The

VIEW Asia’s Bond Markets

April 2012

Overview: Asian Telecoms: New era, new challenges, new opportunities

CNH Market: Dim Sum Tracker

Credit Review: Credits in sideways phase

Credit Research: China Property: Mixed signals

Disclosures and Disclaimer This report must be read with the disclosures and analyst
certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
 The View
Asia’s Bond Markets abc
April 2012

Editorial
In Asian Telecoms: New era, new challenges, new opportunities, we highlight how the telecom world
has entered a new era where people are no longer satisfied with pure voice and SMS communication
services. The consumption of mobile data is rising sharply on the consumers’ behavioural change. This
brings new business opportunities, but at the same time operators also face new challenges. As more
resources and investments are required, capex levels have risen again. This, combined with lower margin
data services and intense competition, has begun to weigh on operators’ profit margins and cash flows.
Yet, we still we take comfort from the Asian operators’ sound liquidity and credit profiles, which provide
cushion to the new challenges facing the industry. In terms of valuation, we currently see the Asian
telecom bonds as fair and maintain our Hold calls across the sector. Meanwhile, we initiate a Tactical Buy
call on STSP ’19 (Optus), which should benefit from SingTel Group’s restructuring going forward.

In the third issue of the Dim Sum Tracker, we perform relative value analysis by taking reference from
pricing in the dollar bond space. Top-tier Dim Sum bonds yielding below 3.5%, such as policy bank
credits, Chinese and foreign high-grade credits, show the highest yield pick-up over comparable dollar
bonds after swaps. Higher yielding securities, including high-yield corporates and selected high-grade
new issues, offer less. We expect average yield on investment-grade credits to continue to move
sideways. In particular, we like China policy banks for their hefty premium over sovereign credits,
limited supply, and potentially better liquidity. On the other hand, we are cautious on high-yield
corporates as the deterioration in their credit fundamentals can be hidden by their non-rated status.
Regulatory development has slowed over the last few weeks and the focus should now be the further
maturing of the market, including geographical broadening of renminbi trade settlements and continued
widening of the investor and issuer base.

In the Credit Review, we look at investor concerns about China, especially with mixed high frequency
data failing to provide certainty about the economy’s future growth path. As a result, both Chinese
industrials and residential property developer issuers have been facing moderate selling pressure on fears
of weakened balance sheet and deteriorating earnings prospects for the foreseeable future. Conversely,
Mongolian debut issuers have taken the limelight as investors look for diversification and solid
underlying macro prospects for the coming few years.

Indonesia is highlighted in the sovereign section this month. S&P has recently concluded its visit to the
country, which should be rewarded with BBB- investment grade credit status based on the medium-term
trajectory of the budget, inflation and external debt metrics. Simply put, the recent politics around the
energy subsidies should have no impact on S&P’s decision about whether to lift Indonesia’s sovereign
rating by one notch to investment grade in the months ahead.

China property developers all released their FY11 earnings by end March 2012. We see mixed signals
from the results – both positives and negatives. In 2Q12, we recommend sell Country Garden/
Evergrande on fundamental concerns and Longfor/ Shui On Land on tight valuations. Our top pick for the
quarter is Yuzhou Properties’ YUZHOU’15 which offers attractive risk-reward at an 18% yield.

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Asia’s Bond Markets abc
April 2012

Contents

Overview 3 Asian Economics Desk

Reference 136
Focus List 20
Asia Credit Coverage 140
CNH Market 25
Spread and Curve Charts 141
Credit Review 38
Appendix 149
Sovereign Risk Analysis 47 HSBC Databank 150
Monthly Focus: Republic of Indonesia 48 Asian Yankee/Eurobond Secondary Trading Levels
People’s Republic of China 51 as of 3/4/2012 167
Republic of India 58 Asian Rating Timeline 174
Democratic Socialist Republic of Sri Lanka 60
Socialist Republic of Vietnam 63 Disclosure appendix 184

Credit Research 71 Disclaimer 197

China Property 72

Company News & Analysis 79

Financial Institutions 80
Corporates 92

2
 The View
Asia’s Bond Markets
April 2012
Asian Telecoms
 Data services turn to be the new growth driver
 A shorter technology development cycle requires continuous
capital investment to meet demand capacity
 Sufficient liquidity and financial flexibility should provide cushion
against headwinds
New era, new challenges,
new opportunities
With rapid advance in technology, we have
entered a new era of telecommunications, where
people are no longer satisfied with pure voice and
SMS services. Instead, thanks to smartphones and
tablets, people request easy data and information
access everywhere. This means consumption of
mobile data is rising sharply. To capture this new
demand from customers’ behavioural change,
telecom operators entered into another network
development stage; this is particularly true in
emerging markets. The operators are facing new
challenges and new opportunities in the telecom
world.
As more resources and investments are required
on an ongoing basis and on the data network
development and enhancement, and combined
with a change in revenue mix, capital
expenditures are elevated again after cooling
down in early years. This has begun to weigh on
the telcos’ cash flows and profit margins.
However, the telecom industry has demonstrated
strong resilience, similar to the utilities sector,
even in an economic slowdowns. People are
reluctant to cut phone expense. Typically, a
mobile phone bill represents only 1% to 3% of the
abc
income. It seems the least obvious choice when it Louisa Lam
Credit Associate
comes to cutting cost. The Hongkong and Shanghai
Banking Corporation Limited
Being in a less cyclical industry, telcos usually +852 2822 4527
louisamclam@hsbc.com.hk
receive steady and regular cash inflows from
Philip Wickham
subscribers, and hence, relatively consistent Analyst
earnings. Financial and credit metrics have The Hongkong and Shanghai
Banking Corporation Limited,
generally been stable amidst challenging Singapore Branch
+65 6239 0630
operating environments. philipwickham@hsbc.com.sg
Due to the stable fundamentals and modest new
issuance, bonds in the Asia telecom sector have
been holding tight compared with other corporate
bonds. We believe the current valuation for the
bonds are fair at the moment, and maintain our
Hold trade calls across the sector. Meanwhile, we
initiate with a Tactical Buy call on STSP ’19,
issued by SingTel Optus, which would benefit
from SingTel Group’s recent restructuring. Optus
is expected to gain stronger parental support as it
is grouped into the regional business area instead
of individual country player. We expect STSP ’19
to trade at similar levels as the rest of the SingTel
Group’s bonds.
Penetration is saturated? Yes and No
The telecommunication industry used to talk
about mobile penetration rates. But following the
incredible speed of mobile penetration growth in
3
 The View
Asia’s Bond Markets abc
April 2012

1. Mobile penetration is maturing 2. Smartphones are becoming more prevalent

210 % Mobile penetration rate 80 % Smartphone penetration rate

180 70
150 60
50
120
40
90 30
60 20
30 10
0 0

Hong Kong

Indonesia

India
HK

Indonesia

India

Singapore

Korea

Thailand

China
Singapore

Korea

Thailand

Sri Lanka

China

Malaysia
Philippines
Malaysia

Source: ICT/ITU, OFTA, iDA Singapore, HSBC Source: Wired, HSBC

Asia in the past years, this is no longer the case. with a big gap at 25% whilst Indonesia is only in
Like the rest of the world, the penetrations in Asia single-digit penetration rate.
have gradually matured. In high income regions
Undoubtedly, mobile data consumption is the new
like Hong Kong and Singapore, their penetration
driving force. The main factors slowing the
rates hit 203% and 150%, respectively, last year.
penetration rate of data services are high cost of
The rates in emerging markets were 80-95%
smartphones and the lack of operators’ capacity to
across the countries. Indonesia rose above 100%
provide. With recent availability of cheaper
level in 2011. Putting the dual-SIM card
smartphones, we believe the penetration will grow
phenomenon in consideration, the effective
faster, and hence, drive the demand for data
mobile penetration rate in Indonesia remains high
services.
at around 75-80% in our view. Going forward, we
believe the emerging markets will experience On supply side, the data services and networks are
steady organic growth. In another words, the still under development phases for the emerging
mobile penetration story is no longer valid. So markets. We see limited technology advance in
what’s on now? Data! the near term; hence, 3G technology should
remain the mainstay of the mobile services in the
One theme fades another theme emerges. The
regions. In developed markets (high income level
telecom market can still be viewed in two
regions), 3G network and broadband internet
categories – saturated and underpenetrated. This
services are mature and well-adopted. The
time, it is all about data services. The invention of
operators are turning their development focus to
smartphones and tablets has changed people’s
an upgrade to the speedy 4G LTE (Long Term
communication behaviours and demand on
Evolution) networks.
telecom services. People care about mobile data
accessibility, connection speed and steadiness Both situations require continuous investments in
with their handheld devices. Yet still, the network enhancements and the rolling out of new
smartphone penetration is very diverse in Asia, technologies. For this reason, we believe
reflecting a divergence of income levels among companies with greater resources and better
the countries. Hong Kong and Singapore have the access to funding are in a better position to
highest rates close to 70%. Malaysia follows but capture the opportunities.

4
 The View
Asia’s Bond Markets
April 2012
Opportunities and challenges come
hand-in-hand
Intense price-based competition remain
Data services are gradually contributing a larger
portion, but not yet dominating in the revenue
mix. This is a new area of opportunities for the
operators to gain higher revenue and bigger
market share. However, at the same time, it has
brought up new faces of competition, which are as
alive and strong as the previous. In the mean time,
price-based and quality competitions remain in
most of the regions, and they have shifted to daa
from voice and SMS. Operators tend to promote
valuable data services packages in order to boost
data uptake and expand the subscriber base.
Further, phone subsidies program is another
strategy that the operators give up some gains in
exchange for client retention. That said, the
relatively weak pricing powers have limited
operators’ ability in transferring their costs to the
customers and put a ceiling on profit margins.
Yet, we take comfort from the fact that the telcos
have learnt the lesson from previous price wars in
voice and SMS, and they would not want to
replicate the pains again. Take Indonesian
operators as an example. The operators have
suffered heavy decline in margins back in the
price-cut competitions in 2008-09 when they
battled for subscribers. Their EBITDA margins
fell to 47% in 2009 from 53% in 2007. Luckily,
the margins have bottomed out from the previous
wars and some operators have managed to raise
tariffs. Furthermore, the telcos may fight to
provide higher quality services and product
varieties for lower churn rates.
Separately, while most regions are free from tariff
regulatory at the moment, the tariff pricing is
regulated in Korea and India where the operators
cannot easily transfer their costs to customers.
This further caps their profit upside. It remains
manageable at the moment, but would be a matter
abc
3. EBITDA margins dropped on intense competition
70%
60%
EBITDA margin (%)
50%
40%
30%
20%
10%
Indosat
-%
FY06 FY07 FY08 FY09 FY10 FY11
Source: Indosat, HSBC
to look at if the regulation will be eased or spread
to other regions.
More than just a communication service
provider
What’s new? In the high-income areas, customers
began to look for something more than pure data
and voice services. Information contents and VAS
(value added services) have become another battle
field for the operators. Instead of pure
infrastructure and services providers, the telcos
are likely to focus more on information and
communications technology (ICT), digital media
and other VAS such as pay TV, cloud computing
and business solutions, etc. The new focus would
hint at more investments and possible mergers and
acquisitions in the space.
Singapore Telecommunications (SingTel), which
holds direct equity stakes in a number of
subsidiaries and associates across Australia and
South East Asia, recently announced to restructure
its organization to fit customer behavioural
change. The group will merge all operations into
three global business operating divisions
(consumer, digital life and ICT) instead of the
previous individual geographic regions. Moving
along with the new strategy, SingTel announced
its acquisition of Amobee Inc, a US mobile
advertising solutions provider, to expand its
business beyond mobile advertising and customer
5
 The View
Asia’s Bond Markets
April 2012
loyalty program. Hong Kong Telecommunications
(HKT) promotes multimedia communications on
top of its fixed-line voice services via its tablet-
based IP phone. Besides, HKT, being a pioneer in
Hong Kong, provides a cloud storage service
alongside its high-speed fibre broadband services.
Elevated capex and shorter investment cycle
While Internet and mobile data usages have been
well-adopted by the public, data uptake and traffic
is increasing in an exponential rate along with the
information contents and the availability of more
affordable mobile devices. Data traffic volume
has been rising by 100% every year. With the
growth of smartphone penetration, we expect the
traffic volume will surge further. The high data
traffic would pose a threat to the operators in the
long run when capacity cannot meet demand. This
has begun to be witnessed in the developed
markets, where the telcos offer high data volume
packages in fixed prices, e.g. unlimited data usage
bundles in Hong Kong and 12GB starter pack in
Singapore. Emerging markets may gradually face
a similar situation, if the telcos take similar price
strategies. Further, speedy technology advance in
recent years has largely shortened the network and
product development cycles. Hence, network
enhancement and product development will
continuously stay on the operators’ agenda,
keeping their capital investments at a higher level
compared with the past.
In another words, the elevated capex and operating
expenses should weigh on profit margins and cash
flows. On the other hand, thanks to the technology
development, equipment costs are getting cheaper
along the years, partly mitigating the operators’
elevated expenses pressure.
Prudent cost management
Despite the fact that the operators have sufficient
liquidity to fund the expenditures internally, given
rising operating costs and capex, telcos have
begun to adopt more prudent cost management
6
abc
and fund-raising mechanisms to ease capex
pressure.
Besides ordinary cost-cutting measures,
investment sharing is another way to minimize
development costs while enabling expansion.
Celcom, a major subsidiary of Axiata Group in
Malaysia, recently signed a memorandum of
understanding with Telekom Malaysia and an
agreement with DiGi to share network
infrastructure.
Some telcos opt to monetize their non-core assets
for expansion funding. PT Indosat signed a
transaction agreement with PT Tower Bersama
Infrastructure Tbk in February to sell and lease-
back 2,500 towers (c25% of Indosat’s tower
assets). The move was aligned with Indosat’s cost
control and deleveraging story, and part of the
proceeds will be used to fund the capex. Separately,
also in Indonesia, XL Axiata (66.7%-owned by
Axiata Group in Malaysia) has also considered
selling tower to fund some of its 2012 capex.
Overall revenue remains resilient
Margins fall but earnings remain stable
Along with rising demand in telecommunication
services, telcos have recorded decent growths in
revenues, but EBITDA and profit growths are
only moderate or flat. This is attributable to three
major factors: 1) rising low-margin data services,
2) elevated capex, and 3) intense competition
which caps the operators’ pricing power.
A shift of revenue mix from higher-margins voice
and SMS services to lower-margins data usage
has also resulted in lower ARPU values. As a
whole, the industry has witnessed a trend of
declining profit margins. Yet, compared with
other international players, the profit margins
remain high in Asia, particularly in the emerging
markets, where the companies we cover have
recorded 45-55% EBITDA margins in general.
Also, we believe the telcos will benefit from their
 The View
Asia’s Bond Markets abc
April 2012

4. Asian telco’s profit margins remain high Furthermore, operators are gradually increasing
50% their dividend payout ratios in favour of equity
40% shareholders. We believe this is a rather positive
EBITDA Margin

30%
sign of stable liquidity, but needs to be monitored
if capex continues to increase.
20%

10% Emerging market risks remain

0% Last but not the least, emerging markets have
Deutsche Telekom
Indosat

Telefonica
Qtel

British Telecom
HKT
Axiata

Verzion
SingTel
France Telecom

AT&T

policy risks and the same can be said for the

telecom industry. A few governments have started
to evaluate their regulatory framework against the
backdrop of regulatory changes. Given a
As of 2011 regulatory ruling in 2011, all subscribers’ value
Source: Company data, Bloomberg
added services (VAS) subscriptions in Indonesia
had to be de-registered. This action has
expansion plans in the long run, resulting in
heightened the industry’s short-term earnings risk;
improving earnings trend thereafter.
the telcos have to re-register their subscribers
Ample liquidity with positive cash flow again. The India’s Supreme Court recently ruled
An Indonesian telecom operator, Bakrie Telecom, to cancel 122 mobile licenses under a 2008 sale.
was downgraded by rating agencies to CCC from B Following the ruling, a number of operators have
earlier on its liquidity. However, most of the been adversely impacted. India Cellular, 19.7%
operators in Asia are well-secured with positive and owned by Axiata, was one of the affected
stable cash flows. We believe the Asian operators companies under the ruling, with 9 licences being
have solid credit metrics and liquidity to withstand affected. Etisalat (not covered), which owned 22
potential negative headwinds and heightened capex. of the affected 2G licenses, indicated that it will
Most of them have sufficient capital to fund capex stop their mobile phone services in India after the
internally or with decent credit facilities. Prudent cancellation. There are a few governments hinting
cost management is another factor that we take at higher spectrums, interconnection and licenses
comfort from in our analysis. fees, etc.

5. Leverage remains low 6. Dividend payout ratio increase along with liquidity

3.0 70
2.5 60
2.0
1.5 50
1.0 40
%

0.5
30
0.0
20
Indosat
PLDT

HKT
Axiata

KT Corp

SingTel
SK Telecom

Telekom Malaysia

10
0
2006 2007 2008 2009 2010 2011
Net debt / EBITDA Av erage Asian telco div idend pay out ratio

As of FY11
Source: Company data Source: Company data, HSBC

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 The View
Asia’s Bond Markets
April 2012
7. USD bond issuance size is little
2500 USDm 10%
2000 8%
1500 6%
1000 4%
500 2%
0 0%
1Q12 2011 2010 2009 2008 2007
USD issuance % of total corporate issuance (RHS)
Source: Bloomberg, HSBC
Bond issuance remains opportunistic
Asian telecom’s issuance is relatively small
within the Asian corporate universe and
opportunistic. The sector only accounted 1.3% of
total Asian USD bond issuance in 2011. While a
single country-exposed telecom player may opt
for domestic funding, some incumbent holding
companies would seize the low interest rate
environment for extra funding. In Indonesia,
Indosat’s management indicated their preference
towards the local bond market to avoid FX
volatility. It recently proposed to issue IDR1trn
local bonds. Bigger players, SingTel and KT
Corp, sold USD700m and USD350m 5-year
bonds earlier this year at 2.4% and 3.9% yields,
respectively. We see HKT (formerly known as
PCCW-HKT) as a potential candidate to issue
bonds. Given the limited chance of further debt
reduction, we expect HKT’s 2013 bonds to be re-
financed upon maturity. A pre-fund issuance is
possible in our view.
8
abc
Bond valuation
We initiate with a Tactical Buy call on STSP ’19.
STSP ’19 was issued by SingTel Optus. We
expect STSP ’19 will benefit from the group’s
recent restructuring to group all business and
subsidiaries into operational units instead of
individual regions. The new business hierarchy
would allow Optus to move closer to the parent
group, gaining stronger parental support. Optus
was viewed as a notch lower than the Group given
the previous separate operations, as highlighted by
the spread differential between SingTel and Optus
notes. STSP ’19 is currently trading flat vs STSP
’21. We expect the bond to gradually move inside
of STSP ’21 should Optus’ credit profile be
viewed as equivalent to the Group.
On the sector level as a whole, we believe the
current valuation for the Asia telecom industry
bonds is fair. The bonds have been holding in a
relative tight range compared with other corporate
bonds. The average spread of the telecom sector is
3.7% versus 4.39% for the whole universe (ADBI).
For example, Indosat’s 2020 bonds and PLDT’s
2017 bonds are tight among other corporate bonds in
their corresponding country. We maintain our Hold
trade calls across the sector.
8. Telecom outperformed the universe in a market recovery
35%
25%
Total return
15%
5%
-5%
-15%
1Q12 2011 2010 2009 2008 2007
ADBI - Telco ADBI
Source: HSBC
 The View
Asia’s Bond Markets abc
April 2012

9. Bonds hold on tight in the Asia corporate universe

450 Z-spread (mid, bp)

400 ISATIJ 20

350

300
PCCW 16
250 PLDT 17
PCCW 15 AXIATA 20
200
PCCW 13 TELMAL 14 KOREAT 17 SKM 27
KOREAT 16 STSP 19 TELMAL 25
150 KOREAT 15
STSP 21 STSP 31
KOREAT 14
100 STSP 17
M. dur
50
1 3 5 7 9 11 13

Source: HSBC

Recommendation summary and risks

Issuer Recommendation Upside risks Downside risks
Axiata Group Berhad Neutral Significant market and operating growths in Intensive price competition and substantial capex
core subsidiaries for data network expansion and opportunistic
acquisitions.
Indosat Neutral Upside risk could be further assets sales to We see the possibility of higher capex spending on
fund additional capex and reduce debt data network development or intensified price
leverage. competition in the industry.
Singapore Telecom Neutral Strong contribution from subsidiaries, Aggressive expansion program and acquisition
especially Bharti Airtel, on increasing after organization restructuring
market shares or material growth in core
markets (Singapore and Australia)
HKT Neutral Significant market and operating growth in Uncertainties may result from unexpected
mobile business and data services corporate events or potential privatization
Source: HSBC

9
10
Appendix
Sector summary by regions
Hong Kong
Market view
Credit view Highly penetrated market, where
subscriber growth is no longer the key
driver, the focus has shifted towards
data services and digital technology
services.
Market structure and the Dominated by 3 major operators,
competition Smartone, Three and PCCW, where
PCCW takes the majority market share
in fixed-lines. Intense competition but
low churn rates due to the prevalence of
post-paid and phone subsidies
contracts.
Regulation Highly liberated market and no further
regulatory changes expected in the near
future.
Fundamental credit view
Revenues and profitability Smartphone penetration of over 65%
are driving data revenue growth,
however, data bundles and fixed-fee
data plans put pressure on profitability
and infrastructure capacity.
Leverage Under-leveraged balance sheet
Liquidity needs High capex needs are mitigated by
relatively underleveraged balance
sheets. Most names have enough
financial flexibility to accommodate
increased expenditure.
Issuance Opportunistic play given the sufficient
liquidity and financial flexibility. HKT is a exhibiting the tendency towards
potential issuing candidate given the
existing 'optimal' capital structure. The
upcoming 2013 bonds are expected to
be refinanced upon maturity.
Source: HSBC
Indonesia
The Government of Indonesia is likely to
fully re-acquire its investment grade
status, which could benefit Indosat in
the long run.
Despite the existing 10 operators, the
top 5 players have retained 90% of the
market share. Yet, given the 75-80%
penetration rate, the industry still
remains in competitive environment.
Regulatory pressure is high in the form
of increasing frequency and spectrum
fees and licensing charge revision.
Expect pressure on profitability margins
Strong revenues, although we expect
profitability margins to be squeezed.
Growth of data revenues to remain
subdued hindered by low smartphone
penetration.
Backed by improving FCF and self-
financing in capex, the industry is in a
pace of organic deleveraging.
Despite high capex needs, large
companies are generating strong cash
flows enough to fund investment needs
internally. Smaller companies like
Bakrie Tel would continue to be under
pressure from high investment
expenditure.
Large players in the market are
domestic markets to mitigate currency
risk. Furthermore, the shift towards loan
market is reducing the probability of
excessive bond issuance.
Malaysia
The market reached full penetration in
2011, however, suburban penetration
remains low. Data uptake is limited by
the high price of the smartphones.
Market is dominated by three large
players, however the smaller operator
DiGi is catching up, intensifying
competition.
Regulatory changes to date have
resulted in increased competition in the
industry. We expect the decision on
spectrum reframing to be taken in 2012,
which is generally positive for marginal
players.
Increased data uptake could become an
important driver of growth once
smartphone penetration starts
increasing. Margins are high in a three-
play market, however, persistent efforts
by DiGi to increase its market share
could intensify competition.
The industry is not overleveraged;
nevertheless, we expect the debt ratio
to increase, caused by higher capex
going forward.
Liquidity needs are comfortably
manageable from existing cash and
cash flows.
We expect the companies to continue
shifting towards domestic funding in
order to mitigate currency risk.
Philippines
Wireless data talk is remote given the
less than 5% smartphone penetration
rate. SMS and voice remain the major
contributors in revenue mix
A shift to duopoly (PLDT and Globe)
market will rationalise the intense
competition once PLDT completes the
takeover of the No. 3 operator Digitel,
while the planned entry of new
operators may increase competition at
the same time.
Regulator may review voice mobile
termination rates in 2012, which may be
negative to PLDT.
Telcos continue to face price
competition, plus a gradual shift from
high margin SMS and voice to lower
margin data services in revenue should
continue to pressure profit margins.
Leverage ratios remain stable while the
increased capex put a floor on further
deleveraging.
Liquidity needs can be comfortably
managed by internal financing or
domestic bank loans if necessary.
Comfortable access with domestic
banks provides financial flexibility to the
telcos and could reduce the chance of
Eurobond issuance.
April 2012
Asia’s Bond Markets
The View
Singapore
Highly penetrated market, where
subscriber growth is no longer the key
driver, the focus has shifted towards data
services and digital technology services.
Dominated by SingTel, which is partly
owned by Temasek, and Starhub.
Lower churn rates compared to other
Asian market due to the prevalence of
post-paid contracts. Weaker margins
result from handset subsidies.
Regulatory changes are reducing
differentiation between triple play
operators and facilitating SingTel
entering into the pay TV space. We
expect this trend of teleccoms
increasingly providing data services to
continue.
Smartphone penetration of over 65% is
driving data revenue growth, however,
data bundles and fixed-fee data plans
put pressure on profitability and
infrastructure capacity.
Under-leveraged balance sheet
High capex needs are mitigated by
relatively underleveraged balance
sheets. Most names have enough
financial flexibility to accommodate
increased expenditure.
abc
With sufficient liquidity and financial
flexibility, issuance would be an
opportunistic play as the solid
investment-grade credits would enjoy
broader investor base and lower
borrowing cost in the USD bond market.
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April 2012

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11
 The View
Asia’s Bond Markets abc
April 2012

Axiata Group Berhad Baa2 positive / BBB stable / NR

Credit quality view: Neutral Louisa Lam +852 2822 4527 / Philip Wickham +65 6239 0630
As one of the largest Asian telecom services holding groups, Axiata benefits from its solid market share in Malaysia via Celcom as well as growth opportunities in emerging
markets through its major subsidiaries in south Asia, including XL Axiata (Indonesia), Dialog (Sri Lanka) and Robi (Bangladesh). Celcom and XL Axiata are its two largest
subsidiaries, accounting for 82% of group revenue. Despite the challenging operating environment, Axiata has demonstrated resilience, aided by a diversified geographic
business portfolio and sound operating track record.
The group has more than sufficient liquidity profile with cash/short-term debt ratio and FFO/total debt ratio staying sound at 3.0x and 0.5x, respectively; we believe it has ample
headroom against the potential weaker market conditions given global growth concerns. Operationally, the revenue mix is reconfiguring from voice to data on strong user
demand, which contributed 19.8% of total revenue in FY11 from 16.1% in FY10. Despite this, to meet the growth opportunities, rapid data network expansion will keep capex
elevated over the coming one to two years before it begins to ease. We have concerns that the lower margin data service along with the higher capex would pressure the
group’s cash flows and margins in the short term.

