Monday and a 144A/Reg S $-bond offering may follow. Medco Energi is conducting a consent solicitation exercise for its $400 million 8.5% bonds due 2022 and $500 million 6.75% bonds due 2025, CreditSights said.

Sun Hung Kai Properties, POSCO, China Merchants Securities, Pertamina, Redsun Properties, Logan Property, BOC Aviation, China South City and Tower Bersama are already in the market with bond issues which will close this week. 

China Development Bank has mandated banks for an investor roadshow which could be followed by an offering of sterling-denominated bonds due 2023. Indonesian PT Bank Tabungan Negara (expected bond rating: Ba3) is kicking off a roadshow for a proposed $150-300 million Reg S subordinated Basel III compliant Tier 2 bond.

Fund flow

Jefferies analysts said 2020’s first week (ended January 8) saw robust inflows into global MM funds (+$47bn) and global bond funds (+$23bn, a record high versus 2019’s weekly average of $9.5 billion).

Global equity funds with outflows of $679m but interest in EM equities extended to 11 straight weeks with inflows of $2 billion. Developed market equities saw $2.7 billion of redemptions amid US (-$3.5bn) and European (-$1.3bn) equity withdrawals.

“In Asia, China domestic (+$3.4bn) and Hong Kong (+$1.2bn) shares continued to attract significant buying via the stock connect,” Jefferies analyst Kenneth Chan said in his report.

Economic data calendar

Tuesday, January 14, 2020
Japan current account/trade
China trade/exports/imports
US CPI/Redbook
US Fed Williams speech
Wednesday, January 15, 2020
Japan money supply
UK CPI/retail/PPI
EU trade/IP
US NY Empire State Manufacturing/PPI
Thursday, January 16, 2020
US Phase One trade deal signing
US Fed Harker speech
US Fed Beige book
Japan PPI/Machine orders
ECB monetary policy meeting accounts
US retail sales/Philadelphie Fed survey
Fed Bowman speech
Friday, January 17, 2020
Japan bond and shares – foreign investments
China GDP/Fixed Asset/IP/retail
EU current account/CPI
UK retail sales
US building permits/housing starts
US IP/Michigan consumer sentiment index
Saturday, January 18, 2020
Fed Bowman speech
LAST WEEK’S RATING CHANGES
Notable rating changes To From
Date Agency Description Rating type Rating action Rating Outlook/Credit Watch Rating Outlook/Credit Watch
9-Jan S&P Saka Energi Issuer rating Downgrade BB Stable BB+ Stable
9-Jan S&P Medco Energi Internasional Issuer/issue rating Upgrade B+ Stable B Positive
8-Jan S&P Lippo Karawaci Issuer/issue rating Outlook revision B- Negative B- Stable
8-Jan S&P POSCO Issuer/issue rating Outlook revision BBB+ Stable BBB+ Positive
9-Jan Moody’s Medco Energi Internasional Corporate Family/Issue rating Upgrade B1 Stable B2 Positive
10-Jan Fitch Century Sunshine Group Issuer/issue rating Outlook revision B Rating Watch Negative B Stable
9-Jan Fitch Sinofert Holdings Issuer/issue rating Outlook revision A- Rating Watch Negative A- Stable
Source: S&P, Moody’s, Fitch