Catalysts Financial summary (FY end 31 December)

Growth data services: Demand on data services has been growing, altering Axiata’ (USD m) 2008 2009 2010 2011
revenue mix. The company has had to boost investment in data networks and
equipment, putting pressure on profit margins and cash flow in short to medium Revenue 3,357 3,872 4,816 5,274
term, but this expenditure should benefit the group in the long run. EBITDA 1,315 1,576 2,175 2,285
Depreciation and amortisation 692 849 1,215 1,009
M&A: Following a failed attempt to increase its stake in India’s Idea Cellular last Operating profit 268 776 988 1,147
year, Bloomberg said in mid-January that the company has been in talks to acquire Interest expense 330 221 173 249
a stake in Tikona Digital Network; such an acquisition would allow Axiata to tap the Taxation 129 265 336 277
rising data service demand in India. Net income 139 511 653 870
Cash flow from ops (CFO) 736 1,407 1,901 1,968
Policies and licensing in emerging market: Its substantial business in Asia
Capex 3,338 957 915 1,560
emerging markets exposes Axiata to various execution risks, policy risks and
Dividends 9 0 0 416
uncertainties. India’s Supreme Court recently cancelled 122 mobile licenses that Free cash flow (FCF) 407 -379 1,334 107
had been granted in a 2008 sale. India Cellular, 19.7% owned by Axiata, was one of Total assets 10,779 10,816 12,437 12,779
the affected companies, having bought nine licences 2008, which would be
Cash 965 586 2,049 2,085
adversely impacted by the cancellation.
Short-term debt 1,568 628 228 702
Technicals Total debt 4,623 3,599 3,487 3,611
Net debt 3,658 3,013 1,438 1,526
Liquidity: The group’s liquidity and financial profile remain more than sufficient, with Shareholder equity 3,388 5,515 6,619 6,656
a cash balance of MYR6.6bn (USD2.1bn). Cash to short-term debt ratio and
FFO/Total debt ratio stayed sound at 2.97x and 0.51x, respectively. We expect Ratios
capex to remain elevated over the coming one to two years to support rapid data EBITDA margin (%) 39.3 40.7 45.2 43.3
network expansion and gradually ease afterwards. We expect the current cash EBITDA growth ( %) 24.9 21.9 30.2 1.0
balance and positive recurring cash flow can fund the capex internally. Net debt/EBITDA (x) 2.8 1.9 0.6 0.7
Short-term debt/EBITDA (x) 1.2 0.4 0.1 0.3
Supply: While we expect the current cash balance and positive recurring cash flows
EBITDA/gross interest (x) 5.6 6.8 10.6 11.2
will be sufficient to fund the capex internally, we would not rule out the possibility of
Capex/EBITDA (%) 253.8 60.7 42.1 68.3
the company visiting the primary market. Further, given the current sufficient
FCF/total debt (%) 8.6 -10.6 40.5 2.9
borrowing headroom, Axiata may be an opportunistic issuer. The group currently
has only USD300m 2020 bonds outstanding. Meanwhile, with plans of increasing
Operating data
ROIC, we believe merger & acquisition activities are possible in short to medium
Number of subscribers (m) 89.3 120.1 159.7 199.1
term.
Churn rate n/a n/a n/a n/a
Company profile ARPU (average) n/a n/a n/a n/a
Source: Axiata, HSBC.
Including a 39.26% ownership from the Malaysia government investment arm,
Khazanah Nasional Bhd, Axiata Group Berhad (formerly known as TM International)
is 58.6% owned by the Malaysia government. The ASEAN telecom holding group
owns controlling interests in a number of mobile operators in Asia, including two Bond summary
core subsidiaries in Malaysia (Celcom) and Indonesia (XL Axiata). The rest of the
Bloomberg Principal Maturity Coupon Redemption Price Yield
holdings include Dialog Telecom (Sri Lanka), Robit Axiata (Bangladesh), Hello
ticker (USD m) (%) type mid mid (%)
Axiata (Cambodia), Idea Cellular (India), M1 (Singapore) and MTCE (Iran).
AXIATA 300 2020 5.375 Bullet 106.7 4.4
Source: HSBC

12
 The View
Asia’s Bond Markets abc
April 2012

Credit ratings Revenue composition by country (FY 2011)

Senior unsecured Outlook Last rating action

foreign debt Bangladesh
Indonesia (Ro bi)
Moody's Baa2 Positive Outlook revised from stable on 6 (XL) 8%
December 2010 39%
S&P BBB Stable Downgraded from BBB+ on 28 Sri Lanka
July 2011 (Dialo g)
Fitch NR 8%
M alaysia
Source: Rating agencies (Celco m) Others
43% 2%
Total revenue:
Debt maturity profile MYR16.45bn (cUSD5.27bn)

1,500 Source: Axiata

1,200
Capex composition by major operators (FY 2011)
900
USDm

600
300 Indonesia
Bangladesh
(Ro bi)
(XL)
- 14%
59%
<1 y ear 1-2 y ears 2-5 y ears >5 y ears
Sri Lanka
Bonds Loans
(Dialog)
M alaysia 4%
Source: Bloomberg, Axiata
Total capex: (Celcom) Others
22% 2%
MYR4.44bn (cUSD1.48bn)
Group structure
Khazanah Nasional Celcom (100%) Source: Axiata
Berhad (38.3%) Hello Axiata
(100%)
XL Axiata (66.7%)
Employees Steady growth in subscriber numbers
Provident Fund Robi Axiata
Axiata Group (70.0%)
Berhad
Dialog Axiata 250 million
AmanahRaya (85.0%)
Multinet Pakistan 200
Trustees (6.64%)
(89.0%)
M1 Ltd (29.4%) 150
Public Idea Cellular
Mobile Tel. Co of (19.1%) 100
Esfahan (49.0%)
50
Smart i-Mobile
(24.4%) 0
Source: Axiata 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
Malay sia Indonesia India Sri Lanka
Bangladesh Singapore Cambodia Others

Source: Axiata, HSBC

13
 The View
Asia’s Bond Markets abc
April 2012

PT Indosat Tbk Ba1 stable /BB watch positive /BBB- positive

Credit quality view: Neutral Louisa Lam +852 2822 4527 / Philip Wickham +65 6239 0630
Indosat recorded a moderate performance in FY11, in which operating revenue improved 3.9% y-o-y to IDR20.6trn (USD2.3bn). EBITDA, however, dropped 1.9% y-o-y to
IDR9.4trn (USD1.0bn) with a lower margin of 46%. This was mainly attributable to the one-off increase in personnel expenses in Voluntary Separation Scheme (VSS) and
higher frequency and 3G spectrum fees. Credit metrics stayed sound with gross debt/EBITDA at 2.5x, well below the threshold of 3.5x and interest coverage at 5.53x. While 3G
development remains in the early stage of wireless data evolution for the country, wireless cellular business should continue to be the key growth driver and the major source of
revenue and cash flow in the near term. While Indosat is vulnerable to intense price competition, which weighs heavily on the company’s top-line growth and profit margins, the
industry has learnt and bottomed out from the pain in previous voice and SMS price war in 2008 and does not expect entering into another one. With current effective mobile
penetration rate (c80%), there is room for organic revenue growth. In terms of strategy, wireless broadband is one of Indosat’s key focus areas for growth and the company
aims to gain market leadership in this area. Indosat’s management once indicated that more than 50% of the capex will be allocated for wireless data expansion. Meanwhile,
the company recorded higher operating costs and licensing fees. This, together with the capex on data network development, should slow Indosat’s deleveraging, but we
believe it will continue to benefit from organic deleveraging.
And CDB

Catalysts Financial summary (FY end 31 December)

Data network & services expansion: Data network development is an inevitable (USD m) 2008 2009 2010 2011
event in the industry and the data services should soon to be the growth driver in
Revenue 1,839 1,856 2,156 2,280
the region, as has become the case in the developed markets. One of Indosat’s key
EBITDA 919 865 1,048 1,043
strategies is to gain market leadership in data services, and this would require
material investment. This should benefit the company in the long run, but in the Depreciation and amortisation 452 548 670 729
short term should put pressure on its cash flow. Operating profit 466 317 378 314
Interest expense 183 185 247 198
Cost efficiency program: Indosat is undergoing cost efficiency program. It has Taxation 41 67 39 28
monetised some of its non-core assets by selling and leasing back 2,500 of its Net income 188 153 79 103
towers to PT Tower Bersama Infrastructure for a total consideration of USD519m, Cash flow from ops (CFO) 592 581 923 942
including USD406m upfront. Proceeds will be used to fund some capex and repay Capex 946 1,138 723 667
existing debts. We see this positive as it points to better cost and liquidity Dividends 95 101 86 39
management. Free cash flow (FCF) -351 -555 199 276
Total assets 4,743 5,862 5,883 5,753
Regulatory changes: Policy and regulatory changes remain one of the key Cash 526 302 231 245
concerns in the industry. Given technology advances, the regulatory bodies will Short-term debt 58 456 477 534
evaluate the existing framework against the backdrop of higher operating costs – Total debt 1,996 2,713 2,680 2,581
frequency fees, licensing fee and spectrum fees, etc. Indosat recorded 12.2% q-o-q Net debt 1,470 2,411 2,449 2,336
EBITDA drop in 4Q11 on the unexpected one-off licensing charge revision. We Shareholder equity 1,624 1,948 2,031 2,075
believe similar events may occur in the coming years.
Technicals Ratios
EBITDA margin (%) 50 47 49 46
Liquidity: Indosat’s liquidity and financial profile are sound with the credit ratios EBITDA growth( %) 7.0 -5.9 21.2 -0.5
well within the covenant thresholds. We expect FY12 capex to be flat compared Net debt/EBITDA (x) 1.7 2.6 2.3 2.3
with FY11 at around IDR5.8-6.2trn (USD630-675m); this sum can be funded Short-term debt/EBITDA (x) 0.1 0.5 0.5 0.5
internally using cash flow and by monetising more non-core assets. We also take EBITDA/gross interest (x) 5.0 4.7 4.2 5.3
comfort from the prudent cost control management. Capex/EBITDA (%) 111 122 67 64
FCF/total debt (%) n/a n/a 7.4 10.7
Supply: The company’s management has indicated that, to avoid FX volatility, it will
look to its domestic market for funding instead of the US dollar markets. Also,
Indosat has tended to favour loan facilities over bond issuance in recent years. The Operating data
organic deleveraging story should also continue. Number of subscribers (m) 36.5 33.0 44.3 51.7
Churn rate n/a n/a n/a n/a
Company profile ARPU (average, USD) 3.54 4.01 3.87 3.13
Indosat is an Indonesian fully-integrated telecommunication company. It is the Source: Indosat, HSBC.
country’s second-largest cellular operator in terms of revenue and subscribers, and
a leading provider of international call services. It has the third largest mobile
network in Indonesia (after Telkomsel and XL) in terms of base transceiver station. Bond summary
While Indosat provides a full range of services across fixed line and wireless
networks, its mobile business generates most of the revenues and cash flow. The Bloomberg Principal Maturity Coupon Redemption Price Yield
company is 65%-owned by Qatar Telecom (Qtel) which is, in turn, 55%-owned by ticker (USD m) (%) type mid mid (%)
the Qatar government. Indosat’s standalone credit is rated Ba2 by Moody’s. Being
ISATIJ 650 2020 7.375 Callable 111.25 4.7
a strategic investment for Qtel and with strong parental support, Indosat’s final
rating was uplifted by one notch to Ba1 by Moody’s. Source: HSBC

14
 The View
Asia’s Bond Markets abc
April 2012

Credit ratings Revenue composition by segments (2011)

Senior unsecured Outlook Last rating action

foreign debt
Fix ed Data
Moody's Ba1 Stable Rating affirmed on 8 Feb 13%
2012
Cellular
S&P BB Watch Positive Put on watch on 10 Feb 2012
Fitch BBB- Positive Outlook revised from Stable 81%
on 15 Dec 2011
Fix ed Voice
Source: Rating Agencies
6%
Operating revenue:
Debt maturity profile IDR20.58trn (cUSD2.7bn)

1200 Source: Indosat

1000
800 3G penetration rate in Indonesia
USD m

600
120%
400
3G Penetration Rate

100%
200
80%
0
60%
1Yr 2Yr 3-7Yr 7+Yr
40%
USD debt IDR debt
20%
Source: Indosat, HSBC
0%
2010 2011f 2012f 2013f 2014f 2015f 2016f
Group structure
Source: Informa Telecoms & Media (WCIS+), Indosat
Republic of
Skagen AS Qatar Telecom Public
Indonesia

5.62% 65.00% ARPU trend to decline

14.29% 15.09%

250
200
IDR '000

PT Indosat Tbk
150

100
As of December 2011 50
Source: Indosat
0
2007 2008 2009 2010 2011
Prepaid Postpaid Blended

Source: Indosat, HSBC

15
 The View
Asia’s Bond Markets abc
April 2012

Hong Kong Telecommunications Baa2 stable /BBB stable /NR

Credit quality view: Neutral Louisa Lam +852 2822 4527 / Philip Wickham +65 6239 0630
HKT’s first set of financial results since its November 2011 IPO were solid, exceeding its own guidance in revenue, EBITDA and adjusted fund flow (AFF). Revenue increased
7% y-o-y to HKD19.8bn (USD2.6bn) and reported EBITDA rose 2% y-o-y to HKD7.4bn (USD1.0bn). Margins, however, declined 2% to 37% in 2011. HKT has a strong market
position in HK. It is the market leader in the telecommunication services industry, which allows the company to continue to drive revenue growth and stabilise EBITDA.
Broadband network revenue surged 11% to USD474m in 2011 while the churn rate sat below 1%. At the same time, thanks to smartphones and tablets, data revenue
continued to expand rapidly (+69% y-o-y), and now accounts for 59% of service revenue. Meanwhile, HKT continues to strive for higher ARPU across its business. It has
targeted higher usage 3G subscribers, driving the average post-paid ARPU to HKD184 (USD23.7) from HK143 (USD18.4) a year ago, while on the fixed line side, it has
recorded rapid growth in IP-based subscriptions. On the cash flow side, we take comfort from HKT’s modest capex. Capex-to-revenue ratios have stayed below the guidance
of 10% in recent years, at 8% in 2011, or USD205m. Stepping in 2012, HKT management said the company will focus on mobile business development while continuing to
expand in broadband services. But given the intense competition in the telecom industry as a whole in HK, we see little opportunity for any one company to expand rapidly in
the near term, and believe HKT will achieve only steady and more or less flat earnings.
And CDB

Catalysts Financial summary (FY end 31 December)

Revenue mix shifts to data: HKT has reconfigured its revenue mix to data and (USD m) 2008 2009 2010 2011
wireless from traditional voice and fixed businesses. In line with the developed
Revenue 925 2,316 2,391 2,558
market telecom companies, it is extending its services to encompass ICT and other
EBITDA 362 1,010 1,004 1,035
digital services such as uHub (cloud storage service). As this seems an inevitable
trend within the industry, we like the management’s pioneering move in HK. This Depreciation and amortisation 283 508 557 548
should result in superior client retention rates and higher margins in the long run. Operating profit 629 429 380 409
Interest expense/(income) 29.41 189 202 193
Deleveraging story: HKT used some USD1bn from its IPO listing in November Taxation 16.95 62 49 44
last year to reduce outstanding debt, cutting gross indebtedness by USD1.5bn in Net income 35 170 119 159
2011. Guidance from management is that capital expenditure will stay below 10% of Cash flow from ops (CFO) 514 620 636 n/a
revenue, which has been the ratio historically, and compares to an 8% ratio last Capex 289 194 207 205
year. Capital expenditure is focused on cellular and fibre broadband network Dividends n/a n/a n/a n/a
expansion, which is both more demand-driven and usually generates higher Free operating cash flow (FCF) 225 433 435 n/a
revenues and profitability. Nonetheless, further room for debt reduction is limited as Total assets 8,281 8,289 8,706 8,374
management has said it views the existing capital structure as “optimal”. Cash 194.45 287 702 287
Short-term debt 0 469 1,660 4
Technicals Total debt 5,572 4,939 5,107 3,032
Liquidity: Liquidity remains sufficient with USD1.1bn of undrawn bank facilities and Net debt 5,378 4,651 4,405 2,746
with no significant debt maturing this year. Total debt/EBITDA was 3.2x last year, Shareholder equity 2,187 2,366 2,497 3,969
with net debt/EBITDA at 2.9x. (The reported figures don’t take into account off-
balance sheet liabilities). In addition, we project the effective interest rate to fall to Ratios
2.7% in 2012 from 3.6% in 2011 as the company benefits from the lower interest EBITDA margin (%) 39.1 43.6 42.0 40.5
environment. EBITDA growth( %) n/a 179.4 -0.6 3.2
Net debt/EBITDA (x) 4.5 4.5 4.1 2.9
Supply: We acknowledge HKT’s improved credit profile following the partially spin- Short-term debt/EBITDA (x) 0 0.46 1.65 0.00
off of the telecom operations in November 2011. Given little chance of further debt EBITDA/net interest (x) 12.3 4.5 4.3 4.6
reduction, its outstanding US dollar-denominated notes maturing in 2013 are likely Capex/EBITDA (%) 80 19 21 20
to be rolled into new bonds on maturity, possibly through pre-funding. FCF/total debt (%) 4 9 9 n/a
Company profile Operating data
Hong Kong Telecommunications Ltd (HKT) is the largest integrated Number of exchange lines in services ('000) n/a n/a 2,590 2,636
telecommunications provider and also offers ICT services. Together with its parent Total broadband access line n/a n/a 1367 1518
company, PCCW Limited, HKT offers media content and services across the Number of mobile subscribers ('000) n/a n/a 1484 1535
PCCW Group's platforms – fixed-line, broadband Internet access, TV and mobile as Churn rate n/a 0.8 0.6 1.2
well as IT outsourcing projects and network/technical supports. Mobile ARPU (average, USD) n/a n/a 18.45 23.74
Source: PCCW, Bloomberg, HSBC.
HKT used to be a subsidiary of PCCW Limited, and but has been separately listed
since an IPO in November 2011. As a whole, the group accounted for 61% of
market share in number of fixed lines (as of June 2011), 12% market share in
mobile subscriber and c65.4% in broadband access lines. Bond summary
Bloomberg Principal Maturity Coupon Redemption Price Yield
ticker (USD m) (%) type mid mid (%)
PCCW 500 2013 6 Bullet 104.33 2.64
PCCW 500 2015 5.25 Bullet 106.42 3.20
PCCW 500 2016 4.25 Bullet 102.34 3.61
Source: HSBC

16
 The View
Asia’s Bond Markets abc
April 2012

Credit ratings Revenue composition by segment

Senior unsecured Outlook Last rating action Other

foreign debt
Businesses
Moody's Baa2 Stable Outlook revised from negative 4%
watch in Nov 2011
S&P BBB Stable Outlook revised from negative TSS
watch in Nov 2011 Mobile 86%
Fitch NR 10%
Source: Rating agencies
Total revenue:
HKD19.8bn (USD2.6bn)
Debt maturity profile

1200 Source: HKT, HSBC

1000
800 HK mobile penetration rate hit 200% in 2011
USD m

600 250.0
400
200
200.0

0 150.0
%

2012 2013 2014 2015 2016 100.0

USD bonds Long-term bank loans
50.0
Source: PCCW, HSBC

0.0
Ownership structure 2005 2006 2007 2008 2009 2010 2011
Source: World Bank, OFTA
PCCW Public

63% 37%
Steady margins
Share Stapled Units 50%
100%
Units Preference shares 40%
Provides trustee &
managementt services 30%
Trustee-
HKT Trust HKT Limited
Manager 20%
Reimbursement 100% Ordinary shares
of expenses 10%
Source: PCCW, HKT/HKT-Trust 0%
2008 2009 2010 2011
EBITDA margin Profit margin

Source: Company reports

17
 The View
Asia’s Bond Markets abc
April 2012

Singapore Telecommunications Ltd Aa2 stable /A+ stable /A+ stable

Credit quality view: Neutral Louisa Lam +852 2822 4527 / Philip Wickham +65 6239 0630
SingTel Group is one of the more defensive credits in the Asia universe. The group has a stable operating profile and credit metrics together with diversified operations both
geographically and across both of its business units. We are comfortable with SingTel’s profile and financial position. It recently announced plans for organisational
restructuring, in which all businesses will be grouped according to operations instead of by geographic region to best capture opportunities offered by advancing technology.
While the benefits of the new structure are yet to be seen, we are encouraged by the management’s proactive move on the industry evolution.
SingTel company (Singapore) and Optus (Australia) are the two major revenue contributors, accounting for 53% in total group EBITDA, while six regional mobile associates
contributed the remaining 45%. Telkomsel (Indonesia) and Bharti Airtel (India and Africa) are the two biggest associates in the regional mobile space. Given its significant
position in the emerging market, SingTel is exposed to execution risks and FX rate fluctuation at the same time. While Bharti remains in the initial expansion stage in African
markets, the company recorded net loss on the back of high acquisition financing costs despite a solid market position in India. Its share of this net loss has pressured
SingTel’s earnings. This is partly compensated for by subsidiaries in other regions, and SingTel’s operating profit remains solid and stable as a whole.

Catalysts Financial summary (SingTel Group, financial year end 31 March)

Not just data services but ICT opportunities: Data services have been well (USD m) 2009 2010 2011 9M12
adopted in Singapore and Australia. With this change in customer behaviour, ICT,
digital services and other VAS such as payTV, mobile TV and cloud computing, etc Revenue 9,826 12,054 14,339 10,828
have gradually become the new growth drivers. While core operations in Singapore EBITDA 2,915 3,463 4,062 2,921
Share of associates' pre-tax profits 1,349 1,722 1,699 1,142
and Australia are expected to show low single-digit growth, the new type of service
Depreciation and amortisation 1,140 1,342 1,562 1,152
demand may boost the group’s revenue growth and margins.
Operating profit 3,125 3,843 4,199 2,911
Organisation restructuring: In order to catch the emerging opportunities amid Interest expense 205 239 257 191
technology advancements, SingTel will merge all operations into three global Taxation 614 811 928 708
divisions – consumer, digital life and ICT – instead of operating separately in Net income 2,269 2,792 3,035 2,081
individual geographic regions. The new strategies and changes hint at higher Cash flow from ops (CFO) 3,174 3,594 4,546 2,876
investment in the coming years, which may put pressure on the group in the short Capex 1,274 1,353 1,590 1,213
run but prove beneficial on a longer timescale. Dividends 1,309 1,489 1,871 2,335
Free operating cash flow (FCF) 1,578 2,025 2,330 1,241
Continuous investments and possible acquisitions: SingTel has entered into a Total assets 21,880 27,116 31,171 30,662
conditional agreement to acquire 100% of Amobee Inc, a US mobile advertising Cash 708 1,153 2,173 1,172
solution to expand its business beyond mobile advertising and customer loyalty Short-term debt 943 1,092 2,142 101
programs. While the cUSD321m cash acquisition should not pressure the leverage Total debt 4,931 4,915 5,781 6,890
metrics at SingTel, we see it as likely to presage more investments in the coming Net debt 4,223 3,762 3,609 5,718
years. Shareholder equity 13,488 16,802 19,323 17,116
Technicals
Ratios
Liquidity: SingTel’s credit and liquidity metrics are solid, with leverage comfortably EBITDA margin (%) 29.7 28.7 28.3 27.0
below the company’s covenant threshold of 2.0x net debt/EBITDA. Positive free EBITDA growth( %) -2.2 9.4 5.6 1.7
cash flow and a stable operating performance provide sufficient headroom against Net debt/EBITDA* (x) 1.0 0.7 0.6 1.4
market headwinds and for market expansion. Capex guidance for FY12 is Short-term debt/EBITDA* (x) 0.2 0.2 0.4 0.0
estimated to be SGD900m (USD715m) for SingTel company and AUD1.2bn EBITDA/gross interest* (x) 14.2 14.5 15.8 15.3
(USD1.1bn) for Optus. Capex/EBITDA* (%) 30 26 28 30
FCF/total debt (%) 32 41 40 18
Supply: With its Aa2/A+ credit ratings and support from Temasek, SingTel enjoys
relatively low borrowing costs and good access to the capital market. The group Operating data
sold USD700m five-year dollar bonds at 2.42% in early March. Given its investment SingTel (Company)
plans and the prevailing low interest rate environment, we identify SingTel as an Number of mobile subscribers (m) 2,976 3,116 3,307 3,549
opportunistic issuer. Churn rate n/a n/a n/a n/a
Company profile Mobile ARPU (average, USD) 33.86 36.75 42.64 40.78
SingTel Optus
Singapore Telecommunications (SingTel) is the incumbent integrated telecoms Number of mobile subscribers (m) 7,137 8,498 9,068 9,409
services operator in Singapore, and through SingTel Optus runs the second largest Churn rate n/a n/a n/a n/a
market player in Australia. The group also operates in a number of Asian countries, Mobile ARPU (average, USD) 31.86 43.70 49.79 47.07
owning minority stakes in a selection of mobile operators. SingTel is headquartered
* EBITDA plus share of associates’ pre-tax profits
and listed in Singapore, and is 54.4%-owned by the government’s investment arm Source: SingTel, HSBC
Temasek Holdings (rated Aaa/AAA).

18
 The View
Asia’s Bond Markets abc
April 2012

Bond summary EBITDA composition by regions (December 2011)

Bloomberg Principal Maturity Coupon Redemption Price Yield

ticker (USD m) (%) type mid mid (%) Regional
Mobile Others
STSP 700 2017 2.375 Bullet 99.54 2.47 1%
STSP 600 2021 4.5 Bullet 106.70 3.65 46%
STSP 500 2031 7.375 Bullet 143.57 4.12
STSP (Optus) 500 2019 4.625 Bullet 106.78 3.59
Source: HSBC
Singapore
Australia 23%
Total EBIDTA: 30%
Credit ratings USD10.83bn
Senior unsecured Outlook Last rating action
foreign debt Source: SingTel, HSBC

Moody's Aa2 Stable Senior unsecured debt rating

upgraded from A1 in 2005 New group organisation structure effective from 1 April 2012
S&P A+ Stable Downgraded from AA- in 2003 CEO
Fitch A+ Stable Upgraded from A in July 2010 Group Consumer
Comsumer Australia
Source: Rating agencies CEO Consumer Singapore
Group Digital L!fe International Group

CEO
Debt maturity profile Group ICT Communities & Ecosystems
Group CEO Concierge & Hyperlocal
eCommerce
Group CFO NextGen TV
3,500 Amobee
SingTel Innov8
3,000 Group Director
Human Resources
2,500
Business Group
USD m

2,000 Group CSO Enterprise Data & Managed Services

NCS
1,500 Optus Business
Group CIO
1,000
500 Source: SingTel

0
<1 y ear 1-2 y ears 2-5 y ears 5-10 y ears >10 y ears Margin evolution

Source: Bloomberg, HSBC

35%

30%
Ownership structure
25%
Temasek Group
20%
54.4%

SingTel (Group) 15%

FY09 FY10 FY11 9M12
EBITDA margin Profit margin
100% 100% 32.3% 35%
SingTel SingTel Optus Bharti Airtel Telkomsel
Source: SingTel
(Singapore) (Australia) (India & Africa) (Indonesia)

47.3% 23.3% 45% 30%

Globe AIS Citytel Warid
(Philippines) (Thailand) (Bangladesh) (Pakistan)

Source: SingTel, HSBC

19
 The View
Asia’s Bond Markets abc
April 2012

Focus List
New trading calls: SingTel Optus (BUY), Sun Hung Kai Properties (BUY), The Wharf Holdings
(SELL), Yuzhou Properties (BUY)
Issue Ratings Cur Prev __ Price____ Yield SOT+ Z-Spd SOT chg from Comments
Bid Ask Bid Ask Bid Ask Bid Ask last mth (Bid)
High-grade corporates
Hutchison Whampoa We regard Hutchison Whampoa as a defensive Asian credit
6 Perpetual, $2,000m Baa2(N)/BBB(S) BUY BUY 101.5 102.5 5.5 5.2 451 420 465 434 -17 given its improved balance sheet and robust liquidity profile
(HKD87bn at end-2011). Moreover, while exposed to the
weakening EU economy - in the retail, ports, and telecoms
operations - we anticipate the credit to maintain its ratings
through the cycle. Technicals have weakened given the rush of
issuance recently, but it continues to have one of the broadest
investor bases for an Asian corporate issuer. (Philip Wickham)
PTT Exploration & Production We see government support as lending stability to PTT's credit
4.152 07/15, $500m Baa1(S)/BBB+(S) BUY BUY 104.1 104.9 2.8 2.6 181 156 202 177 -38 profile. We also like the visibility on PTT's income stream
5.692 04/21, $700m Baa1(S)/BBB+(S) BUY BUY 107.3 109.3 4.7 4.4 249 224 264 239 -22 stemming from 20-30 year gas sales agreements, as well as the
company's low labour costs and wide margins. From a valuation
perspective, we believe PTT is attractive relative to its BBB-rated
peers. (Philip Wickham)
Noble Group Our BUY call reflects an improving credit profile and debt
8.5 5/13, $500m Baa3(N)/BBB-(N) BUY BUY 105.0 106.5 4.0 2.7 364 234 348 218 -54 reduction as the company divests assets and reorganizes
4.875 8/15, $500m Baa3(N)/BBB-(N) BUY BUY 99.5 101.5 5.0 4.4 402 336 422 356 -49 investments. We regard valuations as excessively conservative,
6.75 1/20, $1,250m Baa3(N)/BBB-(N) BUY BUY 98.8 100.0 7.0 6.7 477 455 514 492 -10 with the bonds trading in line with highly speculative grade issues
6.625 8/20, $250m Baa3(N)/BBB-(N) BUY BUY 98.3 99.8 6.9 6.7 471 447 499 475 -9 in the region. The liquidity position of Noble remains sufficient
into next year in our view. (Philip Wickham)
SingTel Optus We expect STSP ’19 will benefit from the group’s recent
4.625 10/19, $500m Aa3(S)/A+(S) BUY n/a 106.8 107.5 3.6 3.5 139 129 176 166 n/a restructuring to group all business and subsidiaries into
operational units instead of individual regions. The new business
hierarchy would allow Optus to move closer to the parent group,
gaining stronger parental support. Optus was viewed as a notch
lower than the Group given the previous separate operations, as
highlighted by the spread differential between SingTel and Optus
notes. We expect the bond to gradually move inside of STSP ’21
should Optus’ credit profile be viewed as equivalent to the Group.
(Louisa Lam)
Sun Hung Kai Properties Sun Hung Kai's SUNHUN'22 widened more than 50bp with
4.5 2/22, $900m A1(N)/A+ BUY n/a 95.0 96.6 5.1 4.9 295 275 296 276 n/a regards to the arrest of Mr. Thomas Kwok and Mr. Raymond
(Watch N) Kwok, the group's joint chairmen and managing directors, by the
Independent Commission Against Corruption (ICAC) in
connection with an investigation into an offence suspected to be
committed under the Prevention of Bribery Ordinance. While we
are not in a position to gauge whether the allegations will be valid
or not, we believe the investigation has little credit implications to
the group. In our view, the group’s core credit strength is linked to
its steadily growing recurrent rental income base. Its net rental
income consistently covers its interest expense and overheads in
every financial years starting from 1995. That means even if the
group’s property development operation were to be negatively
impacted by any hypothetical potential changes in senior
management, we believe property investment would continue to
provide stable cash inflows to the group. We understand that in
the syndicated loan covenants, there is no change of
management put in place. Buy SUNHUN'22 (Keith Chan)
ENN Energy ENN is seeking to communicate with the board of directors of
6 5/21, $750m Baa3(RFD)/ SELL SELL 95.0 97.0 6.7 6.4 455 425 471 441 -5 China Gas, while liaising with China Gas’ majority shareholders,
BBB-(Watch N) including SK and Fortune Oil. We believe sweetening the deal, if
any, would happen before ENN’s publication of the circular with
regards to the acquisition on 30 April 2012. Should the deal be
sweetened and go through, we believe ENN Energy’s investment
grade credit ratings would be pressured. Reiterate Sell
XINAOG’21. (Keith Chan)

20
 The View
Asia’s Bond Markets
April 2012
Issue
The Wharf (Holdings)
4.625 2/17, $900m
High-grade banks
Hana Bank
4.25 6/17, $500m A1(S)/A(S)
OCBC Bank
3.75 11/22-17c Aa2(S)/A+(S)
Shinhan Bank
4.125 10/16, $500m A1(S)/A(S)
Woori Bank
4.75 1/16, $600m A1(S)/A-(S)
Bank of East Asia (BEA)
6.125 7/20, $600m A3(S)/A-(S)
8.5 11/49-19c, $500m Ba3(S)/BB+(S)
abc
Ratings Cur Prev __ Price____ Yield SOT+ Z-Spd SOT chg from Comments
Bid Ask Bid Ask Bid Ask Bid Ask last mth (Bid)
The Wharf's credit profile continues to be underpinned by
NR/NR SELL n/a 104.2 104.7 3.7 3.6 265 255 247 236 n/a sizeable recurrent rental income generation from its flagship
investment properties - Harbour City and Times Square, which
contributes more than HKD6bn of net rental income per annum,
per our estimate. Yet, the group is one of the most aggressive
among Hong Kong peers with regards to China expansion, with
at least RMB14bn in 2010 and RMB13bn in 2011 earmarked for
new land purchases in China. Turning to its leverage position, the
group’s net debt grew to HKD43bn as of end-2011 from
HKD33bn at end-2010 on the back of its China investments.
EBITDA interest coverage weakened to 8x from 13x while net
debt to EBITDA increased to 3.4x from 3.1x. Net gearing,
however, remained stable at 20%, with HKD10bn raised from
shareholders in 1H11. Its balance sheet liquidity is adequate, with
HKD32.5bn in cash at end-2011 and USD900m (HKD7bn) from
issuance of 5-year bond in 1Q12 versus HKD8.9bn in short-term
debt and HKD21bn in capital expenditure in 2012. At current
levels, WHARF'17 is expensive versus BBB-rated Hong Kong
peers. Sell WHARF'17. (Keith Chan)
The outlook will be shaped by the strength of domestic growth
BUY BUY 103.4 104.2 3.5 3.4 250 234 222 207 +4 and the recovery of sectors such as construction and real estate.
We think Hana Bank’s credit profile is stable and maintain our
Neutral recommendation on the credit. Upside risk is tied to the
improvement in the operating environment and the bank’s
profitability, while downside risk is tied to too much leverage from
the acquisition of KEB. We have a buy on this bond as we see
the senior debt Korean banks as being defensive in a volatile
market. (Devendran Mahendran)
The move to acquire ING’s private banking assets in Asia will
BUY BUY 99.6 100.2 3.8 3.7 163 152 242 231 +1 differentiate and strengthen its franchise, in our view. We think
the bank is under-rated by S&P and has room for a 1-notch
upgrade in the year ahead. We think this non-step callable sub-
debt offers value. (Devendran Mahendran)
While the bank is seeing incremental improvement to its credit
BUY BUY 103.8 104.4 3.2 3.1 220 204 210 195 -21 metrics, raising profitability still seems a challenge and reflects its
operating environment. We continue to see Shinhan’s credit
profile as stable. We have a buy on this bond as we see the
senior debt Korean banks as being defensive in a volatile market.
(Devendran Mahendran)
Woori Financial Group (WFG) reported a 52.6% y-o-y increase in
BUY BUY 106.2 106.9 3.0 2.8 199 179 208 188 -31 net income to KRW3,202bn (USD2.85bn) in FY11 due to growth
in net interest income and lower loan provisions. The bank's
capital ratio has slipped with total CAR of 11.9% in FY11
compared to 12.5% in FY10, which is partly attributable to its
sub-par profitability as reflected by its ROAA of 0.8% in FY11.
Compared with its peers, the bank is more reliant on wholesale
funding, as reflected by the group’s loan-to-deposit ratio of 120%
at end FY11. The government owns 57% of the bank, and as one
of the top 4 banks in the country, it enjoys a high degree of
institutional support in our view. We have a buy on this bond as
we see the senior debt Korean banks as being defensive in a
volatile market. (Devendran Mahendran)
Bank of East Asia (BEA) reported a 3.2% increase in net income
SELL SELL 106.2 107.6 5.2 5.0 300 280 328 307 -30 for FY11 to HKD4.4bn (USD559m). Net profits for 2H11 dropped
SELL SELL 104.0 107.0 7.8 7.3 560 509 604 553 -4 23% y-o-y, due to trading losses and higher operating expenses.
ROAA for FY11 was 0.8%; however, underlying ROAA could
weaken to 0.6%, if we exclude hybrid dividends, disposals, and
valuation gains on investment properties. The bank's loan book
expansion was mainly driven by demand from China. On-
balance-sheet non-bank mainland exposure amounted to 65% of
BEA's loan book in FY11. Capital ratios declined, with tier-1 and
common equity/total asset ratio down to 9.4% and 7.2% from
9.8% and 7.7% a year ago. Excluding hybrid tier-1 securities,
core tier-1 ratio was 8.4%, which is low compared to peers. The
bank has GBP300m UT2 (21Mar2012) and USD600m LT2
(22Jun2012) to be called this year, which, if exercised, would
reduce the total capital ratio down to 11.6% from 13.7% currently.
(Yi Hu/Devendran Mahendran)
21
 The View
Asia’s Bond Markets abc
April 2012

Issue Ratings Cur Prev __ Price____ Yield SOT+ Z-Spd SOT chg from Comments
Bid Ask Bid Ask Bid Ask Bid Ask last mth (Bid)

Public Bank Public Bank’s 4Q11 net income increased 3.6% y-o-y to
6.84 8/36-16c, $200m Baa2(S)/BBB-(S) SELL SELL 100.5 103.5 6.7 5.9 568 490 564 485 -30 MYR877m (USD277m). Net income growth was relatively
lacklustre compared to the previous quarters, due to higher credit
costs. Direction of lending remains toward the household sector,
which now accounts for 63.3% of loan book. Direct and indirect
property and construction-related exposure (including mortgages)
rose by 17% y-o-y and account for 52% of the bank’s loan book.
Although the bank has continuously improved its key credit
metrics, we are concerned that it sits at the center of an economy
with a highly indebted household sector. We have a Sell call on
PBKMK 6.84% 36-16c. (Devendran Mahendran)
High-yield corporates
China Shanshui Cement Group Market conditions remain challenging over the near term, but we
8.5 5/16-14c, $400m NR/BB-(S) BUY BUY 97.5 98.5 9.2 8.9 822 792 824 794 +58 expect China Shanshui to outperform as conditions stabilise.
Moreover, we regard corporate transparency for the credit as
superior to other Chinese issuers. The strategic position of the
cement producer – the second largest within the country -
improves access to funding lines, such as the recent banking
agreements in place with BOC. (Philip Wickham)
CITIC Pacific In the existing weak economic outlook, we recommend a buy-on-
6.625 04/21, $500m Ba1(N)/BB+(N) BUY BUY 94.6 96.6 7.5 7.1 526 494 545 513 -22 dip strategy for CITPAC'21s, which offer a decent yield of 7.0% in
our view. We take substantial comfort from the state ownership
structure and the track record for financial support from the
parent company. We anticipate the company is on pace to
delever in 2013 and 2014, with potential for an upside surprise
from asset disposals. (Philip Wickham)
PLN We prefer PLN to Pertamina among the Indonesian quasi-
7.75 10/16, $550m Baa3(S)/BB(S) BUY BUY 116.0 118.0 3.9 3.4 284 240 276 232 -11 sovereign issuers. While we realize that S&P ranks the
7.75 1/20, $1,250m Baa3(S)/BB(S) BUY BUY 119.5 121.0 4.7 4.5 253 232 291 270 +4 government support for PLN as weaker than for Pertamina, we
5.5 11/21, $1,000m Baa3(S)/BB(S) BUY BUY 104.5 106.0 4.9 4.7 271 252 277 258 +17 characterize PLN as a vital element in Indonesia's economic
growth story. (Philip Wickham)
Yuzhou Properties Yuzhou Properties is prudently managing its balance sheet
13.5 12/15-13c, $200m B2(S)/B(N) BUY HOLD 85.3 87.8 19.2 18.2 1823 1716 1838 1731 n/a liquidity in light with slower contracted sales and tight monetary
backdrop. The group halted land acquisitions in 2H11 and
materially slowed down its primary land development project in
Beijing. The group has outstanding land premium of RMB111m
but no payment for land is expected in 2012. Its balance sheet
liquidity improved in 1Q12 on the back of strong contracted sales
performance, with cash balance reaching RMB2.5bn versus
RMB2.0bn as of end 2011. We consider the group's liquidity
position as adequate given its niche business scale. YUZHOU'15
offers attractive risk-reward to investors at high teens yield in our
view. Buy YUZHOU'15 (Keith Chan)
China Lumena New Materials Our Sell call on China Lumena reflects heightened corporate
12 10/14-12c, $250m B2(N)/B+(S) SELL SELL 88.0 91.0 18.1 16.5 1773 1612 1742 1580 +67 governance concerns for Chinese high yield industrials. Earlier
this year, China Lumena was the subject of an article in the
Financial Times looking at corporate governance and Chinese
corporates. We see this as a warning sign in the current
environment. (Philip Wickham)
Country Garden Country Garden reported FY11 results on 28 February and
10.5 08/15, $400m Ba3(S)/BB-(S) SELL SELL 99.5 101.5 10.7 10.0 965 893 987 915 +37 subsequently raised USD280m from top-up placement of new
11.25 4/17-14c, $550m Ba3(S)/BB-(S) SELL SELL 99.0 101.0 11.5 10.9 1050 992 1033 997 +42 shares. This, together with the payment of RMB2.2bn dividends
11.125 2/18-15c, $900m Ba3(S)/BB-(S) SELL SELL 98.0 99.5 11.6 11.2 940 904 1023 986 +15 in strip-dividend format, should be viewed positively. In our view,
the group has continual needs to tap the offshore bond market
given its higher working capital requirement than peers.
Specifically, the group will have to top-up initial construction
capital expenditure of its property projects by its own pocket
before it could go to the banks to arrange construction financing,
given the lands are of low values and remotely located. Sell
COGARD'15, '17, '18 and look for potential new issuance for
better entry points. (Keith Chan)

22
 The View
Asia’s Bond Markets abc
April 2012

Issue Ratings Cur Prev __ Price____ Yield SOT+ Z-Spd SOT chg from Comments
Bid Ask Bid Ask Bid Ask Bid Ask last mth (Bid)
Evergrande Real Estate We see some warning signs on Evergrande’s business model
13 1/15, $1,350m B2(N)/BB-(S) SELL SELL 98.0 99.5 13.9 13.2 1284 1218 1317 1251 +72 when analyzing the half-over-half (h-o-h) statistics. On h-o-h
basis, the group’s recognized average selling price increased
1.3% to RMB6,430 per sq m in 2H11 from RMB6,345 per sq m in
1H11; yet, gross margin declined to 31% in 2H11 from 35% in
1H11. This reflects bottleneck in the group’s business model, as
unit cost base is increasing at a faster pace than average selling
price and erodes profitability. The group outlined its plan in
accomplishing its 2012 contracted sales target of RMB80bn (flat
versus 2011) while keeping its average selling price at steady or
slightly higher levels versus RMB6,590 per sq m in 2011. We
believe maintaining a stable profitability while keeping a fast
asset turnover is a very tough balancing act. At current levels, we
believe the risk-reward of holding EVERRE'15 is not compelling,
taking into account uncertainties in sales performance and
intensified competition in lower-tier cities. Reiterate Sell
EVERRE'15. (Keith Chan)
Longfor Properties We like Longfor’s strong execution ability, fast asset turnover,
9.5 4/16-14c, $750m Ba3(S)/BB(S) SELL SELL 100.9 101.6 9.2 9.0 821 799 827 805 -50 quality brand and a diversified funding source. We view the group
as the best credit play among the non-state-owned China
property developers. In 2H11, the group recorded absolute
decline in net debt, demonstrating its financial prudence in
matching cash inflows with outflows amid slowing property sales.
However, we believe further upside on LNGFOR'16 is capped by
its high dollar price. Sell LNGFOR'16. (Keith Chan)
Shui On Land Shui On Land managed to price a 3-year USD bonds at 9.75% in
9.75 2/15, $475m NR/NR SELL SELL 100.4 101.9 9.6 9.0 857 796 888 827 +37 February 2012, with 75cents private banking investor rebates.
The same issue was subsequently re-tapped for USD75m,
bringing the total issue size to USD475m. In our view, the current
pricing of the bonds is too tight considering its fundamentals.
Note the group has been relying on short-term bond issuance in
offshore market for funding. Hefty refinancing needs lingered,
with RMB2.7bn of convertible bonds put-table in September
2013, followed by RMB3bn synthetic bonds in December 2013.
Reiterate Sell SHUION'15 on its unattractive risk-reward.
(Keith Chan)
Star Energy We currently have a Sell trade call on STAREN’15s. We regard
11.5 2/15-13c, $350m B2(S)/NR SELL SELL 109.5 111.0 7.5 6.9 646 587 700 644 +31 the valuations for the company's notes as not fully factoring in the
credit risk associated with the construction of Unit 3, a new
generation plant. We also see a level of information risk given
management’s infrequent interaction with the investor
community. (Philip Wickham)
High yield sovereign
Sri Lanka We have a tactical sell on the Sri Lanka' 21 for a price target of
6.25 10/20, $1,000m B1(P)/B+(S) SELL SELL 100.0 101.0 6.3 6.1 406 390 430 415 -59 94 (7.13%),driven by dwindling FX reserves and deteriorating
6.25 7/21, $1,000m B1(P)/B+(S) SELL SELL 99.9 100.9 6.3 6.1 407 393 421 406 -52 current account balance which will likely put increasingly
downward pressure on the local currency. Sharp currency
depreciation could result in higher import inflation forcing the
central bank to compensate by additional monetary restraint. The
IMF breaking the final disbursement into 2 tranches with the first
USD426m just being released reflects the need for additional
structural reforms to put the country's external and fiscal position
on a stable medium-term footing. (Dilip Shahani)
Bonds removed from the focus list
Agile Property Agile issued USD750m 5-year bond at 9.9% yield in March 2012,
10 11/16-13c, $300m Ba2(S)/BB(S) HOLD SELL 99.0 100.5 10.3 9.8 925 881 917 896 +61 which helped shore up its balance sheet liquidity for opportunistic
8.875 04/17-14c, $650m Ba2(S)/BB(S) HOLD SELL 93.0 94.5 10.7 10.3 968 928 949 909 +92 land purchases. This also provides a better liquidity cushion for
9.875 3/17, $750m Ba2(S)/BB(S) HOLD n/a 96.6 97.6 10.8 10.5 975 948 959 932 n/a the group to weather against industry volatilities. With the supply
overhang removed, we change our call on AGILE'16 and '17-old
to HOLD from SELL, and initiate a Hold call on AGILE'17-new.
(Keith Chan)
Bumi Resources We have removed our tactical sell call to reflect lower event risk
12 11/16-13c, $300m Ba3(S)/BB(S) HOLD SELL 109.8 111.8 8.8 7.6 774 660 810 708 +126 after the boardroom changes at the holding company, Bumi PLC.
10.75 10/17-14c, $700m Ba3(S)/BB(S) HOLD SELL 108.0 109.5 8.6 8.2 755 716 749 711 +65 In addition, we anticipate shareholder friendly announcements
that should improve investor sentiment. Nonetheless, a levered
balance sheet and corporate governance issues remain the
concerns in our view. (Philip Wickham)

23
 The View
Asia’s Bond Markets abc
April 2012

Issue Ratings Cur Prev __ Price____ Yield SOT+ Z-Spd SOT chg from Comments
Bid Ask Bid Ask Bid Ask Bid Ask last mth (Bid)

Central China During Central China’s FY11 results earnings analyst meeting,
12.25 10/15, $300m B1(S)/B+(S) HOLD SELL 97.0 98.5 13.3 12.8 1232 1177 1250 1194 +88 the group refused to release 2012 cash flow guidance as it will
commence a fixed income investor road show that may lead to a
SGD bond offering, subject to investors’ appetite and market
conditions. The group’s debt fund raising plan comes to us as no
surprise, as we articulated in ACT dated 7 March 2012 that its
consent solicitation to cure technical defaults on CENCHI’15 is to
pave the way for bond issuance. Note the group’s HKD765m
convertible bond issued in August 2009 will be put to the group at
109.3 for HKD836m (USD108m) in August 2012. As such, we
believe the pending SGD bond offering, if it materialises, would
refinance the convertible bond coming due. CENCHI'15 is now
fairly valued against peers after the correction in March, in our
view. As such, we change our trading call on CENCHI’15 to Hold
from Sell. (Keith Chan)

Market data as of 3 April 2012

Source: HSBC

24
 The View
Asia’s Bond Markets abc
April 2012

Dim Sum Tracker

 More deposits were placed in real assets, as outstanding renminbi
bonds now account for half of deposits, up from 38% a quarter ago
 Top-tier credits have the highest pick-up over USD peers after swap
 Cautious view on high-yield corporates, given deteriorating
fundamentals hidden by non-rated status

Summary order books. Becky Liu

Analyst
The Hongkong and Shanghai
The focus has been on the primary market. Public We continue to expect steady average yield for Banking Corporation Limited
issuance of bonds picked up to RMB12.5bn from investment-grade credits. Valuation remains +852 2822 4392
beckyjliu@hsbc.com.hk
RMB6-7bn in January-February. The investment- attractive, in our view, and supply from Chinese
Dilip Shahani
grade sector was very steady, with the average high-grade is likely to be slower than initially Analyst
yield of investment-grade credits moving in a expected. Notwithstanding higher dollar bond The Hongkong and Shanghai
Banking Corporation Limited
tight range of 3.52-3.55% throughout the entire yields due to US Treasury weakness, high quality +852 2822 4520
dilipshahani@hsbc.com.hk
month. The successful bond auction by Export- Dim Sum bonds still offer a pick-up of 40-120bps
Zhi Ming Zhang
Import Bank of China (CHEXIM) shows demand over dollar peers after swapping from CNH to Analyst
for quality credits. All new issues priced in the USD. This is despite having declining by c30- The Hongkong and Shanghai
Banking Corporation Limited
month ended higher from issuing levels. The 40bps from a month ago. +852 2822 4523
high-yield sector, on the other hand, was weaker, zhimingzhang@hsbc.com.hk
The offering rate of Certificates of Deposits (CDs), Linus Fung
in line with the US dollar space. Having said that,
a new benchmark for investment-grade bonds, Credit Associate
the high-yield primary market was re-opened by The Hongkong and Shanghai
remained largely stable. The issuance amount Banking Corporation Limited
Ford and New World China Land with strong +852 2822 4687
linusckfung@hsbc.com.hk

1. Total return compared with peers in March (in USD terms) 2. CDs offering rates drop with declining issuance

CNH ov erall 0.24% RMB mn %

35,000 3.0
CNH - GV 0.03%
30,000
2.5
CNH - IG 0.12% 25,000
CNH - HY+NR 0.49% 20,000 2.0

CGB onshore 0.44% 15,000 1.5

Ax J Eurodollar 0.08% 10,000
1.0
5,000
Ax J IG 0.32%
0 0.5
Ax J HY Corp 0.25%
4.2011 7.2011 10.2011 1.2012
-1.74% Ax J Local ccy Amt issued (all) Av g coupon(1-y ear, RHS)

Source: HSBC Source: HSBC

25
 The View
Asia’s Bond Markets abc
April 2012

declined sharply in March to RMB16.5bn from
February’s RMB30bn. The average rate for one-
year CDs edged down to 2.48% from 2.6%. CDs
offerings are here to stay, due to technical issues.
However, we are not looking for a material
increase in CDs offering rates, as banks’ renminbi
liquidity condition have improved following two
refinements by the HKMA.
However, sentiment is susceptible to weaker-than-
expected macro data out of China in the months
ahead. The role of currency appreciation buying
CNH bonds is diminishing, following policy
makers’ signals for “higher volatility while slower
appreciation”. Taking away demand by currency
speculators is a step forward for the offshore
renminbi bond market developing into a genuine
credit market.
Relative value analysis
Although the Dim Sum bond market has started to
establish its own benchmarks, it remains helpful
to take reference from pricing differences of US
dollar peers. It is particularly true for corporate
credits to bridge geographical and industrial
differences. There are still not enough comparable
credits to enable direct comparison on credit
fundamentals, translating into pricing differences.
Our analysis shows top quality Dim Sum bonds,
including Chinese policy banks and top-tier
Chinese and multinational corporates, offer the
highest pick-up over comparable US dollar bonds.
Conversely, higher yielding CNH bonds,
including high-yield credits and certain
generously priced high-grade new issues, offer
lower or even no pick-up over comparable US
dollar bonds. This is owing to: 1) wider credit
differentiation in the US dollar bond market; and
2) a historically existing premium on Asian
credits over similar US bonds. For example,
Caterpillar 2014 is trading 256bps inside of China
Resources Power 2015 in the US dollar bond
market, but only 100bps in the renminbi market.
Chart 3 and 4 shows relative values between CNH
bonds (after swapping to US Dollar using current
cross-currency rates) and USD-denominated bonds
by the same issuers of similar tenors. At current
levels, top-tier names, which generally yield
<3.5% in nominal CNH terms, offer yield pick-ups
of 40-120bps over similar US dollar bonds after
swapping. Examples included Caterpillar
(+120bps), BP (+70bps), and CHEXIM (+46bps).
On the other hand, higher yielding CNH bonds
(>3.5%), offer lower pick-up or even yield lower
than comparable US dollar bonds after swap.

3. Top-tier Dim Sum bonds offer the highest yield pick-up over dollar peers

3.0% CNH after sw ap to USD USD

AMX 2015 CNPC 2016

2.5% EXIMCH 2015
YUM 2014 VW 2016
CAT 2014 CNPC 2014
2.0% AMX 2016
EXIMCH 2015 VW 2016
BP 2014 YUM 2015
Yield (%)

1.5% UNANA 2014

1.0% China 2013 BP 2014

CAT 2014
0.5% UNANA 2014

CGB 2013 Modified duration (yrs)

0.0%
1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Source: HSBC

26
 The View
Asia’s Bond Markets abc
April 2012

4. Higher yielding Dim Sum bonds offer lower pick-up over dollar peers

CNH after sw ap to USD USD

14% GZRFPR 2016
ROADKG 2014 GZRFPR 2014
12% ROADKG 2014

10%
SHASHU 2016
Yield (%)

8% SHASHU 2014

6% EBIUH 2017
VTB 2013 VTB 2015 EBIUH 2015 LOTTES 2016
RESOUR 2015
4% F 2015 F 2015

2% LOTTES 2015 RESOUR 2015

Modified duration (yrs)
0%
1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Source: HSBC

Although having been issued at much higher yields
than other single-A peers, the after swap levels of
Lotte Shopping 2015 and Emirates 2015 were both
similar to their comparable US dollar bonds.
Policy banks represent value
We retain our preference for investment-grade
credits. In particular, we like policy bank credits
that offer yield pick-up over the sovereign. We
recommend switching from government bonds
into policy bank bonds (China Development Bank
(CDB), Export-Import Bank of China (CHEXIM),
and Agricultural Development Bank of China
(ADBC)) for yield pick-up of 145-160bps in the
offshore market, versus only 70-75bps in the
onshore market (Chart 5).
Despite strong sovereign support, Chinese policy
bank credits are yielding similar or even at wider
levels than multinational corporate credits, such as
Caterpillar, Volkswagen, and Yum. Supply risk is
limited as bond issuances are subject to NDRC
(National Development and Reform Commission)
approval – total quota around RMB25bn to be
shared between 10 policy and commercial banks.
Two out of the three policy banks – CHEXIM and
ADBC – have never issued any Renminbi CDs
offshore.
There is also insufficient credit differentiation
between policy banks and commercial banks, in our
view. For instance, the new CHEXIM 2- and 3-year
came at just 20-28bps inside of issues from the Bank

5. Policy bank credits show value 6. CD offering levels reflect not reflecting fundamentals

5 3.2 CITIC

4 CDB HK
3
Offering yield (%)
Yield (%)

3 CMB HK CCB HK
2.8
2
ICBC Asia
CGBs
1 2.6
Tenor (yrs)
0 Tenor (yrs)
2.4
0 2 4 6 8 10
CDB ADBC CHEXIM MNCs 1 2 3

Source: HSBC Source: HSBC

27
 The View
Asia’s Bond Markets abc
April 2012

of Communications. This is despite three notches the lack of rated issues, i.e. lack of rating revisions
difference in credit ratings. Instead of credit upon fundamental change. Out of the 37 high-yield
fundamentals, CDs offering rates provided by banks based on our estimates, only five issuers carry
are more to reflect issuers’ individual renminbi credit ratings. We believe the overall credit quality
funding needs and incentive to issue. Chart 6 shows of CNH high-yield credits is weaker than at US
that the AA rated CDB is offering 3.1% for 3Y CDs, dollar peers.
the same as BBB rated China Merchants Bank HK;
Further, these issues could face re-pricing pressure
Single-A banks were generally lower at 2.8-2.9%.
from the primary market. New high-yield issues
Cautious on high-yield are likely to offer higher premiums and better
covenants going forward.
The high-yield sector, which saw benchmark
names dropping 1/2-2.5pt last month, could face Third consecutive drop in
further pressure, in our view. Aside from deposits
valuations, discussed in previous section, high-
Hong Kong’s RMB deposits declined for the third
yield corporate earnings had been weaker than
consecutive month to RMB566.2bn (from
expected. This has prompted a flurry of negative
RMB575.96bn) in February. The pace has slowed
rating actions in Asian high-yield credits, in
to -1.7% from 2.1% m-o-m. Total RMB trade
particular first time issuers. Examples included
settlement, on the other hand, rose by 20% to
Fufeng, Powerlong, Texhong Textile, West China
RMB187.5bn, but is still 22% lower than the peak
Cement, Franshion, Kaisa, Winsway Coking Coal,
witnessed in December 2011.
Zhong An, which all suffered negative rating
actions over the past 4-5 weeks. Moody’s Asian The figure should not be read negatively, in our
Liquidity Stress Index also rose to the highest level view, since it reflects maturity of the offshore
since December 2010 to 14.6% by end-February, RMB market. The combined amount of offshore
although the current level remains much lower bonds/CDs/deposits was up by RMB22.4bn in the
than the peak (37%) during the 2008 crisis. month to RMB839bn. Currently, bonds/CDs
account for c50% of RMB deposits, up from 38%
More concerns on corporate fundamental
as at end-2011.
deterioration in the CNH space could be hidden by

7. More deposits turned into bonds

1000 60%

800 50%

40%
600
30%
400
20%
200 10%

0 0%
1.2007

4.2007

7.2007

10.2007

1.2008

4.2008

7.2008

10.2008

1.2009

4.2009

7.2009

10.2009

1.2010

4.2010

7.2010

10.2010

1.2011

4.2011

7.2011

10.2011

1.2012

RMB deposit base (RMB bn) RMB bonds/CD Outstanding amount (RMB bn) Bonds/Deposits (%, RHS)

Source: HSBC, HKMA, Bloomberg

28
 The View
Asia’s Bond Markets abc
April 2012

Latest developments swap agreements have been signed between the

PBoC and other central banks, providing the
Regulatory developments have been slower in
necessary renminbi liquidity in foreign countries
March. Indeed, we were not looking for major
for renminbi trade settlements. Last month, the
regulation changes in the near future. Most major
PBoC signed a bilateral agreement with Australia
obstacles to offshore renminbi development at this
for RMB200bn/AUD30bn, and doubled its limit
stage have been resolved over the past few months.
with Mongolia to RMB10bn/MNT2trn. These
We have seen widened remittance channels
action have brought the total number of swap
(Renminbi foreign direct investment (FDI),
agreements to 19 and for a total amount of
Renminbi-QFII), renminbi cross-border trade
RMB1,666bn. (Chart 9).
settlement have expanded to the whole nation
(eligible exporter restriction list abolished), and 9. Bilateral currency swap agreements outstanding
banks’ already have greater flexibility on offshore Date entered Country / Period Amount
Region (RMB bn)
renminbi businesses (HKMA two refinements
3/11/2009 Belorussia 3 years 20.0
released in January and February 2012). 3/23/2009 Indonesia 3 years 100.0
4/2/2009 Argentina 3 years 70.0
8. RMB volumes are back up, unlike other major payments 6/10/2010 Iceland 3 years 3.5
currencies 7/23/2010 Singapore 3 years 150.0
4/18/2011 New Zealand 3 years 25.0
Hong Kong China Other Countries 4/19/2011 Uzbekistan 3 years 0.7
6/13/2011 Kazahastan 3 years 7.0
6/23/2011 Russia 3 years 20.0
10/26/2011 South Korea 3 years 360.0
11/22/2011 Hong Kong 3 years 400.0
12/22/2011 Thailand 3 years 70.0
12/23/2011 Pakistan 3 years 10.0
1/17/2012 UAE 3 years 35.0
79% 2/8/2012 Malaysia 3 years 180.0
2/21/2012 Turkey 3 years 10.0
3/21/2012 Mongolia 3 years 10.0
3/26/2012 Australia 3 years 200.0
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Total 1,666
Source: PBoC, HSBC
Source: SWIFT. Customer initiated and institutional payments, sent and received, base on value.

We have been looking for a further broadening of

As such, the offshore renminbi market is moving
the issuer and investor base, in particular as
from the initial set-up phase with rapid and
renminbi trading activities become more active in
frequent regulatory changes to the development
London, one of the potential next offshore
phase, where the market becomes more mature
renminbi hubs. Trading hours of renminbi
under the current framework. In this phase, we are
products will be extended materially to cover the
looking for a further broadening of renminbi
entire Europe session and part of the US session.
cross-border trade settlement outside of Hong
Kong, which still accounts for 79% of total cross- There is continued active participation by various
border renminbi trades, according to the latest governments, and the latest developments are
SWIFT report (Chart 8). summaries in Table 10.

China has signed agreements with BRICS

countries (Brazil, Russia, India, China, and South
Africa) during the latest summit to promote usage
of local currencies in trades. And more bilateral

29
 The View
Asia’s Bond Markets abc
April 2012

10. Summary of latest developments

BRICS Development banks of the BRICS (Brazil, Russia, India, China, and South Africa) group of five signed two pacts/agreements – the
"Master Agreement In Extending Credit Facility" in local currencies and the "BRICS Multilateral Letter Of Credit Confirmation
Facility Agreement” at the BRIC summit to help reduce demand for fully convertible currencies for transactions among BRICS
nations and lower transaction costs. Under the agreement, CDB will make renminbi loans available and other nations’ development
banks will also extend loans denominated in their own currencies, according to the FT.
The five countries’ stock exchanges will also move closer together, as reported by Reuters. Benchmark equity index derivatives will
be cross-listed on BRICS’ stock exchanges from 30 March, allowing local investors to participate in stock market performances
without currency risk. Starting 30 March, the Hong Kong stock exchange started listing four foreign index futures, including
IBOVESPA (Brazil), MICEX (Russia), Sensex (India).
Japan Japan said on Tuesday that it had received approval from China’s government to purchase RMB65bn (USD10.3bn) in Chinese
government debt, according to Reuters. The timing hasn’t been set due to administrative preparations, and Japan is likely to start
with a small amount, citing Finance Minister Jun Azumi.
Korea Bank of Korea announced that it has received a RMB300m investment quota for renminbi securities from the Chinese government,
and it will soon start investing in Chinese assets as soon as preparation work is completed.
Australia The PBoC and the Reserve Bank of Australia (RBA) signed a bilateral currency swap agreement of RMB200bn/AUD30bn. This is
the first bilateral agreements signed with major developed countries.
Malaysia The HKMA, Bank Negara Malaysia (BNM) and Euroclear Bank jointly announced the launch of a pilot platform for cross-border
investment and settlement of debt securities. The pilot platform will be operational on 30 March to “enhance cross-border debt
securities settlement efficiency and strengthen the capacity for debt securities issuance activities in the Asian region”. Via the
system, investors in Hong Kong and Malaysia can buy and hold foreign debt securities and settle cross-border transactions on a
Delivery-versus-Payment (DvP) basis, and local and international bond issuers can issue a wide range of debt securities. The pilot
platform also includes a comprehensive debt securities database of Asian debt securities maintained by Euroclear Bank, according
to the statement.
Taiwan Taiwan and China could sign a deal in the near future on a clearing system for the yuan, according to Reuters. Taiwan’s central
bank has delivered an initial proposal for a clearing system for renminbi, to have one branch of a Taiwanese bank in China and one
branch of a mainland bank in Taiwan becoming designated clearance banks.
In addition, Taiwan-listed companies is likely to be approve to directly issue Dim Sum bonds in Hong Kong, according to various
local media reports. Companies, such as Uni-President, are preparing to issue offshore renminbi bonds via their Taiwan-listed
holding companies.
Hong Kong The Hong Kong Association of Banks (HKAB) is planning to submit a proposal to the HKMA to simplify the renminbi cross-boarder
trade settlement process, according to HKEJ. The HKAB has suggested earlier a few steps to bring the offshore renminbi business
forward, including allowing non-local residents to open personal renminbi accounts in Hong Kong, and simplify the documentation
and process for renminbi trade settlement. Separately, Hong Kong Mercantile Exchange (HKEMx) is planning to launch yuan-
settled gold and copper futures by July, according to Reuters.
Source: HSBC

30
 The View
Asia’s Bond Markets abc
April 2012

Offshore renminbi market update – April 2012

A steady month
Total return attribution: FX, coupon, and capital gain/loss

105  Bonds were generally steady, but CNY

103 fixing rates showed higher volatility.
FX
101
 Monthly return in USD terms was 0.24%,
99
Capital with the 0.25% gain from price and the
97 Coupo
loss 0.26% gain from coupon being offset by a
95
loss of 0.27% in FX.
Jan- Apr- Jul- Oct- Jan-
11 11 11 11 12  Average yield was little change at 3.94%.
TR (USD) TR (RMB) Capital gain

Source: HSBC. Data as of 30 March 2012

High-grade sector moved sideways

Total return: Government, high-grade, high-yield & non-rated bonds

8  CGB performance was mixed. The belly of

the curve strengthened ¾-1pt, while the
6 long-end lost 5/8-1pt.
Avg yield (%)

4  The average yield of high-grade bonds was

2 little change at 3.5%.

0  High-yield bonds showed weakness in line

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 with US dollar peers. Benchmark credits
Gov t IG HY + NR were down by 1/2-2.5pt from last month.

Source: HSBC. Data as of 30 March2012

Bottom performers dominated by high-beta names

Monthly top and bottom performers

PCDHK 14 Total Return (%)  Earlier outperformers gave back gains. PCD
GZRFPR
’14, Guangzhou R&F ’14, Shan Shui
14 SHASHU
14 ZHOSHK
Cement ’14 were 1.5-3.1% weaker.
14
CHIWIN 14 INDEPS 14  Defensive names were generally steady,
BCOM 14 returning 0-1% in March.
CGB 16
RESOUR
15CGB 14

-4 -3 -2 -1 1 2

Source: HSBC. Data as of 30 March 2012

31
 The View
Asia’s Bond Markets abc
April 2012

Breakdown
More than a half in financial papers
Breakdown by sector
Greater Supr
Sov ereign  Outstanding sovereign bonds stood at
China Corp 1%
11% CN FIs RMB31bn, accounting for 11% of the
27%
9% market.
Foreign FIs
 CDs, one-year or shorter in tenor, account for
5%
42% of the outstanding market. Including other
Foreign
corp financial issuance, the total stands at 55%.
8%
 Greater China corporate debts account for
CD 25% of the total, with foreign corporates at
41%
8%.
Source: HSBC, Bloomberg

63% of outstanding securities are unrated

Breakdown by credit rating
AAA AA
 35% of the outstanding issues are rated by
1% 14%
one of the major rating agencies at
NR.CD
35% investment-grade.
A
17%
 Only 1.7% of the space is rated with a sub-
investment-grade. All in BB category.
BBB

BB
3%  By our estimate, 85% of the outstanding
NR.HY NR.IG
2% securities are of investment-grade quality.
13% 15%
Source: HSBC, Bloomberg

43% of the market maturing in 12 months

Breakdown by tenor (remaining)

4-5Y 5Y 5%+  41%, or RMB113bn, of outstanding CNH

3-4Y 7% securities are maturing in the next 12
3% months.
Less

2-3Y
than1Y  87% of the space is maturing within three
43%
23% years, while only 5% of the bonds have
maturity over five years.

1-2Y
19%
Source: HSBC, Bloomberg

32
 The View
Asia’s Bond Markets abc
April 2012

Supply
Record issuance in short-term bank paper
Monthly issuance by type

40,000  Gross issuance in March 2012 totalled

RMB29bn, up from RMB36bn last month.
30,000
 Year-to-date gross issuance was RMB83.7bn.
20,000

10,000  Issuance of CDs/short-dated MTNs declined

to RMB16.5bn from RMB30bn in February.
0
Bond issuance rose to RMB12.5bn from
7.2010
8.2010
9.2010
10.2010
11.2010
12.2010
1.2011
2.2011
3.2011
4.2011
5.2011
6.2011
7.2011
8.2011
9.2011
10.2011
11.2011
12.2011
1.2012
2.2012
3.2012

RMB5.95bn in February.

HY IG (ex CD) CD/1Y MTN (RMB bn)

Source: HSBC, Bloomberg

Strong response to policy bank bond auction

New issues at a glance

8.5 NEWWOR  Export-Import Bank of China issued

7.5
15 RMB4bn bonds via tender offer. The 2-year
SANYPH
15
note of RMB3bn was priced at 2.7%. The 3-
6.5
Yield (%)

year note of RMB1bn at 2.9%. China

5.5
EBIUH 15 F 15 Development Bank also re-tapped its 15-year
4.5 RBIAV 14
ALOFP 15 issue at par with 4.2% coupon.
HITCAP
3.5
EXIMCH 15
CAT 14 EXIMCH  All new issues held well and high-yield
2.5 14
15 (yrs)
Tenor names traded up. Ford 2015 rose to 100.25-
1 2 3 4
75, and NEWWOR 2015 rose to 100.5-875.
Source: HSBC, Bloomberg

Expected supply in 2012 at RMB260-310bn

Expected growth of offshore renminbi bond market
RMB m  Year-to-date gross issuance of bonds and
500,000
Gross issuance (optimistic) CDs stood at RMB84.1bn, brining
Gross issuance (base)
400,000 Amount issued outstanding securities to RMB299.5bn.
Net issuance (optimistic)
300,000 Net issuance (base)  We expect gross issuance of offshore
200,000 renminbi bonds at RMB260-310bn in 2012
100,000 versus RMB189bn in 2011.

0
2007 2008 2009 2010 2011 2012f 2013f

Source: HSBC estimates.

33
 The View
Asia’s Bond Markets abc
April 2012

Relative value
Policy bank credits attractive
RV by sector

5  Top-tier multinational corporations are

generally priced in line with top-tier Chinese
4
corps, such as CNPC. Selected Hong Kong
Yield (%)

3 names (e.g. MTRC) remain tightly priced

credits.
2
CGBs
1 Tenor (yrs)  Corporates credits broadly priced inside of
0 2 4 6 8 10 banks.
Policy banks Commercial banks
PRC Corp Foreign Corp

Source: HSBC

High-grade Chinese credits steady

Chinese high-grade corporates

5  Fundamentals of investment-grade Chinese

BEIENT
RESOURSBSG 16 corporate credits appear to be fairly priced
4 SINOCH 14 15 relative to peers in the CNH space.
14 COFCO
Yield (%)

SBSG 14
3 RESOUR SBSG 1314  Baosteel credits were well-underpinned,
13 CNPCCH
CNPCCH 14 notwithstanding additional supply. It
2
13 remained the highest yielding single-A
CGBs
Tenor (yrs)
1 Chinese corporate credit due to the cyclical
1 2 3 4 5 business nature.
PRC Corp

Source: HSBC

Seasoned foreign corporate credits remain tightly priced

Foreign high-grade corporates

5  Yield differential between top-tier and lower

AIFP 18
GLPSP 16 rated corporate credits are lower than in the
4 USD bond market.
HKCGAS
Yield (%)

AIFP 16
BSHBOS BSHBOS
3 CAT 13 16  Seasoned issues are yielding lower than new
CAT
14 12
TSCOLN 16
BPLN 14 VW 16 issues.
2 14
MTRC 13 CGBs
Tenor (yrs)
1
1 2 3 4 5 6 7
Foreign corps

Source: HSBC

34
 The View
Asia’s Bond Markets abc
April 2012

Relative value (cont’d)

High-yield sector under pressure
High-yield bonds

12 ROADKG 14  Liquid issues suffered selling pressure, such

GZRFPR 14
as Guangzhou R&F 2014, whose yield went
10 BY DCOL 14 to 13.6% from 11.8%.
Yield (%)

ZHOSHK 14 SHASHU 14
8  Shorter-dated and non-property related
CHCHTO 14 LGFP 14
HAIAIR 14
PCDHK 14 names held well, such as Intime Department
6 M PEL 13 POWINV 15
INDEPS 14 Store 2014 and Galaxy 2013.
4 GA LENT 13

1 2 3 Tenor (yrs) 4
High-y ield bonds

Source: HSBC

Dim Sum bonds yielding outside similar USD bonds

RMB vs. USD credits

CNH after sw ap to USD

3.0% USD  Yield differentials between Dim Sum and
2.5%
AM X 2015
EXIM CH CNPC 2016 USD bonds have narrowed by c30-40bps
YUM 2014 2015 VW 2016
CAT 2014 EXIM CH
CNPC 2014
from last month.
2.0% 2015 AM X 2016
Yield (%)

BP 2014
VW 2016
1.5% UNANA YUM 2015  Multinational corporate issuers generally
China 2013 2014
1.0% BP 2014 yield 40-120bps higher than comparable
CAT 2014
0.5%
UNANA USD bonds.
2014
CGB 2013 Modified duration (yrs)
0.0%
1.5 2.5 3.5 4.5

Source: HSBC, Bloomberg

On-offshore CGB yield gap widened further

Offshore vs. onshore CGBs

5  The spread differential between onshore and

4 offshore government bonds widened to
Yield / differential (%)

157bps from 117bps a month ago.

3

2  The 5-year offshore note yields 1.57% (-

1 8bps) and the onshore note yields 3.14%
0 (+3bps) as at end-March.
(1)11/09 05/10 11/10 05/11 11/11
Differential CGB (5-y r, onshore)
CGB 5Y (Offshore)

Source: HSBC, Bloomberg

35
 The View
Asia’s Bond Markets abc
April 2012

FX and rates
CNH outside of CNY
CNH vs. CNY exchange rates

6.7  Offshore rate was 158pips outside of the

onshore rate by end-March, from nearly flat
6.6
at the start of month.
6.5

6.4

6.3

6.2
Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
CNH CNY

Source: Bloomberg, HSBC

CCS less positive

Yield change from cross-currency swap

1.0  The CNH cross-currency swap rates

Yield change from swap (%)

3Q'11 remained generally steady in March. 1-year

0.5
CCS was up by 7bps to 1.33%, while the
0.0 longer-dated rates were little changed from a
NOW
-0.5
month ago.
Feb'12

-1.0  The yield change by swapping from CNH to

4Q'11 USD is now at 85bps (1Y) from 76bps a
-1.5
month ago.
1Y 2Y 3Y 4Y 5Y

Source: HSBC

RMB HIBOR rates a touch higher

RMB HIBOR rates

 The overnight rate differential between three

CNH interbank offered rates (%)

3.5
banks stayed unchanged at 0-5bps.
3
2.5  HSBC and BOC rates were unchanged to
2 20bps higher, while Standard Chartered curve
1.5 flattened, ranging from +10bps to -10bps.
1
0.5  The overnight and 1-month rates quoted by
0 HSBC were 20bps higher to 1.2% and 1.9%,
ON 1W 2W 1M 2M 3M 6M 9M 12M respectively; 12-month rate was 10bps
HSBC BOC Standard Chartered
higher to 2.8%.
Source: TMA

36
 The View
Asia’s Bond Markets abc
April 2012

Growth
Persisted decline in offshore deposits
Renminbi deposits maintained with Hong Kong banks

700 12%  In February 2012, offshore renminbi

600 10% deposits with Hong Kong banks posted the
500 8% third consecutive monthly decline.
400
6%
300  RMB deposits declined by 1.7%, or
200 4%
100 2% RMB9.8bn from a month ago to RMB566bn.
0 0%
 As at end-February, RMB deposits account
Feb-2004 Feb-2006 Feb-2008 Feb-2010 Feb-2012
for 9% of total deposits in Hong Kong, down
RMB deposits in HK (RMB bn)
% of total deposits in HK(RHS)
from 9.2% a month ago.

Source: HSBC, Bloomberg

Settlements in Hong Kong lower due to seasonality

Renminbi cross-border trade settlements in Hong Kong

300  Renminbi cross-border trade settlements

250 rebounded after the Lunar New Year, but
200 remained 20% lower than the peak witnessed
150 in December 2011.
100
 Settlements in February stood at
50 RMB187.5bn, up 19.9% m-o-m.
0
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
RMB cross-border trade settlement (RMB bn)

Source: CEIC

Accounting for nearly 10% of total China trade settlements

Renminbi cross-border trade settlement (overall)

700 12%  Overall renminbi cross-border trade

600 10% settlement for 4Q11 came in at RMB539bn,
500
RMB (bn)

8% down from RMB583bn in 3Q11.

400
6%
300  It accounted for 8.87% of total China trade
200 4%
2%
settlements in 4Q11, down from 10.2% in
100
0 0% 2Q11.
2Q'10 4Q'10 2Q'11 4Q'11  Total RMB settlements for 2011 totalled
RMB trade settlement
% of total China trade settlement (RHS)
RMB2.08trn.

Source: CEIC

37
 The View
Asia’s Bond Markets
April 2012
Credits in sideways phase
 Sentiment turning neutral on mixed economic signals
 China’s growth pathway of particular concern
 Heavy new primary issuance appeases demand
Summary
Late last month, the Asian credit market’s
relentless rally since mid-January came to a halt
with the space going into a holding pattern. From
our perspective, both fundamentals and technicals
played a role in moderating the bullish sentiment
towards the Asian credit space. As a consequence,
the Asian dollar bond index’s total return was just
0.8% compared with an outsized gain of 1.99% in
February.
In recent weeks, China has taken the spotlight
away from the temporary stabilisation of Europe’s
fiscal problems and growing optimism that the US
economic recovery might be broadening out.
Softer-than-expected China economic data by way
of a weaker-than-expected March HSBC
purchasing manager’s survey caught market
participants by surprise. The survey revived the
debate about whether the Chinese economic
conditions have truly stabilised or will continue to
decelerate in the months ahead.
Likewise, investor sentiment was upset by
unanticipated events in the local political arena.
With existing key political party members being
replaced by a new group only in 4Q12, there were
fears that policymakers might respond slower than
usual to incoming high frequency economic data
during this long transitional phase.
38
abc
From our perspective, fiscal and monetary Dilip Shahani
Analyst
initiatives implemented from end-2011 should The Hongkong and Shanghai
only confirm that the worst of the Chinese Banking Corporation Limited
+852 2822 4520
economic soft patch has passed towards the end of dilipshahani@hsbc.com.hk
2Q12. What this means is that investors will Louisa Lam
Credit Associate
probably have another three months of The Hongkong and Shanghai
interpreting mixed data to ascertain the Chinese Banking Corporation Limited
+852 2822 4527
economy’s true underlying momentum pathway. louisamclam@hsbc.com.hk
To make matters worse, we do not believe that
Chinese policymakers are in any rush to rapidly
easy monetary conditions. Core inflation still
remains sticky and could turn back up if credit
conditions are relaxed too quickly. The lack of
good data on labour productivity means the
authorities have to move cautiously.
Of equal importance, we believe Chinese
authorities will be slow to reverse residential
property market restrictions imposed in key
provinces and cities to dampen speculative
activities. So, unsurprisingly, market participants
have been cool to recent issuance out of the
Chinese property developers’ space.
Specifically, two new issues by Agile and KWG
have performed poorly, falling by around 3 cash
points, respectively, since issuance last month.
Prospects of weak end-user demand, soft price
conditions for most of 2012, and the likelihood of
other developers needing to strengthen their
liquidity positions will likely keep the high yield
 The View
Asia’s Bond Markets abc
April 2012

Chinese property space facing mild selling Conversely, new debut issuers from the Mongolia
pressure in the months ahead. space held up well because of a favourable view
towards the country and the mining sector’s
Likewise, market sentiment soured towards the
medium-term growth prospects. Otherwise, Asian
Chinese industrial names close to the end of the
credits in general were negatively impacted by the
month. Disappointing earnings results by a few
quick backup in US Treasury yields over the
issuers revived concerns about the sector in
month. By end-March, the 5-, 10- and 30-year
general, especially against the backdrop of a still
Treasury yields had widened by 18bps, 24bps, and
moderating Chinese economic growth rate. To
25bps, respectively, from a month earlier.
make matters worse, the credit rating agencies cut
the ratings of Fufeng Group, Texhong Textiles UST continued to steepen
Group, West China Cement and Lonking 4 Yld (%) bp 40
Holdings over the month.
3 30
Besides China, investor sentiment towards the 2 20
Indian banking sector was tempered by the Indian
1 10
government’s failure to aggressively tackle its
own finances and the potentially negative knock- 0 0
on implications for domestic inflation. The -1
3m 6m 1Yr 2Yr 5Yr 10Yr 30Yr
-10
prospects of supply coming from the Indian Chg in Marcg (RHS) 3/30/2012
banking space also weighed on market sentiment, 2/29/2012 12/30/2011

in our opinion. Source: Bloomberg

39
 The View
Asia’s Bond Markets abc
April 2012

Market update: March 2012

1. Asian credit spread and CDS performance Asian credits enter sideways pattern

Spread (bp) The Asian credit market’s rally since January stalled by mid-
500 1,200 March on a combination of fundamental and technical factors.
450 1,100 Concerns over China’s economic performance, deluge of primary
400 1,000 issuance, and Treasury volatility overshadowed surprisingly
350 positive US economic data and receding concerns over the
900
300 European public sector debt crisis
800
250  ADBI spread narrowed by 9bps to 324bps by end-March
700
200  AHBI-Corp: Spread widened by 10bps to 711bps by end-
150 600 March, reflecting concerns over the Chinese corporate space
100 500
 iTraxx AxJ IG was flat at 157bp after testing a tight of 132bp.
50 400 Again, the modest move highlights that the bullish mode has
01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 started to fade from the early part of 1Q12
ADBI iTrax x Ax J IG AHBI-Corp (RHS)
Source: Bloomberg, HSBC

2. Financial Clog Index – level of stress in US financial system De-risking remains the theme
HSBC’s key stress indicator continues to reflect investors’ desire
600 2100 to take on risk following US economic data surprising above
500 1900 consensus. Sentiment was also bolstered by European
1700 sovereigns and banks having aggressively achieved a good
400 degree of financing for 2012 as a whole.
1500
300  Sharp drop in volatility and appetite for mortgage agency
1300
200 securities were the main drivers pushing the overall Clog Index
1100
down by approximately 13% in March
100 900
 Financial institutions’ CDS levels grinded tighter, but market
0 700 participants were reluctant to aggressively increase exposure to
03/10 07/10 11/10 03/11 07/11 11/11 03/12 the banking sector

Interbank Agency Volatiity  The muted drop in interbank rates reflected the unwillingness to
take on counterparty unsecured risk to the levels before the
Ov erall CDS (RHS)
Lehman risk of 2009
Source: HSBC

3. Spread performance, by country and sector High grade and sovereigns shine
With excessive bullish sentiment starting to diminish, there was a
20 shift back towards a quality over chasing beta for portfolio
+10
10 -1 outperformance
0  IG credits clearly benefitted from less euphoria, especially with
-10 -2 -2 -2 renewed concerns about the larger economies like China and
-9 -14 -2 -7 -5
-20 -12 -15 India. Rising energy prices also dampened sentiment due to
-30 -22 receding hopes of rapid relaxation of monetary conditions
-26 across the Asia-Pacific (ex-Japan) as a whole
-40
-50  Sri Lanka was main outperformer on the sovereign side on
dealer short-covering and investors looking for laggards,
-60 especially after the good performance of Mongolian issuers in
-70 -64 -58 the primary market
ADBI
IG
HY
HY-CORP

Hong Kong
India
Indonesia

Pakistan

Vietnam
China

Korea

Singapore
Thailand

Sri Lanka
Philippines
Malaysia

 The Chinese HY corporate sector’s poor performer was on the

back of ratings downgrades, disappointing earnings reports,
and fears of upcoming supply from both the industrial and
property developers
Spread chg in March 2012 (SOT, bp)

Source: HSBC

40
 The View
Asia’s Bond Markets abc
April 2012

Primary market & technical factors

4. Monthly Asia ex Japan public issuance Surprisingly robust primary market
March was another strong month for primary issuance,
amounting to well over USD11bn, following on from the debt
14000 USDm rising exercises of around USD11.7bn for the first two months.
12000 Total issuance for 1Q12 edged to USD35bn, over double the
10000 USD16bn placed during the same period a year earlier

8000  Most interestingly, total issuance YTD amounted over 48% of

HSBC’s expected full-year upper estimate of USD72bn
6000
 There was a combination of high grade and high yield plus first-
4000 time issuers into both spaces
2000
 High yield property market was reopened by Agile and KWG;
0 however the bonds performed poorly in secondary trading
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec  Surprisingly, the Chinese industrial sector was opened by first-
time issuer Zoomlion – a heavy material company – at a pricing
2010 2011 2012 Av erage
level significantly tighter than what names were trading at in the
secondary space
Source: Bloomberg, HSBC

5. Primary issues performance Mixed to disappointing

Given the dispersion and record amount of issuers across both
120 bp the high grade and high yield space, it is not surprising that
89 96
100 secondary performance was mixed to disappointing towards the
80 end of the month. Investors were becoming more selective,
47 especially with a number of factors looking less positive from the
60
25 29 32 start of 1Q12
40 14
5 6 10
20  Most surprising was the disappointing performance of
0 Singaporean banks likes DBS and UOB, given their capital
-20 -8
-21-21-20-18-14-11-10 strength and safe haven status
-40 -21
 First-time issuers from Mongolia have held around par
LIHHK 17-retap
ASRIIJ 17
CAPITA 18
BRAUIJ 17

CITPAC 18
HYUCAP 17

DBMMN 17
KOROIL 17

ICBCAS 17

ZOOMLI 17
MONMIN 17
DBSSP 22
KWGPRO 17
AGILE 17
OCBCSP 15

SLACP 17
STSP 17

SCBTB 17

UOBSP 17-

 Despite talk of strong appetite, Chinese property new issues

fell, with Agile ’17 and KWGPRO ’17 down around 3pt at the
mid-96 areas. Talk of additional supply and lack of any near-
term positive catalysts for sector from a regulatory angle were
clearly effecting market mood
Source: HSBC

6. Asian credit rating outlook trend Downgrades dominate in March

Last month, the credit rating agencies were busy downgrading
issuers in both the high grade and high yield space. The number
25% 78% of stable ratings dropped to below 70% from around 76% in
76% 4Q11. Conversely, negative outlooks jumped up to 20% last
Outlook percentage

20% month from a recent low of around 15% in 4Q11

74%
15%  Notable upgrades on the high grade side was State of
72%
Sarawark to A3/stable from Baa1 from Moody’s and Kia Motors
10% 70% to BBB+, up one notch from S&P
68%  On the bank side, Bank of India and Union Bank of India were
5% both cut by one notch to Baa3/stab by Moody. This action
66%
appears to be a reversal of an earlier decision that banks could
0% 64% be rated above the sovereign
12/10 2/11 4/11 6/11 8/11 10/11 12/11 2/12  On the high yield side, both Chinese industrials and property
pos/*+ neg/*- Stable (RHS) developers were have either ratings or outlooks lowered on
concerns about the sector or the general macro economic
backdrop
Source: HSBC

41
 The View
Asia’s Bond Markets abc
April 2012

Sector performance
7. Sovereign CDS performance Investors hedging less on diminished fears
Asian sovereign CDSs tightened for the third consecutive month,
400 5yr CDS (ask bp) albeit less dramatically to reflect renewed concerns about China’s
economic conditions. The rolling effect of 5-8bps attributed to
350 300
switching to a new 5-yr contract also played a part in the
300 favourable performance of the CDS sovereign market
250
171  Vietnam was the outperformer, with the 5yr CDS spread
200 137 147 dropping to 300bps from around 350bps a month earlier.
114 124 110
150 Improving fundamentals in a way of moderating inflation,
100 narrowing merchandise trade deficit and rising FX reserves
50 were boosting to investor confidence
0  On the flip side, China 5-yr CDS was garnering interest towards
PHILIP
CHINA

THAI

INDON

month-end around the 110-115bps area following high

VIETNM
KOREA

MALAYS

frequency data failing to show stabilising economy

 Indonesia 5-yr CDS was getting a slight bid, resulting from the
government finding it difficult to cut energy subsidies and the
2/29/2012 3/30/2012 potentially knock-on inflation threat, if the central bank moves
slowly to reverse existing easy monetary conditions
Source: HSBC

8. Relative value: high yield sovereign Sri Lanka comes back

Most of the sovereign space was moving sideway, as the UST
450 Z-spd (bp) SRILAN movement at the back end was drawing attention by onshore
400 (B1\B+) total return players
350  With improving risk on the environment, Sri Lanka longer-dated
300 VIETNM debt securities like the ’21 regained all the loss from the
INDON previous month. This recovery was in spite of the fact that the
250 (B1\BB-)
(Baa1\BB+) currency remains weak deterioration merchandise trade
200 balance
150 PHILIP  Vietnam’ 20 price pushed higher by 3/4pt, despite the backup in
(Ba2\BB) UST. In other words, the credit spread narrowed by over 30bps
100
over the month to more than compensate for the backup in the
50 Mdur (yr) UST yield. Again improving fundamentals have resulted in an
increase appetite for Vietnam risk
0 2 4 6 8 10 12

Source: HSBC

9. Relative value: senior banks Spread compression on limited supply

Last month was good again for the senior unsecured Asian bank
400 Zspd (bp) space. The combination of modest new supply and generally
A XSB IN B OBIN 15
09/15 improving confidence toward the financial sector as a whole was
350 getting investors to focus on the credit spread premium over
ICICI 15 similar rated corporates in the same rating bucket
B OIIN 15
300  Korean banks remains of interest to conservative clients, with
spreads having tightened by around 30-50bps from a month
250 HANA B K earlier. Solid capital structure and stable credit metrics
SHNHA N PUSAN '17
WOORIB
15 underpinned the space
16 SHNHAN
200 01/16  Likewise, the Indian bank space was attracting investors
EIB KOR 17 17
WOORIB because of valuation. Having said that, worries about the
B CHINA 16 KDB 03/16
150 10/15 government’s fiscal position, inflation remaining sticky and
B B LTB 20 SB IIN 14 potential supply was keeping investors reluctant to aggressively
100 buy into the space
Mdur (yr)
2.50 3.00 3.50 4.00 4.50 5.00

Source: HSBC

42
 The View
Asia’s Bond Markets abc
April 2012

Sector performance
10. Relative value: bank sub-debts Performance capped on potential supply

800 Zspd (bp) DBS kick-started the primary issuance in the subordinated debt
area by selling USD750m 10NC5 years notes following a senior
SBIIN 49-17c bond sale in February. This revived investors’ concerns on further
700
ICICI 22
supply
600 WINHAN 49-
CANARA 21  Similar to the senior bonds, the sector managed to tighten 35-
17c
500 45bps in March

CINDBK 20
 Being the first to be impacted undoubtedly were the
400 BCHINA 20 DAHSIN 20 Singaporean banks, the least performed bonds in the sector.
LIUCHO 20 The most active benchmark bonds, DBS ’19, UOB ’19 and
300 WOORIB BNKEA 20 FUBON 20
UOBSP 19
OCBC ’19 merely tightened 10-18bps
04/ 15 BNKEA 22- OCBC 19
ICBCAS 20
200 OCBC 19
DBSSP 19
17c  Indian and Korean sub-debts remained in investors’ favour on
Mdur (yr) attractive valuations (the former) and conservative plays (the
100 latter)
2.00 3.00 4.00 5.00 6.00 7.00 8.00
Source: HSBC

11. Relative value: investment-grade corporates Still lots of supply

Last month, there was a mixture of names from the super high
5.0 Yield (%) SINOCH 20 grade to the low BBB- space tapping the market for funds.
PTTEPT 21 Existing issuers in the lower spectrum of investment grade plus
4.5 LIFUNG 20 HUWHY
WHEELK 17 longer duration benefitted from investor interest
SUNHUN 20 SWIRE 22 01/ 22
 Li & Fung in the ‘A’ and Noble Group in the ‘BBB-‘ rating
4.0 SWIRE 19 PETM K 22
buckets, respectively, benefitted from renewed investor
POHANG 16 CNOOC 21
WHARF 17 SINTEL 21 appetite on the prospects of an improving outlook
3.5 PETM K 19
SUNHUN 16 SUNHUN 17  KORGAS’42 was close to 108 from the issuance price of
HUWHY 1/ 17
KOROIL 16 around par on investors looking for a high quality name
3.0
PTTEPT 15 providing duration extension
2.5  Hong Kong property issuers witnesses some profit-taking
US A-rated fair v alue curv e attributed in part to UST volatility and investors making room for
Tenor (yr) additional issuers tapping the market in the months ahead
2.0
 SHK Properties’ bonds fell sharply. The 2022 bonds widened
3 4 5 6 7 8 9 10 11
55bp the day after the company’s announcement
Source: HSBC

12. Relative value: high yield corporate Chinese sector faces profit-taking
From the primary issuance side, we saw the Indonesian and
Chinese corporate space opening and new issuers from the
14 Yield (%)
HIDILI 15 YLLG 18 Mongolian sector last month. Unfortunately, the Chinese space
B RP TIJ 15
has performed disappointingly because of renewed uncertainty
12 WESCHI 16
AGILE 17
COGARD 18 about the macro-economic backdrop and potential further supply
10 SHUION 15
CHOGRP 17  The strong Chinese property sector rally reversed last month
CHOGRP 15
BUM IIJ 17 VEDLN 18 on profit-taking triggered by fears of additional supply and no
8 visibility on when the government would relax restrictions on
home purchase measures. Separately, Renhe Commercial’s
VEDLN 14 BERAUC 15 INDIKA 16 CIKLIS 19
6 STAREN 15 bond fell sharply on the weak results
ADA IND 19
P LNIJ 19  China industrials were hit by unexpectedly by disappointing
4 P LNIJ 16 earnings and negative rating actions. Winsway ’16 dropped
US BB and B fair v alue close to 7pts in two days after for the earnings announcement
2
 Conversely, Indonesian coal issuers benefitted from the
1 2 3 4 5 6 7 8 9 sector’s favourable outlook. This is despite some issuers
Tenor (yr) having corporate governance issues clouding over them. For
instance, Breau’17 was trading above par, close to 101
Source: HSBC

43
 The View
Asia’s Bond Markets abc
April 2012

AMP attribution analysis – resilient and liquid names in Korea and

March 2012 Singapore. Following the trade, the average
modified duration remained flat at 6.3 while the
Portfolio summary
portfolio tenor was reduced slightly to 11.0 years.
AMP ADBI Difference
As of 30 March 2012 Although the recently included new bonds would
Monthly return 0.18% 0.08% +10
YTD return 4.07% 3.37% +70 be sensitive to UST movement, the bonds held up
Monthly volatility, (annualised) 4.02% 2.95% +107 steady in spread terms. The KT Corp ‘17 and
As of 2 April 2012
Current modified duration (yr) 6.27 5.39 0.88 HANABK ’17 were firm around T+210bp and
Current yield (%) 4.41% 4.39% 0.02% T+250bp (bid), respectively. UOB and DBS
Source: HSBC
bonds, however, have been affected by recent
supply concerns and DBS Bank’s acquisition plan
The Asian Model Portfolio managed to outperform
of Bank Danamon.
HSBC Asian Dollar Bond Index by 10bp amidst the
steepened US Treasury curve and relatively longer As a whole, the AMP’s outperformance was
portfolio duration. Average volatility increased for a mainly attributable to security selection, where the
third month to 4% along with the broader market. gains from credit spread compressions offset the
losses brought by higher UST yields. The resilient
In the anticipation of the market correction, we
Singapore and Thailand credits in the AMP
further reduced some risk in the portfolio by
helped stabilise the portfolio performance, while
cutting over 3.6% weightings in China HY
the overweight stance in Indian bank credits
corporate sector, especially in the property space.
boosted gains following the space’s recent rally.
This resulted in a heavy underweight stance in
The return of Sri Lankan bonds also gave a lift to
China (3.5% in AMP vs 9.9% in ADBI). On the
the AMP before we closed the country’s position.
other hand, we increased the weightings in

AMP versus ADBI, March 2012

China Hong Kong India Indonesia Korea Malaysia Pakistan Philippines Singapore Thailand Vietnam Sri Lanka Overall
A. Gains from credit spread movements
AMP (1) 1.18% 1.07% 0.46% 1.91% 0.89% 0.61% 0.00% 1.10% 1.13% 2.28% 0.00% 5.44% 1.16%
ADBI (2) 0.35% 0.49% 0.24% 0.73% 0.96% 0.42% 3.86% 1.06% 0.67% 1.18% 1.33% 4.27% 0.72%
Differential (1) - (2) 0.83% 0.58% 0.22% 1.18% -0.07% 0.19% -3.86% 0.04% 0.45% 1.10% -1.33% 1.17% 0.45%

B. Gains from movements in UST

AMP (3) -0.49% -1.71% -0.68% -2.67% -0.61% -1.91% 0.00% -2.43% -0.72% -1.71% 0.00% -1.81% -1.37%
ADBI (4) -1.10% -1.03% -0.80% -1.92% -0.47% -0.88% -1.10% -2.20% -0.90% -1.28% -0.92% -1.36% -1.10%
Differential (3) - (4) 0.61% -0.68% 0.12% -0.75% -0.14% -1.02% 1.10% -0.23% 0.17% -0.43% 0.92% -0.45% -0.27%

C. Excess returns from accruals: AMP over ADBI

AMP (5) 0.59% 0.43% 0.40% 0.48% 0.38% 0.38% 0.00% 0.40% 0.42% 0.41% 0.00% 0.50% 0.39%
ADBI (6) 0.54% 0.46% 0.50% 0.52% 0.43% 0.39% 0.75% 0.50% 0.36% 0.46% 0.55% 0.57% 0.47%
Differential (5) - (6) 0.06% -0.02% -0.10% -0.03% -0.05% -0.01% -0.75% -0.10% 0.06% -0.06% -0.55% -0.07% -0.08%

AMP 1.29% -0.21% 0.18% -0.28% 0.66% -0.91% 0.00% -0.92% 0.82% 0.97% 0.00% 4.13% 0.18%
ADBI -0.21% -0.08% -0.07% -0.67% 0.92% -0.07% 3.51% -0.63% 0.14% 0.37% 0.97% 3.48% 0.08%
Total excess 1.50% -0.12% 0.25% 0.39% -0.26% -0.84% -3.51% -0.29% 0.68% 0.61% -0.97% 0.65% 0.10%
returns: AMP over
ADBI: A+B+C
Source: HSBC

44
 The View
Asia’s Bond Markets abc
April 2012

Country allocations Sector allocations

35% 40%
30%
30%
25%
20%
20%
15% 10%
10% 0%

Industrial
5%

Utility
Quasi

Congl

Telecom
Banks

Property
Sovereign

Energy
0%
ID
HK
IN

PH

TH
SG
MY
PK

SL
CN

KR

VN

AMP ADBI AMP ADBI

Source: HSBC Source: HSBC

45
 The View
Asia’s Bond Markets abc
April 2012

AMP constituents
Portfolio composite as of 2 April 2012
Bonds Sector Mdy/S&P AMP wgt ADBI wgt Coupon Maturity Price Yield SOT ASW MD Size (m)
Overall BBB+ 100.00% 12.92% 6.14 11.03 n/a 4.41 310 264 6.27 n/a
ADBI BBB+ n/a n/a 5.75 7.21 n/a 4.39 323 n/a 5.39 n/a

China
CHRECO 3.75 08/03/2015 CN utility Baa3/BBB- 0.50% 0.21% 3.750 08/03/15 101.094 3.399 238 269.829 3.1 500
HPDLF 8.125 11/09/2012-09c CN property Caa1/B 0.50% 0.00% 8.125 11/09/12 94.000 19.073 1874 1707.690 0.5 350
NECHIN 9.75 07/23/2014 CN property B2/B- 0.50% 0.00% 9.750 07/23/14 101.000 9.246 892 839.088 2.0 400
CHOGRP 8 08/18/2015 CN indus Ba1/NA 0.50% 0.21% 8.000 08/18/15 94.250 10.043 902 911.151 2.8 550
YLLG 10.625 03/29/2018-15c CN property B1/B+ 0.50% 0.00% 10.625 03/29/18 89.000 13.349 1118 1196.291 4.2 400
CITPAC 6.625 04/15/2021 CN cong Ba1/BB+ 0.99% 0.20% 6.625 04/15/21 94.500 7.472 531 549.055 6.4 500
Hong Kong
HUWHY 7.45 08/01/2017 HK cong A3/A- 4.99% 0.24% 7.450 08/01/17 119.363 3.442 242 228.956 4.5 500
HUWHY 7.45 11/24/2033 HK cong A3/A- 3.95% 0.00% 7.450 11/24/33 131.420 5.047 175 232.539 11.9 1144
KERPRO 5.875 04/06/2021 HK property NA/BBB- 1.04% 0.13% 5.875 04/06/21 100.847 5.753 359 378.095 6.7 300
LIFUNG 5.25 05/13/2020 HK indus A3/A- 2.72% 0.33% 5.250 05/13/20 105.228 4.474 231 265.106 6.5 750
SUNHUN 5.375 3/8/2017 HK property A1/A+ 2.19% 0.11% 5.375 03/08/17 106.519 3.909 289 281.913 4.3 264
Indonesia
PLNIJ 7.75 10/17/2016 IJ utility Baa3/BB 3.04% 0.27% 7.750 10/17/16 116.000 3.873 285 279.757 3.8 550
INDON 11.625 03/04/2019 IJ sov Baa3/BB+ 3.54% 1.21% 11.625 03/04/19 148.250 3.668 150 213.858 5.2 2000
INDON 8.5 10/12/2035 IJ sov Baa3/BB+ 7.02% 0.98% 8.500 10/12/35 148.250 4.992 169 225.802 12.1 1600
INDON 7.75 1/17/2038 IJ sov Baa3/BB+ 2.17% 1.13% 7.750 01/17/38 138.000 5.087 179 226.133 13.0 2000
India
AXSBIN 5.25 09/30/2015 IN bank Baa2/BBB- 2.57% 0.14% 5.250 09/30/15 101.606 4.746 373 398.713 3.2 350
ICICI 4.75 11/25/2016 IN bank Baa2/BBB- 4.22% 0.41% 4.750 11/25/16 98.996 4.993 397 399.825 4.1 1000
BOIIN 6.25 02/16/2021 IN bank Baa3/BBB- 1.61% 0.20% 6.250 02/16/21 100.075 6.238 407 427.916 6.7 500
Korea
SHNHAN 4.375 09/15/2015 KS bank A1/A 3.52% 0.30% 4.375 09/15/15 105.101 2.814 179 208.285 3.2 700
EIBKOR 4 01/11/2017 KS quasi A1/A 6.52% 0.00% 4.000 01/11/17 103.826 3.130 211 211.953 4.3 1250
EIBKOR 5.125 06/29/2020 KS quasi A1/A 0.93% 0.55% 5.125 06/29/20 107.482 4.047 188 217.006 6.7 1250
EIBKOR 5 04/11/2022 KS quasi A1/A 2.65% 0.00% 5.000 04/11/22 105.262 4.347 218 217.186 7.7 1000
HANABK 4.25 06/14/2017 KS bank A1/A 0.90% 0.21% 4.250 06/14/17 103.149 3.580 256 247.853 4.6 500
INDKOR 3.75 09/29/2016 KS bank A1/A 3.07% 0.21% 3.750 09/29/16 102.368 3.180 216 221.363 4.1 500
KDB 5.3 01/17/2013 KS quasi A1/A 1.86% 0.42% 5.300 01/17/13 102.343 2.292 196 180.605 0.8 1000
KOLAHO 4.875 09/10/2014 KS property A1/A 1.65% 0.32% 4.875 09/10/14 104.936 2.767 244 226.244 2.3 750
KOREAT 3.875 01/20/2017 KS tele A3/A 1.98% 0.00% 3.875 01/20/17 102.843 3.230 221 222.701 4.3 350
KOREA 5.75 04/16/2014 KS sov A1/A 1.57% 0.67% 5.750 04/16/14 107.923 1.776 145 127.798 1.9 1500
KOREA 7.125 04/16/2019 KS sov A1/A 7.06% 0.77% 7.125 04/16/19 123.355 3.370 120 183.298 5.6 1500
Malaysia
PETMK 7.875 05/22/2022 MK quasi A1/A- 1.46% 0.55% 7.875 05/22/22 133.726 3.829 166 174.235 7.3 1000
MALAYS 4.646 07/06/2021 MK sov A3/A- 1.75% 0.35% 4.646 07/06/21 107.864 3.638 147 164.600 7.5 800
Philippines
PHILIP 8.875 03/17/2015 PM sov Ba2/BB 1.67% 0.31% 8.875 03/17/15 118.750 2.284 126 155.837 2.7 644
PHILIP 4 01/15/2021 PM sov Ba2/BB 3.09% 0.88% 4.000 01/15/21 103.625 3.516 135 157.921 7.3 2076
PHILIP 6.375 1/15/2032 PM sov Ba2/BB 2.17% 0.70% 6.375 01/15/32 121.000 4.728 143 212.524 11.9 1420
PHILIP 5 01/13/2037 PM sov Ba2/BB 3.89% 0.00% 5.000 01/13/37 103.875 4.732 144 184.947 14.2 1500
ICTSI 7.375 03/17/2020 PM indus NA/NA 2.50% 0.20% 7.375 03/17/20 111.250 5.603 344 381.328 6.1 450
Singapore
PSASP 4.625 09/11/2019 SP quasi Aa1/AA 1.83% 0.22% 4.625 09/11/19 108.829 3.278 111 162.069 6.3 500
DBSSP 2.35 02/28/2017 SP bank Aa1/AA- 0.90% 0.00% 2.350 02/28/17 98.919 2.586 157 159.474 4.6 1000
UOBSP 5.375 09/13/19-14c SP bank A1/BBB 1.39% 0.00% 5.375 09/03/14 105.366 3.056 273 197.953 2.3 1000
UOBSP 2.25 03/07/2017 SP bank Aa1/AA- 0.90% 0.00% 2.250 03/07/17 98.273 2.626 161 163.255 4.6 750
BWGRP 6.625 6/28/2017 SP indus Ba1/BB 2.07% 0.20% 6.625 06/28/17 97.750 7.144 612 588.781 4.3 500
Thailand
PTTEPT 5.692 04/05/2021 TB energy Baa1/BBB+ 2.13% 0.30% 5.692 04/05/21 106.874 4.745 258 273.647 6.9 700
Cash n/a n/a n/a 0.00% 0.00% 0.000 n/a n/a n/a n/a n/a n/a n/a
Source: HSBC

46
The View
Asia’s Bond Markets abc
April 2012

Sovereign Risk Analysis

 Monthly Focus: Republic of Indonesia

 People’s Republic of China

 Republic of India

 Democratic Socialist Republic of Sri Lanka

 Socialist Republic of Vietnam

47
 The View
Asia’s Bond Markets abc
April 2012

Sovereign Risk Analysis

Dilip Shahani
Analyst
The Hongkong and Shanghai
Banking Corporation Limited
+852 2822 4520
dilipshahani@hsbc.com.hk
Monthly Focus: Republic of Currency outlook
Qu Hongbin
Indonesia The IDR has been one of the worst performing Economist
currencies in the region since the beginning of the The Hongkong and Shanghai
Fuel hike concerns lingers (2 Apr) Banking Corporation Limited
year. We believe part of the reason has been the +852 2822 2025
 Indonesia is a solid BBB- investment grade ongoing difficult parliamentary discussions over a
hongbinqu@hsbc.com.hk

credit possible fuel price hike and the potentially negative Frederic Neumann
Economist
inflationary implications, which the central bank The Hongkong and Shanghai
 IDR to underperform on delay of fuel price Banking Corporation Limited
hike will have to deal with using its monetary tools. +852 2822 4556
fredericneumann@hsbc.com.hk
From our perspective, the IDR will likely continue
 Cautious on IndoGB supply; entry target for to underperform until there is greater clarity Leif Eskesen
Economist
5yr set at 5.5% about the proposed mechanism. Of greater The Hongkong and Shanghai
Banking Corporation Limited,
Sovereign rating outlook importance, sentiment should be less positive Singapore Branch
towards Indonesia, in our view, since the +65 6239 0840
S&P has recently concluded its visit to Indonesia leifeskesen@hsbc.com.sg
and market participants are expecting positive measure potentially diverts government funding
Trinh Nguyen
sovereign rating action to investment grade soon. away from development programmes to support Economist
The Hongkong and Shanghai
We maintain that Indonesia is a solid BBB- an energy subsidy scheme. Banking Corporation Limited
+852 2996 6975
investment grade credit based on the medium- Over the weekend, Indonesia’s parliament decided trinhdnguyen@hsbc.com.hk
term trajectory of the budget, inflation and to reject the government’s proposal to raise fuel Sun Junwei
external debt metrics. Simply put, the recent prices by 33% to IDR6,000 per litre on 1 April 2012.
Economist
The Hongkong and Shanghai
politics around the energy subsidies should have However, parliament did agree to allow the Banking Corporation Limited
no impact on S&P’s potential decision to lift +86 10 5999 8234
government to increase subsidised fuel prices if junweisun@hsbc.com.cn
Indonesia’s sovereign rating by one notch to the Indonesia Crude Price (ICP)1 increases by Ma Xiaoping
investment grade in the months ahead. 15% or more above the USD105 per barrel Economist
The Hongkong and Shanghai
From a trading perspective, Indonesia’s assumed average budget target oil price for six Banking Corporation Limited
+86 10 5999 8232
government USD bonds might modestly drift months. Given the government’s assumptions, with xiaopingma@hsbc.com.cn
outwards in the interim, until we get clarity on the a 2012 budget oil price set at USD105 per barrel Pin-ru Tan
(changed from the earlier forecast of USD90 per Rates Strategist, Asia
fuel price mechanism. We maintain a hold on the The Hongkong and Shanghai
Indonesian USD bonds, based on the gradually barrel), the ICP would have to stay at or above Banking Corporation Limited
+852 2822 4665
improving fundamentals. With regards to USD120.75 per barrel for a six-month period for the pinrutan@hsbc.com.hk
sovereign CDS, we believe the Indonesian 5-yr government to raise fuel prices. Asian FX Team
The Hongkong and Shanghai
CDS should trade flat to the Philippine 5-yr CDS Banking Corporation Limited
+ 852 2822 4340
from the current 23bps gap (mid-level) that has asian.fx-gr@hsbc.com.hk
1
opened up in recent weeks (see Chart 1 and 2). The ICP is determined by Pertamina. This price index is based on the
moving average spot price of a basket of five internationally traded Prithviraj Srinivas
crudes: Minas (Indonesia), Tapis(Malaysia), Gippsland (Australia), Economics Associate
Dubai (UAE) and Oman. Bangalore

48
 The View
Asia’s Bond Markets abc
April 2012

1. 5-year CDS performance of ROI vs. ROP 2. ROI sovereign bond curve

350 bp 6.0 Yield (bid, %)

250 5.0

150 4.0
50
3.0
-50
2.0
-150 Tenor (yr)
1.0
1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12
ROI - ROP ROI 5Y CDS ROP 5Y CDS 0 4 8 12 16 20 24 28 32

Source: Bloomberg, HSBC Source: Bloomberg, HSBC

In March, from our replicated ICP analysis, the oil again seek parliamentary approval or there is now
price was already at USD129 per barrel and the a mechanical procedure that is separated from
six-month moving average of the official ICP politics.
from the October 2011 to March 2012 period was
Assuming the authorities were to raise fuel prices
only 3.5% below the target set (Chart 2). Having
in the coming months to ensure the budget deficit
said that, it is still unclear when fuel prices might
stays below the 3% GDP legal limit and global
be changed, since there is no clarification about
economic conditions continue to improve, the
the starting point for measuring the six-month
Bank Indonesia (BI) would need to start
moving average divergence from the fixed price
unwinding its accommodative monetary stance, in
set in the 2012 budget. We believe it could be as
our view. Currently, the overnight deposit rate
early as June or a few months later, if the ICP
trades at the bottom of the interest rate corridor
stays above the USD120 per barrel blended level.
(Chart 4) and there is excessive liquidity in the
We are still unclear on the oil price hike
system. As we have argued in our past note on the
magnitude and whether or not the price can be
IDR (see Asian FX Focus: IDR fuelling concern,
adjusted downward if the ICP average measure
16 March 2012), the authorities must be less
slips below the set budget target oil price.
dovish by actively managing excessive liquidity
Equally, we do not know if the government has to
in the system. They could consider: 1) hiking the

3: ICP is still trending higher 4: Monetary policy condition remains excessively loose

140 10
%
120
USD per barrel
8
100
80 6
60 4
40
2
Jan-09 Jan-10 Jan-11 Jan-12
Official ICP Jan-09 Jan-10 Jan-11 Jan-12
HSBC Replicated ICP Policy rate Ov ernight rate
6mths MA of the official ICP Lending facility Depo facility

Source: CEIC, HSBC Source: CEIC, HSBC

49
 The View
Asia’s Bond Markets
April 2012
reserve requirement rate (RRR), like in 2004 after
the presidential elections; and/or 2) increase the
frequency, amount and tenor for term deposits.
Note that these policy actions have been
suggested by the BI to counter a potentially
negative inflationary impact. If this were to
happen, we believe it should help stabilise, or at
the very least slow the IDR weakness.
Without the BI gradually reversing its monetary
accommodation, the IDR will likely continue to
underperform against the rest of the Asian
currencies, in our view. To diminish the IDR’s
volatility related to the energy subsidy policy, the
BI might be forced into continuous intervening.
From our recent estimate (see Asian FX
Dashboard: Two-way management continues,
21 March 2012), the BI has sold about USD28bn
to slow the IDR weakness from last June 2011 to
February 2012.
With regards to specific trades, we see value in
selling the IDR against the SGD, particularly ahead
of the MAS meeting, especially since the IDR NDF
points have shifted lower after the news and
improving weakened China high frequency data.
Rates outlook
Based on the parliament’s expected approval of
the fuel reduction subsidies, the Ministry of
Finance forecasts that the budget deficit would be
5. Foreign holdings of IndoGBs have fallen by 2ppts since
late January
240
235
230
IDR trn
225
220
215
210
2 10 18 27 6 14 22 1 9 19
Jan Jan Jan Jan Feb Feb Feb Mar Mar Mar
Foreign investors' holdings of IndoGBs
Market share (%, RHS)
Source: HSBC, Indonesia Debt Management Office
50
abc
2.2% of GDP for 2012, up from the 1.5%
projection made in late 2011. To finance the
potentially larger budgetary shortfall, the debt
management office plans to increase its issuance
of government bonds by IDR25trn, such that the
full-year gross funding target would amount to
IDR279trn.
Now that the subsidies are not reduced, the fiscal
deficit is likely to be above 2.2% of GDP. If the
3% legal limit is hit and based on the assumption
that no new revenue sources or cuts in other
expenditure programmes are found, HSBC FI
Research estimates that gross bond issuance can
increase by as much as IDR95trn, compared with
the government’s projection of IDR25trn. This
equates to potentially around 12 more regular
auctions. As a consequence, we believe it is
advisable to wait until greater clarity is provided
on the possible revised new issuance plan before
establishing new longs in the government bond
market. Previously, HSBC FI Research favoured
buying 5-year government bonds at 6% in view
that inflation will breach 6% in the coming
months due to the subsidy reform. With the
reform process delayed, the entry target is
lowered to 5.5%.
Clearly investors are nervous and this is best
illustrated by the fact that foreign holdings of
6. Yield curve has shifted upwards in parallel since late January
32.5% 7.0
32.0%
6.5
31.5%
31.0% 6.0
%
30.5% 5.5
30.0%
5.0
29.5%
4.5
5y r 10y r 15y r 20y r
Current 30-Jan
Source: HSBC, Bloomberg
 The View
Asia’s Bond Markets
April 2012
Indonesia government bonds fell from IDR236trn
to IDR225trn since late January. As a percentage
of outstanding bonds, offshore ownership has
dipped two percentage points from 32.08% to
29.62% (Chart 5). Likewise, local players are
worried about the government bond curve staging
a parallel upward shift in yields since the end of
January (Chart 6). More specifically, the 10-year
government bond yield is now 20bp higher from
before Moody’s upgrade of the Indonesian
sovereign to investment grade status on 18
January 2011.
Dilip Shahani, Paul Mackel, Perry Kojodjojo,
Pin-ru Tan, Daniel Hui, Dominic Bunning
People’s Republic of China
Weaker growth calls for additional
easing (12 Mar)
China's growth dataset for January-February
confirms a slowdown in domestic growth. IP
and retail sales growth were much weaker-
than-expected, while FAI growth continued to
moderate. Despite the recent RRR cut,
February's new lending slowed to a pace
weaker than market expected. This coupled
with weakening export growth and declining
headline CPI readings call for more steps
towards easing. We expect at least a further
100bp RRR cut in 1H 2012.
Facts
National Bureau of Statistics (NBS) reported
weaker-than-expected industrial production (IP)
and retail sales for the Jan-Feb period, which
strips out the distortion arising from Chinese New
Year. Fixed asset investment growth continued to
slow, albeit at a better-than-expected pace.
Industrial production (IP) growth fell to 11.4%
y-o-y in Jan-Feb from 12.8% y-o-y in December,
which was even weaker than our below-consensus
forecast (Bloomberg:12.3%, HSBC 11.6%). This
translated into a 0.7% m-o-m sa growth rate in
abc
February, slowing from 0.9% in December. The
slowdown was driven by heavy industries, whose
growth dropped to 10.9% y-o-y in Jan-Feb from
13% in December, subtracting nearly 1.5ppts to
Jan-Feb's IP growth. Meanwhile, growth of light
industries edged up to a pace of 12.7% y-o-y in
Jan-Feb from 12.6% in December.
By product, there was a broad slowdown across
key industrial products during the Jan-Feb period
(all in volume terms). Electricity growth
decelerated to 7.1% y-o-y from 9.5% in December;
steel production dropped 4.6% from 6% in
December and cement production slowed to 4.8%
from 7% in December, crude oil was down to 4%
from 4.9% in December, and cars continued to
contract by 1.8%.
Retail sales growth decelerated sharply to 14.7%
y-o-y in Jan-Feb from 18.1% in December notably
lower than market and our expectations
(Consensus: 17.6%, HSBC: 18%). Despite easing
inflation, real growth of retail sales cooled to a six-
month low at 10.8% from 13.8% in December.
The average m-o-m sa growth for Jan-Feb
moderate to 1.29% from 1.41% in December.
Breaking down individual components showed
that a slowdown was broad-based, spanning from
staples to durables. In particular the 14% y-o-y fall
of property sales during Jan-Feb period weighed
on the retail sales for home appliances (2.9% y-o-y
contraction in Jan-Feb vs 33.4% y-o-y in
December), furniture (25% y-o-y vs. 39.2% y-o-y
in December) and home decoration materials
(25.3% y-o-y vs. 37.2% y-o-y in December).
Fixed asset investment growth (FAI) slowed to
21.5% in Jan-Feb period, better than market
expectations of 20.5% y-o-y. But this is still a
notable slowdown from nearly 22% y-o-y in 4Q
and 23.8% y-o-y for the whole year 2011.
Average m-o-m sa growth for Jan-Feb slowed to
1.34% from the average of 1.36% in 4Q.
Investment at local levels cooled to 24% y-o-y in
51
 The View
Asia’s Bond Markets abc
April 2012

Jan-Feb from 27.2% last year while investment Implications

backed by central government contracted by 7.9% Today's growth data confirms that domestic
y-o-y in Jan-Feb. demand continues to slow down. With the HSBC
manufacturing PMI reading stuck below the 50-
By sectors, investment growth slowed notably in
neutral mark, it is unlikely that IP growth will
secondary and tertiary sectors (at 24.9% y-o-y and
rebound anytime soon. We expect IP in March to
18.5% y-o-y respectively vs. 27.3% and 21.1%
be around 11-12% y-o-y, taking IP growth in the
y-o-y last year) while investment in primary
first quarter below the 12.8% y-o-y growth
sectors jumped to 43.9% y-o-y from 25% y-o-y
recorded in 4Q last year, in which GDP cooled to
last year.
8.9% y-o-y. If history provides a reference, 1Q
Real estate investment held resilient at 27.8% 2012 GDP growth is likely to drop to around 8%
y-o-y in Jan-Feb, compared with 27.9% for the y-o-y (chart1).
whole year of 2011. This is likely due to the large
Although investment growth was better-than-
amount of ongoing projects, whose construction
expected, cooling property prices are set to take
floor space rose 35.5% y-o-y compared with
its toll over the coming months. Property sales are
25.3% last year. However, floor space of new
falling with prices declining sequentially across
housing projects only grew by 5% y-o-y.
more cities. In turn, private developers are
Separately, the PBoC reported that China's new demanding a higher discount, which is likely to
lending slowed to RMB710.7bn in February from result in a further correction in prices. Therefore,
RMB738.1bn in January, below market a slowdown in total property investment remains
expectation for RMB750bn. This translated into a extremely likely, even if public housing
slight rebound of outstanding loan growth to construction accelerates.
15.2% y-o-y in February from 15% y-o-y in
As such, this is likely to weigh on IP growth given
January. New loans breakdown suggests that the
that the volume growth of property-related capital
lower February new loans were driven by very
goods such as steel and cement has fallen below
weak new loans to household sector (RMB65.3bn
5% y-o-y. Meanwhile, consumer durables are
vs. RMB152.7bn in Jan), likely due to the ongoing
likely to be affected as well. All these imply
tightening and correction with the property market.
downside risk to domestic demand.
Meanwhile, mid and long-term loans to corporate
sectors also fell to RMB178.4bn in February from Even worse, February' exports are likely to deliver
RMB235bn in January. a big downside surprise on 10 March. Over the
press conference earlier this week, Minister of
Money supply growth saw a rebound in February.
Commerce said around 7% exports growth for
M2 growth picked up to 13% y-o-y from 12.4%
Jan-Feb period, which implies around 19% y-o-y
y-o-y in January, broadly in line with market
exports growth for Feb. Exports growth to Europe
expectation for 12.9% y-o-y. This reflected a
recorded 2-3% y-o-y decline for Jan-Feb period,
simultaneous rebound of deposits (12.6% y-o-y vs.
following the notable deceleration in 2H 2011.
12.4% y-o-y in January). Meanwhile, M1 growth
Meanwhile, he mentioned import grew slightly
rebounded to 4.3% y-o-y in February from 3.1%
above 7% y-o-y in Jan-Feb, suggesting that
y-o-y in January, but well below market
imports grew by around 38% in February. As such,
expectation for 4.3%.
trade balance would transform to having a deficit

52
 The View
Asia’s Bond Markets abc
April 2012

1. GDP growth is likely to drop to around 8% in 1Q

(%y r) (%y r)
24 16
14
20
12

16 10
8
12 6
Forecast
4
8
2
4 0
00 01 02 03 04 05 06 07 08 09 10 11 12
IP (Lhs) GDP (Rhs)
Source: CEIC, HSBC estimates

of around USD28bn in Feb from a surplus of Slowing growth coupled with faster-than-
USD27.3bn in Jan. expected easing in headline CPI calls for more
easing. Beijing has sufficient room and strong
Despite the two RRR cuts, the pace of new
reasons to catch up with the region in terms of
lending has been slower than expectation and the
monetary stimulus. We expect at least another
historical pattern. Combined new lending stood at
100bp RRR cut in 1H 2012.
RMB1448.8bn in Jan-Feb, representing around
18% of expected RMB8trn new lending for 2012, Bottom line: The slowdown across domestic
which is well below the average of share of nearly demand, exports, inflation and new lending
25% of annual new loans over the previous five require more easing by policy makers. Get ready
years. Despite the pick-up of M2 growth, it was for additional RRR cuts after the NPC meeting.
well below last year's 13.6% and below 14%
Sun Junwei, Qu Hongbin
official M2 growth target for 2012. This suggests
room for further easing of liquidity conditions to
support domestic demand.

2. Loan and investment growth continued to slow

(% y r) (% y r, 3mma)
35 35

30
30
25

20
25
15

20 10
05 06 07 08 09 10 11 12
FAI , y td (Lhs) Loans (Rhs)
Source: CEIC, HSBC

53
 The View
Asia’s Bond Markets
April 2012
Trade (Feb) - European crisis bites
(12 Mar)
Both exports and imports slowed at a faster pace
than expected. The 6.9% growth rate of exports
during Jan-Feb was half of the rate recorded in Dec
and one third of that averaged for 2011. In
particular, the ongoing sovereign debt and
economic crisis in Europe – China's largest exports
destination – is starting to bite. Meanwhile, slowing
imports, plus Feb's weaker-than-expected IP and
retail sales growth underscores the continuous
slowdown in domestic demand. Today's trade
numbers reinforce the need for easing efforts to be
stepped up in coming months. We still expect at
least another 100bp RRR cuts in 1H 2012.
Facts
At 18.4%, February's exports growth came in lower
than our below consensus expectation (Bloomberg:
31%, HSBC 19%). It also spelt an end to the
temporary contraction (0.5% y-o-y) of exports
growth in January due to the Chinese New Year.
However, combining January and February's
exports together (to eliminate the distortion of
Chinese New Year), exports only expanded by
6.9% y-o-y, less than half the pace of 14.3% y-o-y
recorded in 4Q 2011 and one third of that averaged
for the whole year 2011 (20.3%). Seasonally
adjusted, exports plunged by 27.4% m-o-m
following a 3.3% m-o-m contraction in January.
By destination, the exports growth slowdown was
broad-based with the biggest drag coming from
Europe (China's largest exports destination) and its
still unfolding sovereign debt crisis. Exports to the
EU contracted by 1.1% y-o-y in Jan-Feb, compared
to 6.5% y-o-y in 4Q 2011. Despite a relatively
milder slowdown of exports to Japan and the US
(14.9% y-o-y and 12% y-o-y in Jan-Feb,
respectively, vs. 17.4% y-o-y and 14.3% y-o-y in
4Q), exports to the G3 markets decelerated
noticeably to a pace of 6.7% y-o-y in Jan-Feb, from
11.5% y-o-y in 4Q 2011. Meanwhile, exports to
54
abc
non-G3 markets decelerated sharply to 6.9% y-o-y
in Jan-Feb, from 16.5% y-o-y in 4Q 2011.
By product, exports of electronic and machinery,
which accounted for 59.2% of total exports for the
first two months, outperformed the overall exports
growth by 8.8% y-o-y growth in Jan-Feb(vs.
compared with 11.5% y-o-y in 4Q). In contrast,
exports of major labor-intensive products contracted
for the Jan-Feb period: textiles exports contracted by
2.6% y-o-y vs. 14.7% y-o-y in 4Q 2011; clothing
exports dropped by 2.5% y-o-y vs. 5.6% y-o-y in 4Q
2011; shoe exports contracted by 2.1% y-o-y vs.
10% y-o-y in 4Q 2011.
China's imports picked up to a growth rate of
39.6% y-o-y in February from a 15.3% y-o-y
contraction in January, slightly higher than our
above consensus expectation ( Bloomberg:31.8%,
HSBC: 38.5%). In seasonally adjusted terms,
import growth rose marginally by 0.3% m-o-m
following 2.9% m-o-m contraction in January.
That said, imports growth for the Jan-Feb period
only expanded by 7.7% y-o-y, sharply slower than
the 20.6% y-o-y averaged in 4Q 2011.
By custom regimes, ordinary trade imports rose by
10.3% y-o-y in Jan-Feb (vs. 25.4% y-o-y in 4Q
2011), while processing imports growth decelerated
to a growth rate of 2.4% y-o-y in Jan-Feb from 8.6%
y-o-y in 4Q.
Imports of most major commodities were mixed
in volume terms. Agricultural products and
automobile imports were strong. Imports of
unwrought copper and unwrought aluminium
surged by 49.8% y-o-y and 39.3% y-o-y in Jan-
Feb, respectively (vs. 38.7% y-o-y and 5.5% y-o-y
in 4Q). Imports of crude oil picked up slightly to
12.7% y-o-y in Jan-Feb compared to 12.5% y-o-y
in 4Q. Imports of iron ore slowed to 5.7% y-o-y in
Jan-Feb, compared to 10.6% y-o-y in 4Q and
10.3% y-o-y in December. Steel products imports
 The View
Asia’s Bond Markets abc
April 2012

dropped by 13% y-o-y in Jan-Feb, compared with downside risks to growth, whilst domestic demand
a 7.9% y-o-y contraction in 4Q. too continues to slow as indicated by cooling
imports growth, and weaker-than-expected growth
As a result, China's trade balance turned to a large
in industrial production (IP) and retail sales. Easing
deficit of USD31.5bn in February, compared to
import growth for steel and iron ore reflects the
consensus expectation for a USD5.4bn deficit and
continued slowdown in investment. However, a
January's surplus of USD27.3bn. Taking January
sharp deceleration is unlikely given the revival of
and February together, China recorded a trade
restocking of crude oil and metals in response to
deficit of USD4.2bn, or nearly five times the trade
higher commodity prices.
deficit of USD0.85bn recorded in Jan-Feb last year.
Net exports will likely become a drag on GDP
Implications
growth in 1Q, with a weaker-than-expected
Despite the rebound after the Chinese New Year,
exports growth resulting in the largest monthly
both exports and imports are slowing at a pace
trade deficit (February) in the past two decades.
faster than expected to a single-digit growth rate in
But for the renminbi, volatility in China's monthly
Jan-Feb. Exports were hit hard by the ongoing
trade balance will unlikely have any meaningful
European debt and economic crisis, despite being
impact in the short term. The renminbi exchange
counterbalanced by better-than-expected growth in
rate will likely continue to appreciate slowly but
the US. The weak growth of ordinary trade imports
with increasingly higher volatility.
mirrors the further slowdown of ordinary exports.
Bottom line: Today's trade data confirms the
The exports outlook remains gloomy, considering: a)
weakness in both China's external and domestic
mild recessions in European economies, b) weak
fronts. This reinforces the need for further easing
final demand and economic growth in the US
measures, especially with inflation falling faster
economy, c) the slight spillover of the European
than expected. We expect at least another 100bp
crisis to economies in the developed and developing
worth of RRR cuts in the coming months.
world, and d) the looming risk of high oil prices to
demand in particular within developed markets. Sun Junwei, Qu Hongbin

Strong external headwinds only add more

1. Both exports and imports slowed fast to single-digit growth

(%y r) (USDbn)
80 100
90
60 80
70
40 60
50
20
40
0 30
20
-20 10
0
-40 -10
*
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Trade balance (Rhs) Ex ports (Lhs) Imports (Lhs)

Source: CEIC, HSBC

55
 The View
Asia’s Bond Markets
April 2012
HSBC China Manufacturing PMI
(Mar, flash) - Still soft (22 Mar)
Weakening domestic demand continued to weigh on
growth, as reflected by March's HSBC's China
manufacturing PMI flash reading which fell to a
four-month low. Slowing manufacturing production
is clearly deterring enterprises from hiring, as the
employment index slipped to a post-March 2009
low. With new export orders sluggish and domestic
demand still softening, China's slowdown has yet to
finish. This calls for further easing to come from
Beijing. With a sharp resumption of inflationary
pressures unlikely, we expect the PBoC to cut the
RRR by a cumulative 100bp in the coming months.
Facts
March's flash HSBC China manufacturing PMI
slowed to a four-month low of 48.1, down from
49.6 (final) previously. The quarterly PMI
average for 1Q12 fell to 48.9 from 4Q11's 49.2
and 2011's annual average of 51.
The key drag came from a significant drop in new
orders, which printed a four-month low of 46.1 in
March compared to 48.5 in February. The output
sub-index dropped to 47.9 following February's
temporary rise to 50.2. Both factors held back
hiring activities, the sub-index for which plunged
to a post-March 2009 low of 48.6, compared to
51.1 in February.
External demand is still slowing, although the
1. Flash PMI vs. final PMI
60
55
50
45
40
Jan Apr Jul Oct Jan Apr Jul
08 08 08 08 09 09 09
Source: Markit, HSBC
56
abc
pace of deceleration improved in March as the
new export orders print rose to 48.7, up from
February's 8-month low of 47.5.
The steeper drop in overall new orders than in new
exports-only orders only suggests China's slowdown
remains more internally than externally driven.
Subsequently, China's new orders minus
inventory (of finished goods) ratio fell to -1.7 in
March from -1.3 in February, and -1.4 in 4Q11.
The only relief offered in this month's PMI
reading is that the pace of input destocking
slowed for the fourth consecutive month (49.8
versus 46.8 previously) and finished goods
inventory went back into contraction (47.9 versus
50.8 previously) – both of which suggest that a
restocking boost could be around the corner.
On the inflation front, both the input and output
price sub-indices stayed well below their long-
term average. March's input price index fell to 50
from 50.6 previously, well below its long-term
average of 59.4. The output price sub-index
stayed below 50 for the second successive month,
registering 48.8 compared to 48.4.
Implications
The continued softness of China's manufacturing
suggests that the country's manufacturing
slowdown still has further to go. That said, current
PMI readings remain in line with an IP growth
Flash Final
Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
09 10 10 10 10 11 11 11 11 12
 The View
Asia’s Bond Markets abc
April 2012

2. Current PMI readings remain in line with an IP growth rate of around 11-12%

25 %yr,3mma 60
20 55
15
50
10
5 45

0 40
05 06 07 08 09 10 11 12
IP (Lhs) HSBC China manufacturing PMI (Rhs)
* Flash reading for March 2012. Source: CEIC, Markit, HSBC

rate of around 11-12% and GDP growth rate of that March's new lending will likely only be
around 8% – which we expect to result in 1Q12. slightly higher than Jan-Feb's average of
RMB725bn. Compared to the previous years
Near-term risks for the economy remain tilted to
when first quarter new loans have typically
the downside, due to:
accounted for 30% of full-year new lending,
1. The sluggishness of new orders suggests that this remains relatively low.
domestic demand has yet to respond fully to
3. External demand continues to deteriorate as
Beijing's recent loosening measures. Property
expected. January to February's exports
investment is set to weaken further in the coming
growth witnessed a much weaker-than-
months, with households' willingness to buy a
expected year-on-year growth rate of 6.9%,
home sitting at a post-1999 low according to the
with shipments to China's biggest trading
latest central bank survey. With bank lending
partner (aka Europe) contracting by 1.1% y-o-
restrictions still hampering credit creation to an
y. We expect exports to continue to grow at a
extent, financing difficulties for infrastructure
single-digit pace in the coming months.
projects championed by local government
financial vehicles are not yet over. With CPI easing to a 20-month low and PPI at 0% in
February, inflation is unlikely to be a major concern
2. Tight liquidity conditions and dampened
in the near future, providing ample room for Beijing
demand from the corporate sector suggests

3. China’s slowdown remains more internally than externally driven

65
60
55
50
45
40
35
30
25
05 06 07 08 09 10 11 12
HSBC PMI: New orders HSBC PMI: New export orders
Source: Markit, HSBC

57
 The View
Asia’s Bond Markets
April 2012
to enact more aggressive easing measures. Despite
the NDRC's recent upward adjustment of domestic
gasoline and diesel price, we still expect March's
CPI to stay well below 4% as a result of soft
domestic demand for other goods.
The PBoC should cut the reserve ratio by at least
another two 50bp in 1H 2012, following two cuts
since last November. This, plus a resumption of
VAT rebate on exports and more pro-growth
fiscal measures, should help secure a soft landing
for China.
Bottom line: Growth has further to slow given how
sluggish new export orders and domestic demand
remain, calling for further easing from Beijing.
Ma Xiaoping, Qu Hongbin
Republic of India
Post-budget quick take – Not
ambitious but more realistic (19 Mar)
The Minister of Finance presented the budget for
FY13, which was low on ambition but more
realistic than last year. The government targets a
reduction in central government deficit to 5.1% of
GDP (vs an estimated 5.9% of GDP this fiscal
year). It plans to achieve the deficit reduction by
increasing indirect taxes, raise divestment and
spectrum receipts, and containing subsidies.
Although more realistic, we still expect there will
be some fiscal slippage, especially with respect to
non-tax revenues and subsidies. However, it will
likely not be sufficient to prevent the deficit from
declining.
Facts
Minister of Finance Mukherjee presented the
FY13 budget, targeting a central government
deficit of 5.1% of GDP. This was broadly in line
with our expectations (see pre-budget note Will
Delhi Deleverage) and consensus. It also implies
an improvement relative to the estimated deficit of
5.9% for the current fiscal year, which far
58
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exceeded the budgeted 4.6% of GDP on account
of lower direct tax revenues and a much higher-
than-budgeted subsidy bill.
Total revenues are projected to grow 21.5% y-o-y
(vs 0.9%% y-o-y in FY12), raising their share of
GDP to 12.6% (vs 11.8% in FY12). The budgeted
increase in revenues is partly the result of
measures to raise indirect taxes, including through
a 2ppt hike in excise and service tax rates.
Moreover, the government, as expected,
introduced a negative list for service taxation to
help broaden the tax base.
The steps to raise indirect taxes more than
countered the easing of direct taxes, i.e. through
higher exemption limits. As such, gross tax
revenues are budgeted to grow at a healthy clip
(19.5% y-o-y from 13.7% in FY12).
In terms of pending tax reforms, the Standing
Committee on Finance recently submitted its
report on the Direct Taxes Code bill, but there
were no promises that it would be implemented
during the upcoming fiscal year. On the GST bill,
the government simply noted progress on the
legislative process, but this will not, in our view,
be introduced the upcoming fiscal year.
Moving on to non-tax revenues, divestment
proceeds are budgeted at INR 300bn (vs INR 155
bn estimated for FY12) and spectrum sales at INR
582 bn (vs 166 bn in FY12).
Total expenditures are budgeted to increase 13.1%
y-o-y (vs 10.1% in FY12. While current
expenditures are expected to grow at a slightly
slower pace, this is made up for by faster growth
in capital expenditures (30% y-o-y).
Looking at plan versus non-plan spending, the
former is expected to pick up pace led by capital
spending as the new five-year plan starts and
kicks execution into higher gear to reach the more
ambitious targets for infrastructure outlays, etc.
 The View
Asia’s Bond Markets abc
April 2012

Non-plan expenditure is expected to see a after the rather disappointing showing in the
slowdown in growth, which is primarily driven by recent state elections.
non-food subsidies. While the government did not
The budget, consequently, moved the deficit in
explicitly announce subsidy reform, they did
the right direction, but the implied fiscal
signal the intention to keep the subsidy bill below
consolidation is relatively moderate. Moreover,
2% of GDP.
the budget was not ambitious with respect to
In terms of themes, the budget focused on (1) structural reforms, shying away from
creating a domestic driven recovery, including by commitments to unpopular measures such as
boosting infrastructure outlays and generally liberalization of fuel prices and steps related to
creating conditions to strengthen private multi-brand retail, although the government did
investment; (2) developing the agricultural sector, suggest that it would try to broker consensus on
including through measures to support access to the latter.
credit and improve irrigation; (3) improving
However, the budget was more realistic this time
inclusion, including by focusing on improving
around. The government’s underlying growth
food security, education, health care,
assumptions are more conservative, with real
employment/skill development; and (4)
GDP growth assumed to pick up to 7.6% (broadly
strengthening governance.
in line with our 7.5%) and nominal GDP growth
Over the medium term, the government plans to expected to reach 14%.
bring the central government deficit down to 4.5%
That being said, the government has still assumed
of GDP in FY14 and further down to 3.9% of
an improvement in tax buoyancy. It could also
GDP in FY15, which falls short of the 3% target
still be difficult to fully deliver on the
recommended by the 13th Finance Commission.
assumptions for non-tax revenues. While less
The government also announced its intention to
optimistic this time around, the budgeted
introduce a number of changes to its medium term
divestment proceeds imply a significant increase
fiscal framework to strengthen commitments to
from the current fiscal year. The same goes for the
medium term spending targets and ensure that
budgeted number for spectrum sales, although the
quality spending is not inadvertently compressed.
re-auctioning of 2G licenses would imply a jump
Implications in revenues if it goes ahead as planned.
The budget presented today reflected the tight-
The subsidy bill may also be difficult to achieve if
rope the government has to walk due to economic
oil prices remain elevated and inflation proves
and political realities.
sticky. This could dissuade the government from
On the one hand, fiscal policy has to help RBI adjusting diesel and kerosene prices as much as
contain inflation pressures and bring public needed to meet the budget target.
finances back onto a sustainable path to allow the
We therefore expect some fiscal slippage relative
government to regain fiscal credibility after this
to the budget target, with the final central
year’s significant slippage. On the other hand, the
government deficit possibly slipping to around
budget could not be too tight considering the
5.3-.5.5% of GDP, in our view. This would imply
lingering growth risks and also the government’s
a slightly contractionary fiscal stance, which by
need to cater to populists demands, especially
itself is not enough for the RBI to cut rates. RBI
will still have to keep an eye open for other

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 The View
Asia’s Bond Markets
April 2012
potential upside risks to inflation, including higher
oil prices and the exchange rate. If the upside
risks do not materialize, however, the RBI is
likely to begin the rate cutting cycle in the April-
June quarter, possibly as soon as April.
Beyond FY13, it is vital for the government to
significantly rein in central and state government
deficits to bring public finances back onto a
sustainable path and, thereby, regain fiscal
credibility. Moreover, it is needed to crowd-in the
private sector and bring about higher potential
growth, which will also improve the debt
dynamics.
To achieve it, the government will have to (1) roll
out tax reform to raise revenues and reduce
distortions; (2) cut back unproductive spending on
subsidies; and (3) tighten the fiscal framework to
better anchor fiscal policy. While the deficit is
expected to decline, it is likely to fall short of the
targets set by the 13th Finance Commission.
Moreover, if policy paralysis persists, it would
leave public finances unsustainable with the
general government debt-to-GDP ratio continuing
to climb over the medium term.
Bottom line: The budget was broadly in line with
expectations, targeting measured fiscal
consolidation. It was not ambitious on reforms, as
expected in light of the current political realities
facing the government. However, the budget was
based on more realistic assumptions this time
around, which should limit the slippage relative to
the target and bring about an improvement in the
fiscal deficit.
Leif Eskesen, Prithviraj Srinivas
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Democratic Socialist Republic
of Sri Lanka
Central bank of Sri Lanka on hold
(15 Mar)
The central bank of Sri Lanka kept key policy
rates on hold today as expected following the
surprise hike in February. The Bank revised
down the official growth forecast to 7.2% for
2012. Policy rates remain accommodative and
with inflation set to rise in the months ahead,
the central bank may need to further tighten
monetary policy. This would also help contain
the external imbalances.
Facts
The central bank of Sri Lanka kept its key policy
rates, the reverse repurchase rate (9.00%) and the
repurchase rate (7.50%) on hold as expected.
The central bank stated that, its recent measures
“were intended to deal with the challenge of
lowering the trade deficit to a sustainable level, as
well as to effectively remedy the resultant
emerging imbalances in broad money growth,
credit growth and import growth”.
In light of the tightening and measures taken by
the government, the official growth forecast was
revised down to 7.2 per cent in 2012 from the
earlier projection of 8 percent.
At the same time, the Bank expected the recent
policy measures would “have a dampening effect on
prices, thereby offsetting to some extent the supply
side pressures on prices as a result of the recent
upward adjustments to administered prices.” As a
consequence, the Bank expects inflation in 2012 “to
remain subdued at mid-single digit levels” and that
broad money growth would decelerate during the
course of 2012 towards the targeted levels, “thereby
further easing future inflationary pressures”.
 The View
Asia’s Bond Markets
April 2012
Furthermore, the central bank expects that
commercial banks will “prudently consider the
limitation of credit for the import of motor vehicles”
given that “significant inventories of vehicles have
been built up with dealers of motor vehicles”
In light of the measure already taken and their
expected results, the Bank was of the view that
“its current monetary policy stance is adequate to
appropriately deal with the issues at hand”.
Implications
The central bank governor had already signalled
to the market that current policy rates were
appropriate for now.
However, the pause may prove temporary for a
couple of reasons. First, monetary policy settings are
still accommodative and could continue to fuel credit
demand, although the Banks’ aggressive move to
curtail credit growth at 18% for the year, if achieved,
can help to curb excess demand. But, if credit
growth (34.3% y-o-y in Jan 2012) fails to ease
significantly towards the official target, the central
bank will have to take more corrective measures.
Second, a structural improvement in food supply
has taken a big bite out of food inflation, lowering
headline readings to multiyear lows. However, fuel
price revisions and the devaluation of the currency
will begin to push up CPI inflation again in the
months ahead and will provide another reason for
the central bank to worry about inflation.
Lastly, despite the near-term moderation, growth
remains well above historical trend which could
add to demand pressures on inflation.
To tackle these pressures, we believe that policy
rates will have to go up by 50bps more this year.
Bottom line: The central bank kept policy rates on
hold. However, the still highly accommodative
monetary settings could keep credit growth higher
than targeted and call for additional rate hikes this
year to contain inflation and the trade deficit.
abc
Leif Eskesen, Prithviraj Srinivas
GDP growth broadly stable in Q4
2011 (27 Mar)
Sri Lanka’s Q4 GDP rose 8.3% y-o-y (vs. 8.4% in
Q3 2011). Services accelerated while agriculture
and industry slowed. Growth is expected to slow
this year due to weaker external demand and the
need to tighten fiscal and monetary policy to
contain inflation and rein in external imbalances.
Facts
Q4 2011 GDP growth eased marginally to 8.3%
y-o-y (vs. 8.4% y-o-y in Q3 2011). On a
sequential basis, GDP growth maintained its
momentum, expanding 2.1% q-o-q sa. This took
growth for 2011 as a whole to 8.3% y-o-y (vs.
8.0% in 2010)
On the supply side, agriculture grew at a slower
clip (2.2% y-o-y vs. 6.2% in Q3 2011) mostly due
to a high base last year when production surged.
Moreover, output dipped on a sequential basis,
mainly owing to poor growth in tea production.
Growth in industry output eased slightly (10.0%
y-o-y vs. 10.8% in Q3 2011 led by mining (19%
y-o-y vs. 19.6% in Q3 2011), construction (14.4%
y-o-y vs. 17.3% in Q3 2011) and utilities (3.7% y-
o-y vs. 7.1% in Q32011). Growth in
manufacturing output, on the other hand, was
unchanged at 7.7% y-o-y).
However, services output picked up pace (8.5% y-
o-y vs. 7.8% in Q3 2011) driven by trade (9.9% y-
o-y vs. 9.5% in Q3 2011), ‘transport &
communication’ (11.2% y-o-y vs. 9.9% in Q3
2011) and financial services (8.8% y-o-y vs. 7.4%
in Q3 2011). ‘Other services’ saw growth hold
broadly steady.
Implications
Growth has steadily risen through 2011 aided by
reconstruction efforts, accommodative policy
settings and the cashing in of the peace dividend.
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 The View
Asia’s Bond Markets
April 2012
Construction and rebuilding efforts will continue
to support growth in 2012. Moreover, rising
incomes will support consumption and
investments. Finally, monetary policy remains
accommodative and will also lend a hand.
However, both monetary and fiscal will have to be
tightened to contain inflation and rein in the wide
trade deficit, thus offering less support than last
year. Weak external demand will also constrain
growth and put pressures on external imbalances.
Based on this, we estimate GDP growth to slow to
6.5% y-o-y in 2012.
Bottom line: Growth held up into the final quarter
of last year, but it is expected to slow this year
due to weak external demand and tighter fiscal
and monetary policy.
Leif Eskesen, Prithviraj Srinivas
IMF makes disbursement from
programme; credit neutral (3 Apr)
Overnight, the IMF agreed to make a
disbursement of USD426.8m following the
seventh review of Sri Lanka’s economic
performance under the current Stand-By
Arrangement (SBA). The final disbursement of
USD426.8m will be made on completion of the
final review after 23 July 2012. The favourable
IMF action follows the authorities moving on
several initiatives to reverse the deteriorating
current account deficit and accelerating fiscal
consolidation.
We retain our view that Sri Lanka US dollar bonds
will remain volatile until there is clear improvement
on the inflation, fiscal and external positions. In
particular, we stick with our view that Sri Lanka’21
has value around the 94 cash price area compared
with the current 100 price. Currently, inflation is
ticking upwards on cutting of energy subsidies and
could become problematic with credit growth
running around 30% y-o-y. To make matters
possibly worse, we could see potentially higher
62
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import goods’ prices negatively effecting domestic
inflation, with the central bank’s diminished FX
reserves making it difficult to defend against greater
currency fluctuation in the near term. By end-
January 2012, FX reserves were down to
USD6.97bn from a peak of USD9.49bn in July 2011
and should drop to USD6bn by end-2012, according
to HSBC Economics.
Inflation containment
Sri Lanka's CPI inflation jumped to 5.4% y-o-y in
March (vs. 2.7% in February). The official core
inflation rose to 4.9% y-o-y (vs. 4.7% in February).
On a sequential seasonally adjusted basis, headline
inflation rose by 3.3% m-o-m (vs. 0.0% in
February). Meanwhile, the official core inflation rose
1.1% m-o-m seasonally adjusted (vs. 0.1% in
February). On a 3m/3m sequential seasonally
adjusted basis, both headline inflation (11.8% vs.
2.3% in February) and core inflation (5.0% vs. 1.6%
in February) rose sharply.
By components and on an annual basis, food
prices dropped 2.6% y-o-y (vs. -4.6% in
February) and were flat m-o-m. In the non-food
category, inflation rose sharply for transport
(30.1% y-o-y vs. 19.6% in February) and utilities
(12.4% y-o-y vs. 8.4% in February). Other
components did not report significant changes in
inflation, although inflation eased for recreation
(4.3% y-o-y vs. 6.1% in February).
Implications
CPI inflation rose drastically due to the sharp
revision in energy prices in February (diesel +38%,
gasoline +9% and electricity at 15-40%). Moreover,
food inflation held steady m-o-m in March and did
not dampen the impact of the fuel price revisions as
it did in February. The direct and indirect impact
from the reduction in energy subsidies is likely to
unfold in the months to come and should keep
inflation levels elevated. Moreover, currency
depreciation will likely impact imported inflation.
 The View
Asia’s Bond Markets abc
April 2012

Chart 1: Inflation rises due to energy price revisions

% y-o -y
30
25
20
15
10
5
0
04 05 06 07 08 09 10 11 12
Core inflation Headline inflation
Source: CEIC

Apart from cost-push pressures to inflation, price Socialist Republic of Vietnam

pressures are likely to build due to credit-fuelled
demand growth, which is likely to increasingly strain
capacity. Private sector credit growth remains
elevated (30% y-o-y in January) due to
accommodative policy settings. Moreover, currency
depreciation has further loosened monetary
conditions.
In response, the central bank will need to push up
policy rates by another 75bp this year to 9.75%, in
our view, to keep inflation pressures in check and
contain external imbalances. A large portion of this
could come during the course of the April-June
quarter, according to Leif Eskesen (HSBC
Southeast Economist).
Dilip Shahani, Leif Eskesen,
Prithviraj Srinivas
Oil shock aside, impact of rate cut on
inflation will be muted (13 Mar)
 Policy rates have been cut 1% due to easing
price pressure
 Domestic oil prices were increased 10% to
reflect international price rises, while the duty
for most energy imports was removed
 However, a favourable base effect coupled
with dampened demand should be enough to
ease inflationary pressure
Don’t worry, prices will still slow
Inflation may become a problem again in Asia
later this year. But, in Vietnam, things are likely
to be different. After last year’s rapid rise, price
pressures are now cooling amid slowing demand

Chart 2: Momentum in headline and core CPI has jumped as a result

% m /m sa
4.0

3.0

2.0

1.0

0.0

-1.0

-2.0
09 10 11 12

Core inflation Headline inflation

Source: CEIC, HSBC

63
 The View
Asia’s Bond Markets abc
April 2012

and falling credit growth. The State Bank of
Vietnam has thus been able to cut rates by 1%.
The cut had been priced in by the market but the
question of whether it will stoke inflationary
pressure and destabilize the dong remains. While
easing policy rates in the midst of a rise in
international oil prices may seem premature, the
cut is unlikely to reverse the downward trend in
Vietnam’s inflation.
Based on our analysis of Vietnam’s monetary
policy, the cut comes as no surprise. The SBV
implements monetary policy in two main ways: 1)
it appears to track core inflation to determine
policy rates; and 2) it uses administrative
measures as the primary tool to target inflation.
Core inflation has eased since its peak at 15.2% y-
o-y in August 2011 to 12.7% in February. The
slowdown of both headline and core inflation plus
the stability of the dong provided scope for the
SBV to cut rates.
Despite today’s cut, inflation should continue to
decelerate to single-digits by year-end for three
reasons: sluggish domestic demand, slow credit
growth and a favourable base effect. Persistently
high inflation in 2011 taught consumers to be
cautious, which will affect their spending this
year. Meanwhile, optically, inflation’s rapid rise
last year means that the base effect is enough to
allow y-o-y inflation to fall. We also do not
expect the rising oil price to significantly have an
impact on inflation in 2012, assuming that oil
prices do not rise above USD140 per barrel.
For the currency, many of the factors that have
concerned us are still there – double-digit
inflation, negative real interest rates and a sizable
trade deficit – but we are seeing improvements.
For now, the risks are still skewed slightly to
further VND weakness, and we forecast USD-
VND at 21,500 by year-end. However, if these
indicators continue to improve, then VND may
start to look more attractive again.
Why oil would not reverse inflation’s trend
As a nation that exports crude oil, Vietnam still had
to import USD9.7bn worth of petroleum in 2011.
This means that when the oil price increases, as it
has recently, Vietnam benefits through the export
channel but suffers on the import side. The recent
rise in prices would require the state to increase the
oil subsidy or pass the higher cost on to consumers.
With the subsidy fund running out, the Ministry of
Finance increased gasoline prices by 10% on 7
March. The rise coincides with the reduction of
policy rates by 1%.

Chart 1. Oil makes up a small percentage of total weight Chart 2. Headline CPI only increases noticeably when the oil
spike is significant and when domestic price rises

40 30
35
30 25
90
25
20
20
15 40 15
10
5 10
0 -10
5
Foodstuffs

Equipments
Housing

Transportation
Garment

Household
Foods &

-60 0
2002 2003 2005 2006 2007 2008 2010 2011
Brent: Crude (%y -o-y ) CPI (% y -o-y 3mlag)
Source: CEIC, HSBC Source: CEIC, HSBC

64
 The View
Asia’s Bond Markets abc
April 2012

Chart 3. Oil import demand has slowed in recent years Chart 4. But higher oil prices have pushed the costs up

12
11,000 130

7 9,000 110

90
7,000
2
70
5,000 50
-3
2004 2005 2006 2007 2008 2009 2010 2011 3,000 30

Imports (Metric ton mn) 2004 2005 2006 2007 2008 2009 2010 2011
Net oil imports (Volum e metric ton m n) Im port Value (USD m n)
Crude: USD/barrel y ear end

Source: CEIC, HSBC Source: CEIC, HSBC

In our view, the rise in oil prices will not secondary effects of higher oil prices will feed
significantly change the direction of headline through in a couple months, the impact will be likely
inflation, which has been trending down. be offset by low demand.
Transportation costs, which we use as a proxy for oil,
Slower domestic demand
account for 8.9% of the total CPI basket. A 10%
More fundamentally, slower demand for loans as
increase in the oil price would therefore have only a
a result of earlier tightening will also reduce
muted direct impact on headline CPI. Additionally,
inflationary pressure. Chart 5 shows that the
the government recently reduced a number of duties
interest rate for the overnight market has been low
of energy imports. On 2 March the Ministry of
as of late, with a spike during the Tet (New Year)
Finance scrapped import taxes on petroleum gases
festivities. We expect this trend to continue for the
(previously 5%), diesel (3%), kerosene (3%) and
rest of the year. This suggests that even though
gasoline (4%). This suggests that looking forward,
the SBV has tried to pump more money to the
unless oil prices continue to climb higher,
economy through the reverse repurchase window,
distributors will incur less cost to importing oil.
demand is low; thus, it will not significantly affect
Moreover, food prices, which make up almost 40%
liquidity in the financial system. Moreover,
of the total basket, have decelerated sharply and
consumption has cooled recently, especially after
would offset the effect of a higher oil price. While
the Tet festivities. Chart 6 shows the deceleration

Chart 5. Loan demand has been low Chart 6. Domestic demand has decelerated recently

45
17
40
15
35
13
11 30

9 25
7 20
5 15
2007 2008 2008 2009 2009 2010 2010 2011 2011 Jan-09 Aug-09 Mar-10 Oct-10 May -11 Dec-11
OMO Rate VNIBOR Retail Sales (YTD %y -o-y )

Source: Reuters, HSBC Source: CEIC, HSBC

65
 The View
Asia’s Bond Markets
April 2012
Chart 7. Even with oil price increases factored in, inflation
would still go down
27
HSBC
22 Forecasts
17
12
7 15
2 5
Nov -07 Oct-08 Sep-09 Aug-10 Jul-11 Jun-12
Headline CPI (% y -o-y ) Core CPI (% y-o-y )
Source: CEIC, HSBC estimates
in retail sales, a proxy for consumption. We
expect both loan demand and private consumption
to be sluggish in 2012.
Strong base effect will bring the rate down
In the next six months a strong base effect, which
reflects the strong 2% m-o-m (seasonally adjusted
[sa]) increase in March-May 2011, will likely bring
inflation down. The inflection point for inflation is
not until November 2012, when we expect the y-o-
y inflation rate to begin to pick up. However,
should loan demand remain low, the currency stay
stable and no significant supply shocks occur, then
headline inflation could even decelerate beyond
November. At this point, we expect the base effect
alone to have a powerful downward effect on y-o-y
inflation readings until then. After that, other
factors, such as electricity and oil price rises, as
well as demand and monetary shocks would
meaningfully affect inflation.
Inflation decelerated to 16.4% y-o-y in February,
compared with 17.3% in January. On an sa basis,
prices slowed to 0.4% m-o-m in February
compared with 0.6% in January. Food inflation
rose 21% y-o-y in February compared with 23%
in January. On the month, food prices decelerated
0.2% m-o-m sa in February compared with 0.5%
in January. The sharper-than-expected
deceleration in prices suggests that the filtering
66
abc
Chart 8. Food makes up 40% of the basket and its prices are
falling fast
%3m/3m saar
65
55
45
35
25
-5
Jul-07 Jun-08 May -09 Apr-10 Mar-11
Headline Core Food
Source: CEIC, HSBC
through of tightening policy (Resolution 11), the
easing of demand after Tet and the base effect are
all working together to keep price pressures low.
And we still expect prices to decelerate to single-
digits this year.
Weaker credit growth more important
Before we discuss the policy rate easing, we
should look at credit growth in Vietnam, a more
important measure of liquidity conditions. Credit
grew 10.9% in 2011, compared with 27.7% in
2010. The government capped credit growth at
20% in 2011, suggesting that demand was low in
2011 given that actual growth was lower than the
cap. For this year, the cap is 17%, 15%, 8% and
0% for different banks. The growth for loans for
investment and trading in stocks and real estate as
well as consumer loans is capped at 16%. Given
the lacklustre demand in the market, the cap is
unlikely to be reached.
The easing of interest rates then would only
meaningfully affect the domestic economy if it
ultimately increases demand. The open market
operations (OMO) rate was lowered to 13% from
14% and the refinance rate to 14% from 15%. The
government also decreased the deposit cap on
interest rates to 13% from 14%. Both policy
moves are part of the SBV’s attempt to respond to
complaints from consumers concerning high
 The View
Asia’s Bond Markets
April 2012
Chart 9. Rates will decline gradually with inflation
27
22
17
12
2
Feb-07 Aug-07 Feb-08 Aug-08
OMO Rate
Source: Reuters, CEIC, HSBC
interest rates. With the overnight interest rate
being significantly lower than the OMO rate and
expected to remain so for the rest of the year, the
move is unlikely to significantly change domestic
demand.
As such, we reiterate our call that inflation will
continue its downward trend this year. This,
however, does not imply that Vietnam’s battle
with inflation is over indefinitely, as high inflation
in 2011 exposed structural bottlenecks in the
economy that would need to be addressed. In the
short term, dampened demand, lower credit
growth and a favourable base effect should be
enough to keep price levels more stable this year.
Once the shock of a 10% increase in oil prices
subsides and the benefits of energy tax reductions
filter through, consumers will breathe a sigh of a
relief as prices decelerate this year.
Trinh Nguyen
FX outlook better, but still wary (13 Mar)
VND – waiting for the tide to turn
We have long been of the view that VND still
faces downside risks and have been calling for
further depreciation of USD-VND to 21,500 by
the end of 2012. This would be largely in line
with what the SBV recently stated was its view
abc
F eb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
Headline (% y-o-y ) Core (% y -o-y )
for the dong in 2012 – when Governor Nguyen
Van Binh stated that he saw no more than 2-3%
depreciation this year. Many of the factors that
have worried us on the VND remain – double-
digit inflation, negative real interest rates and a
sizable trade deficit – but we are seeing
improvements in these indicators. For the
moment, the risks are still skewed slightly to
further VND weakness. However, we are
watching these indicators and if we continue to
see improvement, then VND may start to become
more attractive again.
Interest rate cuts – slowly does it
Inflation has come off notably since its peak in
August last year, down from 23% to 16.4%, and
our economists forecast this to continue moving
lower. The risk, from our perspective, is that rate
cuts come too soon and too fast, and that investors
both domestically and abroad start to fear the re-
emergence of the inflation-depreciation cycle.
Historically, negative real interest rates, or falling
real interest rates, have been associated with
weakening pressure on the VND (Chart 10). In
this cycle, the positive news has been that real
rates have narrowed from being highly negative.
This should limit the disincentives of holding
VND instead of USD. Provided interest rates
don’t fall too fast, and inflation continues to drop,
67
 The View
Asia’s Bond Markets abc
April 2012

Chart 10. VND has faced stronger depreciation pressure when real interest rates have been negative or falling

Real rates fall, VND VND stabilisation

10 15000
depreciation starts as rates rise
Real rates turn negativ e; 16000
5
depreciation persists 17000
0 18000

-5 19000

20000
-10
21000

-15 22000
Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Real OMO rate USD-VND, RHS, inv .

Source: Bloomberg, HSBC

then the real rate environment should be more
positive for VND.
The volatility in gold prices has also limited the
onshore demand for the precious metal, which has
been seen as a good alternative store of value,
given the history of the depreciating VND.
Authorities have also redoubled their efforts to
clamp down on gold trading and therefore on gold
imports. The rising inverse correlation seen late
last year between gold and VND has declined
notably in recent months (Chart 11). With less
demand onshore to hold gold for investment or
store of value purposes, some of the pressures that
had previously been weighing on VND have been
removed.
Flow picture looking more positive
One of the notable improvements for VND has
come though the narrowing of the trade balance.
The overall picture has been improving for some
time, with a small trade surplus recorded in
January, which was only the second monthly
surplus in three years. The previous VND
depreciation has no doubt had something of an
impact, but so too has the fact that Vietnam

Chart 11. USD-VND and gold less correlated now Chart 12. Improvement in trade and robust FDI has boosted
underlying flows

90day rolling correlation betw een Gold and 4 USD bn, 3mma
40%
USD-VND 3
30% 2
1
20%
0
10% -1
0% -2
-3
-10%
Jan-09 Oct-09 Jul-10 Apr-11 Jan-12
-20%
FDI Trade bal Net
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Source: Bloomberg, HSBC Source: CEIC, Bloomberg, HSBC

68
 The View
Asia’s Bond Markets
April 2012
exports a lot of primary goods with stable
underlying demand, such as rice and fish produce,
which means it has suffered less from the global
slowdown.
Meanwhile, FDI flows have remained relatively
robust. One thing to watch will be investment
from Japan. Since the earthquake in 2011 affected
much Japanese production, firms have been
looking to diversify their production lines to other
Asian centres. Thailand had been a key
destination for such investment, but with the
floods late last year affecting Japanese companies,
many are being forced to consider more
diversification, and Vietnam could benefit.
Indeed, February’s data shows more than
USD800m in FDI from Japan to Vietnam. If
similar flows continue then it will provide a useful
source of foreign exchange to the country.
Finally, from a capital flow perspective, there has
also been an improvement. Ytd flows into the
equity market have been around USD500m (Chart
13). As the inflation-growth outlook improves,
onshore asset markets should start to look more
attractive. At the same time, with a lower
depreciation risk expected, investors are likely
looking at the onshore markets with a more
favourable risk-reward. With western central
banks priming the printing presses, excess funds
Chart 13. Capital flows have also improved this year
2.5
USDbn
2.0
1.5
1.0
0.5
0.0
Jan-09 Jan-10 Jan-11
VN foreign equity flow s, cumulativ e
Source: Bloomberg, HSBC
abc
will continue to flow to emerging markets. If
broader risk sentiment returns, then investors may
start to look more closely at markets like Vietnam.
USD borrowing rising giving a shorter-term
VND boost
Anecdotal evidence suggests that onshore there
has been good demand to borrow in USD, given
the low rates compared to VND loan rates. This
has led to spot selling in USD-VND and the
currency has been trading in the middle of the
daily trading band (Chart 14). On the plus side
this should have allowed the SBV to come into
the market to pick up USD to boost its ailing
reserves. However, we would be a little wary of
using this development as an indicator of long-
term strength. As these loans roll off in 3-6
months, there could be increased pressure on
USD-VND spot on the other side, as USD is
needed to repay loans. This would particularly be
the case if export earnings are not as strong as
expected, and exporters need to repay the loans
with dollars bought in the spot market. Also, with
VND rates slowly coming down, there will be less
incentive to borrow in USD in the future too,
which should make this a shorter-term factor,
rather than a long-term indicator for VND.
Moreover, the SBV recently announced that
importers would not be able to take out foreign
currency loans, unless they already have foreign
Chart 14. USD-VND trading in middle of the band allows SBV
to build reserves
21800
21400
21000
20600
20200
Jan-12
Mar-11 Sep-11 Mar-12
USD-VND Band Offsh fix
Source: Bloomberg, Reuters, HSBC
69
 The View
Asia’s Bond Markets abc
April 2012

currency for repayment, effective 2 May 2012.

They would therefore need to source their USDs
in the spot market, which could add to VND
weakening pressure.

Still too many ifs and buts for now

So while the picture for VND has no doubt
improved, particularly in recent months, we
remain wary. There are still too many risks to the
weak side for now. However, if the improvements
in the trade balance and real interest rates can
become more sustainable, then VND would likely
start to look more attractive. We stick to our call
of further depreciation, but then see USD-VND
stable at 21,500 in the medium term.

Dominic Bunning

70
The View
Asia’s Bond Markets abc
April 2012

Credit Research
 China Property

71
 The View
Asia’s Bond Markets abc
April 2012

China Property
 Mixed signals from FY2011 result announcements
 USD bond supply risk dissipated post Mar-12 bond price
correction
 2Q12 strategy – Sell COGARD, EVERRE on fundamental
concerns; LNGFOR, SHUION on valuation; Buy YUZHOU’15

Mixed signals
At a crossroad
China property developers all released their
FY2011 earnings by end March 2012. Here we
outline the key themes observed from the earnings
announcement.
Positives
 Cash collection ratios of contracted sales are
better than our estimates. For full year 2011,
contracted sales cash collection ratios reached Keith Chan
Analyst
78.5% on average versus 64.0% in the first The Hongkong and Shanghai
Banking Corporation Limited
half of 2011. 18 out of 20 developers
+852 2822 4522
recorded improvement in cash collection in keithkfchan@hsbc.com.hk
2H11 versus 1H11 (see Table 1).
 Developers are scaling back their expansion
to preserve liquidity. Some are having smaller
budgets on construction in 2012 versus 2011
(eg Powerlong, Glorious); while most are
slowing land acquisitions (see Figure 2).

1. Cash collection rates improved in 2H11 versus 1H11

Developer Ticker Cash collection for 2011 contracted 2011 cash 1H2011 cash 2H11 versus
2011 contracted sales (RMBm) collection ratio collection ratio 1H11
sales (RMBm)
1 Powerlong PWRLNG 4,800 5,481 87.6% 64.4% Improves
2 Guangzhou R&F GZRFPR 26,120 30,040 87.0% 65.0% Improves
3 Country Garden COGARD 36,700 43,200 85.0% 84.7% Improves
4 Yuzhou YUZHOU 3,647 4,297 84.9% 82.2% Improves
5 Glorious GLOPRO 11,000 13,000 84.6% 90.1% Deteriorates
6 Shimao SHIMAO 25,700 30,700 83.7% 70.0% Improves
7 China Resources Land CRHZCH 29,880 35,880 83.3% 75.6% Improves
8 Longfor LNGFOR 31,800 38,265 83.1% 81.5% Improves
9 KWG KWGPRO 9,447 11,447 82.5% 70.3% Improves
10 Central China CENCHI 6,568 8,164 80.5% 50.2% Improves
11 Kaisa KAISAG 12,300 15,300 80.4% 74.6% Improves
12 Evergrande EVERRE 64,393 80,393 80.1% 60.6% Improves
13 China Overseas CHIOLI 52,900 70,000 75.6% 43.5% Improves
14 Shui On SHUION 8,000 10,700 74.8% 80.0% Improves
15 Franshion FRANSH 7,300 9,800 74.5% 74.2% Improves
16 Sino-Ocean SINOCE 20,000 27,005 74.1% 65.0% Improves
17 Yanlord YLLG 5,370 7,370 72.9% 51.8% Improves
18 Agile AGILE 19,000 31,520 60.3% 51.0% Improves
19 Hopson HPDLF 5,835 9,900 58.9% 49.1% Improves
20 Renhe Commercial RNHEF 1,000 4,000 25.0% 31.6% Deteriorates
381,760 486,462 78.5% 64.0%
Source: Companies, HSBC

* This note was previously published on 5 April 2012.

72
 The View
Asia’s Bond Markets abc
April 2012

2. Less is more: Fewer land acquisitions leads to more 3. Door of capital markets re-opened to China property
financial flexibility developers

140,000 10,000
120,000
8,000
100,000
80,000 6,000
RMBm

60,000

USDm
4,000
40,000
20,000 2,000
0
0
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12

2004
2005
2006
2007

2008
2009
2010
2011

2012
Know n land acquisitions for dev elopers in USD univ erse USD bonds Sy nthetic RMB/ Offshore CNH CB

Source: HSBC Source: HSBC

 Debt capital market fund raising activities in although the asset turnover ratios in 2H11/ 2011
March 2012 helped developers in shoring up are still better than in 2008 (see Figure 4).
their balance sheet liquidity. Agile and KWG
 While developers’ cash on hand is better than
raised USD750m and USD400m respectively
our estimates, their increases in short-term
from issuance of 5-year USD high-yield
debt exceed our expectation. Cash to short-
bonds; New World China Land raised
term debt ratio in 2H11 deteriorated to a level
RMB2.8bn (USD445m) from the issuance of
similar that to 2H08 (see Figure 5).
3-year CNH bond, while China Overseas
Grand Ocean (COGO) raised HKD2.2bn  Contracted sales momentum improves in
(USD283m) from the issuance of convertible March 2012, but we doubt its sustainability.
bonds (see Figure 3). The sales recovery trend is most noticeable in
provincial capitals and first-tier cities.
Negatives
Shimao and Yanlord’s good March 2012
 Asset turnover measured by contracted sales as sales are good reflection of the trend.
a proportion of average total assets is
deteriorating on slower contracted sales in 2H11,

4. Asset turnover declined on weak contracted sales 5. Cash-to-short term debt ratio deteriorates sharply in 2H11

50% 2.50 100

40% 2.00 80

1.50 60
RMBbn

30%
20% 1.00 40

10% 0.50 20

0% 0.00 0
2H07
1H08
2H08
1H09
2H09
1H10
2H10
1H11
2H11

2H11e

2007 2008 2009 2010 2011 1H11 2H11

Asset Turnov er (contracted sales/ av erage assets) Cash ST Debt Cash/ ST Debt

Note: 20 developers included in our analysis Note: 10 developers included in our analysis – Agile, Central China, Country Garden,
Guangzhou R&F, Hopson, KWG, Road King, Shimao, Sino-Ocean and Yanlord
Source: Companies, HSBC Source: Companies, HSBC

73
 The View
Asia’s Bond Markets abc
April 2012

6. HK/ Singapore-listed China property developers are targeting 10% growth in 2012 contracted sales versus 2011…targets look
stretched, in our view
Company 2011 contracted sales (RMBm) 2012 contracted sales target (RMBm) Y-O-Y change
SOHO China 10,900 23,000 111.0%
Shanghai Industrial Urban Development 2,699 4,878 80.7%
Hopson 9,900 16,500 66.7%
Yanlord 7,370 12,000 62.8%
Road King 5,634 7,900 40.2%
Minmetals Land 3,660 5,000 36.6%
SPG Land 3,207 4,200 31.0%
Shenzhen Investment 4,586 6,000 30.8%
China Overseas Grand Ocean 6,250 8,130 30.3%
Sunac China 17,700 23,000 29.9%
Poly (HK) 15,800 20,000 26.6%
Greentown 32,800 40,000 22.0%
Shanghai Forte* 9,417 11,000 16.8%
Yuzhou Properties 4,297 5,000 16.4%
Shui On Land 10,700 12,000 12.1%
China Resources Land 35,880 40,000 11.5%
Yuexiu Property 9,054 10,000 10.4%
Central China Real Estate 8,164 8,900 9.0%
Beijing Capital Land 11,040 12,000 8.7%
Kaisa 15,297 16,500 7.9%
Powerlong 5,569 6,000 7.7%
Shimao 30,700 33,000 7.5%
C C Land 6,378 6,807 6.7%
Guangzhou R&F 30,040 32,000 6.5%
KWG Property 11,447 12,000 4.8%
Fantasia 7,005 7,200 2.8%
Longfor 38,265 39,000 1.9%
Sino-Ocean 26,670 27,000 1.2%
Aoyuan 5,016 5,000 -0.3%
Country Garden 43,200 43,000 -0.5%
Evergrande 80,393 80,000 -0.5%
China SCE 4,567 4,500 -1.5%
Agile 31,520 31,000 -1.6%
Glorious 13,320 13,000 -2.4%
China Overseas 70,813 65,000 -8.2%
629,258 690,515 9.7%
* 100%-owned subsidiary of Fosun International (656.HK)
Note: USD/ CNH/ Synthetic bond issuers highlighted in grey
Source: Companies, HSBC

7. Recovery in March contracted sales not very meaningful – sustainability is the key

120% 106%
Contracted sales target completion rates
100% 92%
90%
81% 82%
69%
80% 77%
60% 68%
52% 56%
60% 44%
41% 48%
40% 20% 34% 35%
14% 29% 27%
19% 17%
20% 12% 10%

0%
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2011 2012

Source: Companies, HSBC

74
 The View
Asia’s Bond Markets abc
April 2012

8. March 2012 – month of bond price correction for China property

4
2
0
-2
-4
-6
-8
-10
RNHEF'16
RNHEF'15
SPGL'16
PWRLNG'15
SHIMAO'16
GLOPRO'15
CENCHI'15
EVERRE'15
SHIMAO'17
GZRFPR'16
AGILE'17
COGARD'18
YUZHOU'15
COGARD'17
COGARD'14
AGILE'17N
CSCHCN'16
FRANSH'21
KAISAG'15
LAIFNG'14
HPDLF'12
COGARD'15
SHIMAO'18
YLLG'17
ZENDA'12
KWGPRO'17
SINOCE'49
AGILE'16
HPDLF'16
SHANG'13
SHUION'15
KWGPRO'17
LNGFOR'16
NECHIN'14
KWGPRO'16
CSTGR'12
YLLG'18
ROADKG'12
ROADKG'15
ROADKG'14
March 2012 change in bond price

Note: RNHEF’15 and ’16 dropped 18-19 points in March 2012

Source: HSBC

USD bond supply risk Trading calls in 2Q12

dissipates on price correction  Buy YUZHOU’15
After sizeable rallies in January and February
Our top Buy trading call in the China property
2012, China property high-yield bonds dropped
high-yield space in 1Q12 is Yuzhou Properties’
2.5 cash points on average in March 2012 (see
YUZHOU’15, which we believe offers attractive
Figure 8). The correction is driven by profit taking,
risk-reward to investors at 18% yield (please see
new issuance (Agile, KWG) as well as weakening
ACT dated 23 March 2012 for further analysis).
macro backdrop, in our view.
 Sell COGARD’15, ’17, ’18, EVERRE’15
With supply risk of Agile out of the gate, we
believe supply risk of BB-rated bonds has We have fundamental concerns on the higher
dwindled as Longfor is in the process of working capital needs of Country Garden and
arranging offshore term loans of size USD300m, Evergrande given their weaker ability in securing
according to Bloomberg. Country Garden will construction loans; as well as intensifying
be more price sensitive with regards to bond competition in lower-tier cities. Reiterate Sell
issuance post USD280m top-up share placement, calls on COGARD’15, ’17, ’18 and EVERRE’15.
in our view. The more likely issuance candidate is
 Sell SHUION’15, LNGFOR’16
Franshion Properties, which had mandated
investment banks to conduct fixed income Shui On’s SHUION’15 and Longfor’s
investor road show, according to Bloomberg. LNGFOR’16 are yielding less than 10%, which
we believe is stretched in relative value terms.
Among the higher-yielders, Central China is
Reiterate Sell calls on SHUION’15 and
conducting a fixed income investor road show for
LNGFOR’16.
SGD bond issuance; Evergrande and Shimao
(13% yield) denied bond issuance speculation;  Hold AGILE’16, ’17, ’17N
while Glorious, Hopson and Kaisa (15-17%
We take off our Sell calls on Agile as supply risk
yield) have limited chance in tapping the bond
from the name is out of the gate.
market at current yield levels, per our estimate.

75
76

9. China property developers – 2012 cash flow projections

April 2012
Asia’s Bond Markets
The View
AGILE CENCHI CHIBEI CHINSC CHIOLI COGARD EVERRE FRANSH GLOPRO GZRFPR HPDLF KAISAG KWGPRO LNGFOR PWRLNG SHIMAO SHUION SINOCE YLLG YUZHOU
RMBm 3383.HK 832.HK 1109.HK 1966.HK 688.HK 2007.HK 3333.HK 817.HK 845.HK 2777.HK 754.HK 1638.HK 1813.HK 960.HK 1238.HK 813.HK 272.HK 3377.HK YLLG.SP 1628.HK
Cash sales - collection for 18,687 7,160 33,311 3,735 17,100 36,530 64,078 10,449 11,000 27,824 9,725 13,265 9,903 32,411 5,255 27,625 9,000 19,996 8,744 4,244
2012 contracted sales
Cash sales - collection for 10,000 1,596 6,000 800 49,121 6,500 16,000 2,500 2,000 3,920 4,065 3,000 2,000 6,500 681 5,000 2,700 7,005 2,000 650
previous contracted sales
Cash sales - 2012 28,687 8,756 39,311 4,535 66,221 43,030 80,078 12,949 13,000 31,744 13,790 16,265 11,903 38,911 5,936 32,625 11,700 27,001 10,744 4,894
Net rental income 0 0 1,986 0 0 0 0 2,000 0 0 0 0 0 0 180 945 815 0 0 0
Construction cost (16,000) (5,522) (22,000) (2,500) (24,390) (22,000) (41,000) (3,700) (3,500) (11,000) (7,000) (8,000) (3,300) (16,000) (3,500) (12,500) (5,500) (14,000) (7,600) (2,800)
Land premium (200) (380) (13,000) (250) (4,065) (2,700) (11,000) (4,000) (1,000) (4,400) (1,300) (2,600) (1,000) (6,500) (800) (5,900) (5,500) (5,000) (2,300) 0
SG&A (2,600) (658) (4,200) (300) (1,442) (2,500) (4,400) (950) (677) (2,036) (1,671) (1,000) (800) (1,700) (767) (2,252) (995) (2,000) (535) (300)
Taxes (7,000) (1,610) (7,500) (700) (8,278) (6,000) (9,000) (1,295) (1,625) (3,968) (2,500) (2,000) (1,488) (5,500) (742) (4,078) (1,463) (4,000) (1,900) (612)
Interest expense (2,000) (678) (3,108) (480) (1,544) (2,500) (5,400) (1,229) (2,000) (2,292) (2,000) (1,500) (1,370) (1,800) (825) (3,300) (2,000) (4,000) (1,300) (600)
Dividends (1,800) (200) (1,235) (92) (2,632) 0 (2,900) (684) 0 (1,920) 0 0 (636) (902) (243) (1,200) (683) (1,422) 0 (78)
Free operating cash flows (913) (292) (9,746) 213 23,870 7,330 6,378 3,091 4,198 6,128 (681) 1,165 3,309 6,509 (762) 4,340 (3,625) (3,421) (2,891) 504
(FOCF)
Offshore financing 4,725 320 6,300 0 2,835 2,520 0 0 (1,875) 0 (2,205) 0 2,520 1,951 0 0 4,243 0 0 0
Onshore financing 0 0 0 0 0 0 0 0 0 0 0 0 (1,600) 0 0 0 0 0 0 0
Unrestricted cash on hand 4,684 3,256 12,494 1,887 15,593 7,744 20,082 9,938 1,021 6,126 2,129 3,945 4,025 14,121 1,411 12,313 3,523 13,977 4,274 1,440
(end Dec-11)
Unrestricted cash on hand 8,496 3,284 9,048 2,100 42,298 17,594 26,460 13,029 3,344 12,254 (758) 5,110 8,254 22,581 649 16,653 4,140 10,556 1,383 1,944
(end Dec-12)
Source: HSBC

abc
 The View
Asia’s Bond Markets abc
April 2012

10. China property HY bonds – Change in March in cash price and yield terms
_________Price __________ _________ Yield__________
30-Mar-12 29-Feb-12 Change 30-Mar-12 29-Feb-12 Change (bp) YTD change in cash price
RNHEF'16 65 84 -19.00 28.33% 18.90% 943 -10
RNHEF'15 66 84 -18.00 27.75% 18.60% 915 -9
SPGL'16 77 83 -6.00 22.53% 19.70% 283 10
PWRLNG'15 83 88 -5.00 20.92% 18.50% 242 9
SHIMAO'16 86.5 91 -4.50 11.86% 10.50% 136 8.5
GLOPRO'15 89.5 94 -4.50 17.08% 15.20% 188 15.5
CENCHI'15 98.5 102.5 -4.00 12.79% 11.40% 139 10.5
EVERRE'15 99 102 -3.00 13.42% 12.20% 122 19
SHIMAO'17 89 92 -3.00 12.54% 11.70% 84 13
GZRFPR'16 91 94 -3.00 13.85% 12.80% 105 16
AGILE'17 93.75 96.5 -2.75 10.50% 9.80% 70 10.75
COGARD'18 99.25 101.75 -2.50 11.30% 10.70% 60 11.25
YUZHOU'15 87.75 90 -2.25 18.18% 17.20% 98 15.75
COGARD'17 100.25 102.5 -2.25 11.17% 10.60% 57 11.25
COGARD'14 105 107.25 -2.25 9.38% 8.50% 88 9
AGILE'17N 97.75 99.903 -2.15 10.47% 9.90% 57 -2.153
CSCHCN'16 86 88 -2.00 18.83% 17.90% 93 16
FRANSH'21 89 91 -2.00 8.52% 8.20% 32 10
KAISAG'15 96 98 -2.00 15.18% 14.30% 88 11
LAIFNG'14 99 101 -2.00 9.69% 8.60% 109 1
HPDLF'12 96 98 -2.00 15.56% 11.20% 436 1
COGARD'15 101.5 103 -1.50 9.95% 9.50% 45 12.5
SHIMAO'18 91.5 93 -1.50 13.10% 12.70% 40 10.5
YLLG'17 89.5 91 -1.50 12.34% 11.90% 44 10.5
ZENDA'12 98 99.5 -1.50 22.53% 11.80% 1,073 3
KWGPRO'17N 98 99.112 -1.11 13.82% 13.50% 31 -1.112
SINOCE'49 90 91 -1.00 13.50% 12.50% 100 16
AGILE'16 100.5 101.5 -1.00 9.83% 9.60% 23 9.5
HPDLF'16 87 88 -1.00 16.49% 16.00% 48 19
SHANG'13 87 88 -1.00 24.69% 21.00% 369 3
SHUION'15 101.5 102.375 -0.88 9.13% 8.81% 32 -0.875
KWGPRO'17 94.5 95 -0.50 13.98% 13.80% 18 14.5
LNGFOR'16 101 101.5 -0.50 9.20% 9.10% 10 9
NECHIN'14 102.25 102.5 -0.25 8.63% 8.60% 3 5.25
KWGPRO'16 98 98 0.00 13.41% 13.40% 1 16
CSTGR'12 88 88 0.00 36.59% 33.20% 339 2
YLLG'18 90 89.5 0.50 13.09% 13.20% (11) 12
ROADKG'12 100 99.25 0.75 2.78% 6.70% (392) 3
ROADKG'15 91.25 90 1.25 12.71% 13.10% (39) 10.25
ROADKG'14 92 90.5 1.50 11.99% 12.70% (71) 8
Source: HSBC

11. China property HY bond space at a glance

30.0 Yield (ask) (%) RNHEF 16 SHANG 13

RNHEF 15
25.0
SPGL 16 PWRLNG 15 ZENDA 12
FTHDGR 15 CSCHCN 16
20.0 GRNCH 13 CHINPR 14
EVERRE 15 KWGPRO 17N GLOPRO 15
ROADKG 15SHIMAO 18 KWGPRO 17 YUZHOU 15 HPDLF 16
15.0 GZRFPR 16
AGILE 17N ROADKG 14SHIMAO 17 KWGPRO
YLLG 18
16 KAISAG 15 SINOCE 49
AGILE 17 LNGFOR 16 CENCHI 15 HPDLF 12
SHIMAO 16 YLLG 17
10.0 COGARD 18
AGILE 16 COGARD 17 LAIFNG 14 NECHIN 14
FRANSH 21 COGARD 15
5.0 COGARD 14
ROADKG 12
0.0
BB+ BB BB- B+ B B- CCC+ CCC NR

Source: HSBC

77
 The View
Asia’s Bond Markets abc
April 2012

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78
The View
Asia’s Bond Markets abc
April 2012

Company News & Analysis

 Financial Institutions  Corporates
China Banks 81 Asia-Pacific Thermal Coal 93
BOC Hong Kong 82 Berau Coal Energy/ Bumi Resources 94
Bank of India 84 Berau Coal Energy 95
CITIC Bank International 84 Bumi Resources 97
Chong Hing Bank 86 Central China Real Estate 99
DBS Bank (Aa1/AA-/AA-) 88 China Overseas Land & Investment Ltd 100
Dah Sing Banking Group 89 China Resources Land 101
Union Bank of India 91 China Resources Power 102
China SCE Property 102
ENN Energy 104
Evergrande Real Estate 105
Franshion Properties 106
Glorious Property 107
Henderson Land Development 108
Hopson Development 111
Hutchison Whampoa 113
Indika Energy 116
Kaisa Group 118
Kerry Properties 119
Longfor Properties 120
Powerlong Real Estate 121
Renhe Commercial 122
Shanghai Industrial Urban Development (Neo-China) 123
Shimao Property 124
Shui On Land 125
Sun Hung Kai Properties 127
Vedanta Resources 128
The Wharf (Holdings) 129
Wheelock and Company 132
Yanlord Land Group 134
Yuzhou Properties 134

79
 The View
Asia’s Bond Markets
April 2012
Financial Institutions
China Banks
Minor adjustment of loan-to-deposit
ratio by CBRC for the Big 4 banks;
credit neutral (15 Mar)
China’s bank regulator CBRC adjusted the target
and upper limit of the loan-to-deposit ratio for the
Big 4 banks, as part of the objective setting process
in March every year, as reported by 21cbh. In our
view, this adjustment, rather than a relaxation of the
loan-to-deposit ratio requirement to push for more
lending, is essentially a reflection of the regulators’
pragmatic approach to adapt to the reality of
increasing deposit mobility/outflow faced by the Big
4 banks.
More specifically, CBRC raised the target loan-to-
deposit ratio for ICBC and CCB to 63% (from
62%) and 70% (from 68%), respectively. On the
other hand, CBRC cut the ratio slightly for ABC to
57% and kept the ratio for BOC unchanged at
72%. The upper limit of the loan-to-deposit ratio
was set at 64% for ICBC, 72% for CCB, 59% for
ABC, and 74% for BOC. The upper limit is
generally 1-2% higher than the target ratio.
Different from the 75% loan-to-deposit ratio limit
set for the banking system, the Big 4 banks (i.e.,
ICBC, CCB, ABC, BOC) enjoy a differentiated set
of regulatory loan-to-deposit ratio requirements
(Fig.1).
Fig.1 Target and upper limit of loan-to-deposit ratio set by CBRC
ICBC
Target 63%
Upper limit 64%
Source: 21cbh
80
abc
The adjustment is not significant in magnitude, and Devendran Mahendran
Analyst
is fundamentally different from 2009 when the The Hongkong and Shanghai
Banking Corporation Limited
loan-to-deposit ratio requirement was temporally
+852 2822 4521
suspended to encourage banks’ lending. This move devendran@hsbc.com.hk
is essentially an adaptation to the reality that the Yi Hu
Analyst
deposit base has been increasingly volatile and has The Hongkong and Shanghai
Banking Corporation Limited
added difficulty for the banks to meet the required
+852 2996 6539
ratio. Low deposit rates have destabilised banks’ yi.hu@hsbc.com.hk
deposit base and diversified household/companies’
savings into alternative investment channels.
Continuously requiring the same level of loan-to-
deposit ratio by the regulator will no doubt
intensify deposit competition between banks and
funding instability in the banking system. As of the
first two weeks in March, new deposits in the Big 4
banks were only RMB47bn, according to 21cbh.
Both CCB and BOC have witnessed large-scale
deposit outflows.
As we have articulated previously, there has been
greater volatility in the deposit trends since 2011.
Accordingly, we have been focusing on China
banks’ funding conditions over the past year, as
funding stability has been the key strength of the
China banking system in the past to extend new
loans (including rolling-over non-performing
loans). For the banking system as a whole, CBRC
vice chairman has reiterated 75% as the ‘ceiling’
loan-to-deposit ratio requirement, and commented
that CBRC has been studying new performance
CCB ABC BOC Banking system
70% 57% 72%
72% 59% 74% 75%
 The View
Asia’s Bond Markets
April 2012
measures to constrain banks’ deposit competition.
However, as the deposit rates remain low and
banks’ margin is still protected by rate regulation
(i.e., cap on the official deposit rate and floor on the
lending rates), we believe deposit competition and
mobility will continue for the time being. Note that
as per our visit to some local bank branches in
mainland China, the yield offered on banks’ low-
risk wealth management products was around 5%,
compared to the 3.5% official deposit rate.
Yi Hu, Devendran Mahendran
BOC Hong Kong
FY11 results showed margin
improvement and signs of asset
quality deterioration; credit/spread
neutral (30 Mar)
BOCHK FY11 results
BOC Hong Kong reported net profits for FY11 of
HKD20.4bn (USD2.6bn), a growth of 26% y-o-y.
Excluding the recovery of Lehman minibond
collateral (HKD2.8bn), underlying profits grew by
8.6% y-o-y. The improvement was driven by
higher net interest income (+17%) on the back of
a 32% expansion in interest-earning assets.
Overall profitability remains good, with ROAA of
1.2% for FY11.
Net interest margins improved to 1.44% in 2H11
from 1.21% in 1H11, thanks to better deployment
of RMB funds, especially in the interbank market,
and the introduction of RMB fiduciary account,
which reduced the diluted effect of RMB funds on
margins. Excluding the effect of RMB clearing
function, the adjusted NIM improved modestly to
1.51% in 2H11 from 1.48% in 1H11. However,
the improvement trend in margins may not be able
to continue, as the bank sees weaker loan demand
and a slowdown in economic growth this year,
despite a pick-up in mortgage loans.
Asset quality remains benign, with the gross NPL
ratio of 0.1% and the loan loss coverage ratio of
abc
399%. However, overdue loans saw a jump of
45% h-o-h. Newly increased overdue loans
mainly came from property investment and
mortgage, the exposure to which, however, is
highly collateralised. The bank set net provisions
of HKD476m in 2H11 versus HKD30m in 1H11
and a write-back in FY10. New impairment
allowances were mainly charged on loans to trade
finance and loans for use outside HK, which is not
surprising to us, given the deteriorating external
environment and the weaker operating
performance of corporates in mainland China.
Note that these are also the two areas we started to
be cautious on since 2010.
The bank’s capital ratios remain one of the
strongest in the region, with total CAR and tier-1
ratio of 16.9% and 12.5% in FY11 versus 16.1%
and 11.3% in FY10. This improvement has
benefitted from the adoption of IRB, which
essentially reduced risk-weight of certain assets.
On a sequential basis, tier-1 ratio declined by
36bps due to the balance sheet expansion.
BOC FY11 results
BOC HK’s parent Bank of China (BOC) reported
net profits of RMB124bn (USD20bn) for FY11, up
19% y-o-y, thanks to higher net interest income on
the back of margin expansion. Loan growth was
12% y-o-y, as the bank was constrained by a higher
loan-to-deposit ratio (70%) and tighter liquidity.
NPLs and the NPL ratio are roughly unchanged on
a sequential basis, with a gross NPL ratio of 1.0%
and a loan loss coverage ratio of 221%. However,
special-mention loans jumped by 32% h-o-h, and
accounted for 3.03% of total loans compared to
2.34% six months ago. This may lead to higher
loan loss provisions going forward. Total CAR and
tier-1 ratio were 12.97% and 10.07% at end-FY11,
respectively, an improvement of 10bps q-o-q.
Investment recommendation
BOCHK has EUR660m outstanding subordinated
loans to its parent Bank of China, which are
81
 The View
Asia’s Bond Markets abc
April 2012

callable in June 2013 (i.e., repayable at the option
of the borrower). We think the likelihood of
issuing sub-debt to replace the loans cannot be
excluded, despite the low cost of the loans, which
is 6m Euribor + 85bps for first five years and 6m
Euribor + 135bps thereafter if not paid. Note the
issue of BCHINA 2020 was to repay USD2.5bn
subordinated loans to its parent Bank of China.
In addition, the bank’s management has indicated
strong loan demand in USD and the strategy to
grow USD deposits. We think if the USD bond
market is favourable and deposit competition
remains fierce, the bank may come to the market to
issue senior bonds.
We have a Neutral long-term recommendation on
BOC HK, thanks to its stable credit metrics and
leading position in Hong Kong. An upside risk is
better-than-expected interest margin expansion,
while a downside risk is linked to asset quality
deterioration. We have a hold call on the senior
BCHINA 3.75% 2016 and the sub-debt BCHINA
5.55% 2020, which are currently trading at 2.7%
and 4.6% (bid), respectively. However, as the bonds
have been traded as China sovereign proxy, their

BOC Hong Kong – consolidated financial statements for FY11

Year to Dec (HKDm) 2010 2011 Y-o-Y change
Income statement
Interest income 23,449 31,931 36.2%
Interest expense (4,715) (9,952) 111.1%
Net interest income 18,734 21,979 17.3%
Other operating income 8,774 8,867 1.1%
Operating income 27,508 30,846 12.1%
Operating expenses (9,584) (7,862) -18.0%
Pre-provision profits 17,924 22,984 28.2%
Net charge of impairment allowances 315 (506) -260.6%
Disposals/fair value adj on inv ppty 1,511 2,213 46.5%
Other income (8) (11) 37.5%
Pre-tax income 19,742 24,680 25.0%
Taxation (3,052) (3,867) 26.7%
Minority interests (494) (383) -22.5%
Net income 16,196 20,430 26.1%

Key balance sheet items 2010 1H11 2011 Y-o-Y change H-o-H change
Deposits 1,027,033 1,103,435 1,145,951 11.6% 3.9%
Advances 645,424 719,500 755,229 17.0% 5.0%
Total assets 1,661,040 1,830,379 1,738,510 4.7% -5.0%
Total equity 118,289 129,623 133,183 12.6% 2.7%

Key credit indicators 2010 1H11 2011

Profitability
ROAA 1.2% 1.4% 1.2%
Pre-provision profits/Average assets 1.2% 1.5% 1.4%
Net interest margin 1.49% 1.21% 1.32%
Cost-income ratio 34.8% 13.2% 25.5%
Asset quality
Gross NPL ratio 0.14% 0.10% 0.10%
Net NPL ratio 0.09% 0.07% 0.06%
Gross NPLs 867 706 710
Loan Loss Res./NPLs 266.6% 349.9% 398.6%
Capital structure
Total CAR 16.1% 17.6% 16.9%
Tier-1 ratio 11.3% 12.9% 12.5%
TCE / total tangible assets 7.1% 7.1% 7.7%
Funding
Loan-to-deposit ratio 62.8% 65.2% 65.9%
Loan/Assets 38.9% 39.3% 43.4%
Source: Company reports, HSBC

82
 The View
Asia’s Bond Markets
April 2012
performances are subject to China headline risks
and market volatility, given their large size, in
addition to the risk of potential new supply.
Yi Hu, Devendran Mahendran
Bank of India
Does Moody’s downgrade presage
wider rating action? (8 Mar)
Moody’s downgraded Bank of India’s (BOI,
Baa3/BBB-/NR both stable outlook) bank
financial strength rating (BFSR) to ‘D’ from ‘D+’
and, consequently, its senior debt ratings from
‘Baa2’ to ‘Baa3’. Moody’s cites the “accelerated
pace of deterioration in BOI’s asset quality, its
stressed core capital levels and increasing
pressure on its profitability”. The key metric cited
by Moody’s is the deterioration in the non-
performing asset (NPA) formation rate to 3.2%
(annualised for the nine months ending
December) compared to 1.7% for FY11 (ended
March 2011).
We are not surprised by the move on BOI’s
BFSR, given the fundamental deterioration that
has taken place (similar to the move on SBI in
October 2011). However, unlike SBI that has held
onto its senior foreign currency rating, BOI’s
senior ratings have been downgraded. Note the
senior foreign currency ratings are tied to support
assumptions of Moody’s rating model. We have
long contended that senior debt ratings of Indian
banks, which were one notch higher than India’s
sovereign ratings, were difficult to rationalise,
given that 25% of banks’ balance sheets comprise
government securities. Moreover, public sector
banks depend on periodic injections of capital
from the government. So, on balance, we don’t
disagree that a bank, such as BOI, that is majority
owned by the Indian government with 25% of its
assets in Indian government securities and an
estimated 5% share of domestic deposits should
abc
be rated the same as the Indian government at
Baa3.
The question arises if this move presages any
rating action on other banks in the space? Our
view is yes, that there will be other negative rating
action as other public sector banks have shown
similar fundamental deterioration. In this regard,
three banks in particular stand out, namely Union
Bank of India (UNBKIN), Indian Overseas Bank
(IOB) and Syndicate Bank (SYND) for having
weak core capital ratios, low profitability and/or
weak asset quality. A one-notch downgrade is not
a done deal for these banks, but is something to
look out for in the months ahead. Investment wise
it does not change our view; we maintain our
‘Neutral’ recommendation on concerns of
volatility due to negative headlines, but
fundamental concerns are overdone as it comes at
the tail end of the policy tightening cycle. We
have a Neutral long-term recommendation on
BOI, with upside risk tied to a sovereign rating
upgrade and downside risk tied to a deteriorating
corporate investment environment.
Devendran Mahendran
CITIC Bank International
FY11 net profits boosted by trading
gains and lower impairment losses;
credit/spread neutral (2 Apr)
CITIC Bank International FY11 results
CITIC Bank International (Baa2/NR/BBB, both
stable) reported a 34% jump in net profits for
FY11 to HKD1,410m. This is attributable to a
HKD229m recovery in Lehman minibond
collateral, a writeback on loan provisions, and the
absence of writedowns on capital notes
investment, which was HKD668m in FY10. In
line with the industry, net interest margin
contracted by 16bps over the year to 1.22% on the
back of higher funding costs resulting from fierce
83
 The View
Asia’s Bond Markets
April 2012
deposit competition. However, the contraction
seems to have stabilised in 2H11.
Loan growth was muted at 0.8% h-o-h, whereas
the deposit base rose by 12.5% h-o-h. This has
eased the bank’s loan-to-deposit ratio to 76%
from 85% half year ago. The bank has shrunk its
Hong Kong loan book by 13% over the year,
which now only accounts for 53% of the bank’s
loan portfolio. Trade finance and loans for use
outside Hong Kong have risen by 41% and 37%
y-o-y, and barely grew in 2H11. The bank’s on-
balance sheet non-bank mainland China exposure
rose by 3% y-o-y and accounts for 46% of the
loan book. This is not surprising, given the
increasing integration between the bank and its
parent in mainland China. In addition, as the
offshore platform for its parent China CITIC
Bank, the bank also opened a branch in
Singapore, with loans in Singapore rising 5 times
over the year and accounting for 4% of the total
loan book. It is also preparing to open a
representative office in Australia.
Asset quality indicators showed improvement.
Gross NPLs dropped significantly by 42% h-o-h
and the gross NPL ratio improved to 0.75% in
2H11 from 1.28% in 1H11. The loan loss
coverage ratio also improved to 77% from 50%
during the same period. The China loan book
showed asset quality deterioration, with gross
NPLs up 11% h-o-h. We expect the provisions
towards the China loan book to trend higher in
2012, given the economic slowdown in mainland
China. The bank’s loan loss coverage of its China
loan book was 128% at end-FY11, but loan
provisions as of total loans were only 0.3%.
84
abc
Total CAR and tier-1 ratio dropped to 18.3% and
10.4% from 20.3% and 11.9%, due to a
HKD1.6bn dividend payment and investment
revaluation losses. Correspondingly, the total
equity-to-total assets ratio dropped to 7.6% from
9.3% during the same period.
China CITIC Bank FY11 results
The bank’s parent China CITIC Bank
(Baa2/NR/BBB, both stable) reported net profit
growth of 43% y-o-y for FY11, thanks to strong
NIM expansion and higher fee income. Loan
growth was 13% y-o-y, but off-balance sheet
grew by 34% y-o-y. Total CAR and tier-1
dropped to 12.3% and 9.9% as at end-FY11 from
12.8% and 10.4% as at end-3Q11. Management
indicated that tier-1 will be around 8.6% by end-
2012. The bank has seen NPLs and the special-
mention loan balance rise by 1% and 74% h-o-h,
due to more stringent loan classification,
according to the bank.
Investment recommendation
We have a Neutral long-term recommendation on
CITIC Bank International, as we see the
demonstrated support from its parent China
CITIC Bank, which is evidenced by the settling of
CDO exposure through provisioning on the
parent’s book. Therefore, upside and downside
risks are linked to the bank’s parental rating and
support.
The bank’s lower tier-2 bond CINDBK 2020 is
trading at 385/365 over 10yr UST, which offers
yield of 6.0%/5.8%. We think the value is fair in
the current environment, but we have a Hold
recommendation as the bond performance is
subject to negative headline risks from China and
CITIC Group.
 The View
Asia’s Bond Markets abc
April 2012

CITIC Bank Intl – consolidated financial statements for FY11

Year to Dec (HKDm) FY10a FY11a Y-o-Y change
Income statement
Interest income 2,831 3,573 26.2%
Interest expense (1,018) (1,712) 68.1%
Net interest income 1,813 1,862 2.7%
Other operating income 1,193 1,557 30.5%
Operating income 3,006 3,419 13.7%
Operating expenses (1,452) (1,652) 13.8%
Pre-provision profits 1,554 1,766 13.7%
Net charge of impairment allowances (930) (103) -89.0%
Disposals/fair value adj on inv ppty 537 28 -94.7%
Pre-tax income 1,160 1,692 45.8%
Taxation (104) (282) 172.2%
Net income 1,057 1,410 33.5%

Key balance sheet items FY10a 1H11a FY11a Y-o-Y change H-o-H change
Deposits 113,466 112,891 127,040 12.0% 12.5%
Advances 90,715 95,622 96,365 6.2% 0.8%
Total assets 148,209 154,632 171,426 15.7% 10.9%
Total equity 13,352 14,388 13,105 -1.8% -8.9%

Key credit indicators FY10a 1H11a FY11a

Profitability
ROAA 0.8% 1.3% 0.9%
Pre-provision profits/Average assets 1.2% 1.4% 1.1%
Net interest margin 1.38% 1.23% 1.22%
Cost-income ratio 48.3% 43.2% 48.3%
Asset quality
Gross NPL ratio 1.39% 1.28% 0.75%
Net NPL ratio 1.05% 1.00% 0.54%
Gross NPLs 1,231 1,199 701
Loan Loss Res./NPLs 53.4% 50.4% 77.4%
Capital structure
Total CAR 19.0% 20.3% 18.3%
Tier-1 ratio 11.2% 11.9% 10.4%
TCE / total tangible assets 9.0% 9.3% 7.6%
Funding
Loan-to-deposit ratio 79.9% 84.7% 75.9%
Loan/Assets 61.2% 61.8% 56.2%
Source: Company reports, HSBC

Yi Hu, Devendran Mahendran for FY11, or 0.4% if recovery from Lehman

minibond collateral is excluded.
Chong Hing Bank
Net interest margin dropped by 4bps to 1.17% for
FY11 results show raising profitability
FY11, due to higher funding costs on the back of
remains challenging; credit/spread
deposit competition, especially from Chinese
neutral (8 Mar)
banks. However, on a sequential basis, margins
Chong Hing Bank (Baa2/NR/BBB+ all stable
improved markedly, thanks to repricing of the
outlook) reported a 17.5% increase in net profits
existing loan book, which, nevertheless, leaves
to HKD559m (USD72m) for FY11, thanks to
limited room for further repricing in the current
recovery from Lehman minibond collateral and
year. Deposits showed a significant improvement
write-backs on loan provisions. Underlying net
and rose by 6.4% h-o-h and eased the loan-to-
profits were down 32% y-o-y, due to fair value
deposit ratio to 66.7% from 68.3% six months
losses on investment securities, on the back of
ago.
widening credit spreads in 2H11. Overall
profitability remains weak, with ROAA of 0.7%

85
 The View
Asia’s Bond Markets abc
April 2012

Loan growth decelerated to 11.4% y-o-y and 4.0%
h-o-h. The bank slowed the lending for trade
finance and use outside Hong Kong sharply in
2H11, and the growth of the loan book in 2H11
mainly came from the property sector in Hong
Kong. Chong Hing Bank’s on-balance sheet
mainland exposure increased by 49% y-o-y and
4% h-o-h and accounted for 16% of the total loan
book. The increase was mainly driven by
financing for Hong Kong companies’ operations
in mainland China.
The bank’s gross NPL ratio dropped to 0.18%
from 0.21%. Nevertheless, lending for trade
finance has seen a deterioration, with gross
impaired loans to this sector up 47% h-o-h, which
is due to an individual account rather than an
industry account, according to management.
However, we believe loans for trade finance need
to be watched carefully during an economic
slowdown, especially given that the growth of HK
banks’ trade finance loans has significantly
outpaced import growth in 1H11 as we pointed
out in October 2011.
Chong Hing Bank’s capitalisation remains
adequate, with tier-1 and common equity/total
assets ratio of 10.6% and 8.8% at end-FY11. The

Chong Hing Bank – consolidated financial statements for FY11

Year to Dec (HKDm) 2010 2011 Y-o-Y change
Income statement
Interest income 1,179 1,370 16.2%
Interest expense (362) (555) 53.0%
Net interest income 816 815 -0.1%
Other operating income 435 499 14.7%
Operating income 1,251 1,315 5.1%
Operating expenses (712) (774) 8.7%
Pre-provision profits 540 541 0.3%
Provisions for loan losses (18) 107 -702.7%
Gains / (losses) on disposals and revaluation 30 6 -81.4%
Impairment loss on goodwill/AFS (3) (4) 63.3%
Share of profits of jointly controlled entities 19 18 NA
Pre-tax income 568 668 17.5%
Taxation (92) (108) 17.4%
Net income 476 559 17.5%

Key balance sheet items 2010 1H11 2011 Y-o-Y change H-o-H change
Deposits 63,500 60,889 64,816 2.1% 6.4%
Advances 38,836 41,597 43,248 11.4% 4.0%
Total assets 74,289 73,580 77,446 4.2% 5.3%
Total equity 6,578 6,835 6,863 4.3% 0.4%

Key credit indicators 2010 1H11 2011

Profitability
ROAA 0.7% 1.1% 0.7%
Pre-provision profits/Average assets 0.7% 1.0% 0.7%
Net interest margin 1.21% 1.11% 1.17%
Cost-income ratio 56.9% 50.4% 58.8%
Asset quality
Gross NPL ratio 0.09% 0.21% 0.18%
Net NPL ratio 0.04% 0.09% 0.09%
Gross NPLs 36 85 78
Loan Loss Res./NPLs 411.8% 216.5% 271.9%
Capital structure
Total CAR 17.9% 16.9% 15.4%
Tier-1 ratio 11.2% 10.8% 10.6%
TCE / total assets 8.8% 9.2% 8.8%
Funding
Loan-to-deposit ratio 61.2% 68.3% 66.7%
Loan/Assets 52.3% 56.5% 55.8%
Source: Company reports, HSBC

86
 The View
Asia’s Bond Markets abc
April 2012

Fig. 1 Performance of 10yr bullet HK bank sub-debt (LT2) Fig. 2 Trading level of 10yr Asian bank LT2

500 SOT (bid) 400 SOT (mid)

CINDBK 20
450
DAHSIN 20 CHOHIN 20
400 350

350 BNKEA 20
300 WOORIB
300 21
250 250 BCHINA 20 ICBCAS 20
200 Mdur (y r)
02/01 16/01 30/01 13/02 27/02 200
BCHINA 20 ICBCAS 20 DAHSIN 20 6 6.2 6.4 6.6 6.8 7
CHOHIN 20 BNKEA 20 CINDBK 20
Source: Bloomberg Source: Bloomberg

bank’s total CAR declined to 15.4% from 16.9%
in 1H11, as the bank called back its tier-2
securities at the end of last year.
We are comfortable with the bank’s credit profile,
thanks to its strong asset quality and adequate
liquidity and capitalisation, despite that
strengthening profitability remains a challenge going
forward in a competitive operating environment.
Therefore, we maintain our Neutral long-term
recommendation on this credit, with upside risk
linked to better profitability and downside risk linked
to the Hong Kong property market.
We think the bank’s LT2 offers value for long-
term buy-and-hold investors. CHOHIN 6% 2020
currently trades at UST10yr + 335bps (ask) and
yields 5.3%. However, the bond’s near-term
performance is subject to market volatility and
thin liquidity of the bond, given its small issue
size (USD225m).
Yi Hu, Devendran Mahendran
DBS Bank (Aa1/AA-/AA-)
Acquisition of Danamon will likely be
beneficial to the franchise in the long
term; credit/spread neutral (2 Apr)
DBS Group Holdings Limited (DBS) has entered
into an agreement to acquire a 67.37% stake in
Bank Danamon Indonesia (Danamon) for
SGD6.2bn (USD4.96bn) from Fullerton Financial
Holdings (a wholly owned subsidiary of
Temasek). Note, Temasek also holds a 29.5%
stake in DBS Group as at 28 February 2012.
The acquisition will be satisfied by issuing new
DBS shares to Temasek. Upon completion of the
acquisition, DBS will launch a mandatory tender
offer to acquire the remaining listed shares from
other shareholders of Danamon for cash at an
offer price of IDR7,000 per share. The acquisition
price represents a 56% premium to the one-month
weighted average price of Danamon and places
the entire value of Danamon at SGD9.1bn
(USD7.3bn), or 2.6 times book value as at
December 2011.
DBS wholly owns DBS Bank, which is rated AA-,
Aa1 and AA- by Fitch, Moody’s and S&P,
respectively. Assets and equity of DBS totalled
USD262bn and USD25bn, respectively, as at
December 2011. Assets and equity of Danamon
totalled USD15.5bn and USD2.8bn, respectively,
as at December 2011. Therefore, the value of
Danamon represents 6% and 29% of DBS’ assets
and equity, respectively, as at the end of 2011.
On an unaudited pro forma basis, assuming the
acceptance of the tender offer, the capital adequacy
ratio (CAR) of DBS will decline from 15.8% to
14.8%, while its core tier-1 ratio declines from 11%

87
 The View
Asia’s Bond Markets abc
April 2012

to 10.3%. It is envisaged that, subject to regulatory spread volatility.

approvals, Danamon will be merged into DBS
Bank’s local operation in Indonesia.
The aspiration of DBS to diversify its revenues
away from its home market and to become a
significant regional player is well known. Within
this context, the current acquisition should not
come as a surprise. Therefore, the near-term
concerns on capital should be offset by long-term
benefits to its franchise, in our view. Although the
above acquisition is subject to necessary
regulatory approvals, we expect it should move
forward smoothly as in the case of similar bank
acquisitions in Indonesia previously. We also
expect execution risks to be manageable, given
DBS’ experience in acquiring businesses, and that
Danamon was already under the watch of
Temasek since 2003. Therefore, we do not expect
any negative surprises to emerge in the merger of
Danamon into DBS Bank, although the benefits
may take time to accrue.
We see this move as credit neutral and expect no
rating changes, although the rating agencies may
feel compelled to place it on rating watch while
they go through the motions of analysing the
details and financing of the transaction. We
maintain our Neutral recommendation on DBS
Bank with downside risk tied to a shift in
financing terms of the transaction and upside risk
tied to improving profitability and capital ratios.
We recommend a hold on DBSSP 2.35% ’17 at
143ps (mid) + 5-yr UST as the expansion into a
lower-rated banking sector may lead to near-term
Devendran Mahendran
Dah Sing Banking Group
FY11 results show stability in credit
metrics, although profitability remains
sub-par; credit/spread neutral (22 Mar)
Dah Sing Banking Group, the holding company of
Dah Sing Bank (A3/BBB+/BBB+ all stable),
reported FY11 net profits of HKD1,077m
(USD144m), which is flat compared to last year.
However, pre-provision profits were down 15% y-
o-y, due to lower margins and higher operating
expenses. Net interest margin shrunk to 1.41% for
FY11 from 1.68% for FY10, mainly due to higher
funding costs, as the bank aimed to secure time
deposits to solidify funding. This is evidenced by
the improvement of the loan-to-deposit ratio of
80.9% in FY11, compared to 84.4% in FY10.
Loan growth was 13.6% y-o-y and 1.7% h-o-h.
Loan expansion in 2H11 was mainly driven by
trade bills, which were mostly guaranteed by
mainland banks. The bank’s non-bank mainland
exposure rose by 50% y-o-y and 11% h-o-h,
which was driven by loan demand from mainland
companies. On-balance sheet non-bank mainland
exposure accounted for 25% of Dah Sing’s loan
book, which remains small compared to other
banks in Hong Kong (Fig.1).
Asset quality showed improvement in 2H11, after
the deterioration in the China loan book in 1H11.
Gross NPLs dropped 4.4%, which brought down

Fig.1 Comparison table for Hong Kong banks

Latest Non-bank mainland Loan-to- Deposit NPL NPL Tier-1 CAR TCE/ total ROAA Note
exposure (as of loans) deposit growth (h/h) ratio coverage assets
BOC HK 39% 65% 7% 0.10% 350% 12.9% 17.6% 7.1% 1.4% 1H11
BNKEA 65% 75% 2% 0.46% 66% 9.4% 13.7% 7.2% 0.8% FY11
CHOHIN 16% 67% 6% 0.18% 272% 10.6% 15.4% 8.8% 0.7% FY11
CINDBK 48% 85% -1% 1.28% 50% 11.9% 20.3% 9.3% 1.3% 1H11
DAHSIN 25% 81% 5% 0.47% 100% 10.5% 15.2% 9.6% 0.8% FY11
ICBCAS 24% 101% 14% 0.45% 118% 7.8% 13.4% 5.7% 1.0% 1H11
Source: Company reports, HSBC

88
 The View
Asia’s Bond Markets abc
April 2012

the gross NPL ratio to 0.47% from 0.50% six
months ago. The bank said asset quality
deterioration in its China loan book has stabilised,
and has been cautious in terms of lending in
mainland China in 2H11.
Capital ratios remain adequate, with total CAR,
tier-1 and equity/asset ratio of 15.2%, 10.5% and
9.6% at end-FY11, respectively. The bank has
USD150m LT2, which is callable on 18 August
2012. After the issue of SGD225m LT2 in
February 2012, the bank has eliminated the need
of further sub-debt issue in 2012. The bank
doesn’t rule out the issue of senior bonds;
however, the current levels are still seen relatively
expensive by management.
Dah Sing Bank owns 20% of Bank of Chongqing,
which has contributed HKD353m in profits to
Dah Sing in FY11, up 42% y-o-y. Bank of
Chongqing’s total assets and total equity
amounted to RMB122bn and RMB6.0bn at end-
September 2011, respectively.

Dah Sing Banking Group – consolidated financial statements for FY11

Year to Dec (HKDm) 2010 2011 Y-o-Y change
Income statement
Interest income 2,756 3,313 20.2%
Interest expense (800) (1,394) 74.1%
Net interest income 1,956 1,919 -1.9%
Other operating income 470 586 24.7%
Operating income 2,426 2,505 3.3%
Operating expenses (1,278) (1,527) 19.5%
Pre-provision profits 1,147 978 -14.7%
Provisions for loan losses (98) (181) 85.2%
Gains / (losses) on disposals and 81 92 14.1%
revaluation of fixed assets
Net loss on disposal and repurchase of 129 325 151.3%
financial instruments
Share of results of associates/JVs 257 366 42.4%
Pre-tax income 1,268 1,227 -3.2%
Taxation (194) (150) -22.7%
Net income 1,074 1,077 0.3%

Key balance sheet items 2010 1H11 2011 Y-o-Y change H-o-H change
Deposits 97,281 107,767 113,369 16.5% 5.2%
Advances 82,095 90,451 91,760 11.8% 1.4%
Total assets 131,839 141,233 147,188 11.6% 4.2%
Total equity 13,546 14,058 14,957 10.4% 6.4%

Key credit indicators 2010 1H11 2011

Profitability
ROAA 0.9% 0.8% 0.8%
Pre-provision profits/Average assets 0.9% 0.8% 0.7%
Net interest margin 1.68% 1.52% 1.41%
Cost-income ratio 52.7% 56.6% 61.0%
Asset quality
Gross NPL ratio 0.25% 0.50% 0.47%
Net NPL ratio 0.12% 0.25% 0.24%
Gross NPLs 182 403 386
Loan Loss Res./NPLs 216.9% 110.3% 99.8%
Capital structure
Total CAR 16.3% 15.6% 15.2%
Tier-1 ratio 10.2% 10.9% 10.5%
TCE / total assets 9.7% 9.4% 9.6%
Funding
Loan-to-deposit ratio 84.4% 83.9% 80.9%
Loan/Assets 62.3% 64.0% 62.3%
Source: Company reports, HSBC

89
 The View
Asia’s Bond Markets abc
April 2012

We have a Neutral long-term recommendation on
Dah Sing Bank, and a hold call on DAHSIN
6.625% 2020, which is currently offered at
10yr+325bps and yields 5.6%. However, the bond
performance is subject to market volatility, thin
liquidity and headline risk out of China. The
upside risk to our fundamental recommendation is
substantial improvement in profitability, while
downside risk is tied to an aggressive expansion
in mainland China and worse-than-expected asset
quality deterioration.
Yi Hu, Devendran Mahendran
Union Bank of India
Moody’s downgrade brings it in line
with the sovereign; credit/spread
neutral (20 Mar)
Moody’s downgraded Union Bank of India’s
(UNBKIN) senior debt ratings by one notch to
Baa3. The move was due to the downgrade of
UNBKIN’s bank financial strength ratings
(BFSR) from ‘D+’ to ‘D’ due to deteriorating
financial metrics. Moody’s latest action follows
from the downgrade of Bank of India (BOI) on 7
March 2012, and is within our expectation – see
“Asia Credit Today 8 March 2012 – BOI: Does
Moody’s downgrade presage wider rating
action?”. We see this as a rationalisation exercise
to bring senior debt ratings of Indian banks in line
with the government debt ratings. We think Indian
banks with senior debt ratings above the
government’s foreign currency bond ratings are at
risk, particularly if their fundamentals are weak
and have weak core capital ratios, low
profitability and/or weak asset quality. Investment
wise, it does not change our view; we maintain
our Neutral recommendation on concerns of
volatility due to negative headlines, but we

1. Indian banks – comparison of key credit indicators

BOI (Baa3/BBB-) SBI (Baa2/BBB-) ICICI (Baa2/BBB-) BOB (Baa2/BBB-) Axis (Baa2/BBB-)
Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11
Profitability (ROA) 0.9% 0.8% 0.9% 1.0% 1.5% 1.5% 1.3% 1.3% 1.8% 1.7%
Capital structure
Total CAR 12.4% 11.2% 13.2% 11.6% 20.0% 18.9% 12.5% 13.5% 12.5% 11.8%
Tier-1ratio 8.0% 7.7% 9.6% 7.6% 13.7% 13.1% 7.7% 9.3% 8.9% 8.3%
TCE / total assets 5.4% 5.4% 6.4% 5.8% 14.1% 13.3% 5.5% 6.2% 9.0% 8.2%

Loan growth (y-o-y) 22.8% 21.4% 21.3% 16.5% 15.3% 19.1% 32.7% 25.8% 45.7% 20.4%
Asset quality - Gross NPA ratio (%) 2.4% 2.7% 3.2% 4.5% 4.8% 3.8% 1.3% 1.5% 1.1% 1.1%
Funding - loan/deposit (%) 76.3% 75.0% 82.7% 84.5% 94.9% 94.5% 73.6% 74.6% 79.3% 71.3%

Government ownership (%) 64.5% 65.9% 59.4% 59.4% 0.0% 0.0% 53.8% 57.0% 0.0% 0.0%
Total assets (INRbn) 2,992 3,646 11,324 13,014 3,929 4,593 3,274 4,114 2,067 2,693
Total assets (USDbn) 67 69 253 245 88 87 73 78 46 51

Canara (Baa2/BBB-) UNBK (Baa3/BBB-) IDBI (Baa3/BBB-) IOB (Baa3/BBB-) SYND (Baa2/BBB-)
Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11 Dec-10 Dec-11
Profitability (ROA) 1.6% 1.0% 1.1% 0.3% 0.8% 0.6% 0.6% 0.2% 0.8% 0.9%
Capital structure
Total CAR 13.0% 13.2% 11.9% 11.7% 14.1% 13.5% 13.5% 11.8% 11.7% 11.5%
Tier-1ratio 8.3% 9.5% 7.4% 8.0% 8.8% 7.5% 7.3% 6.7%
TCE / total assets 5.9% 6.2% 5.6% 5.3% 6.5% 6.2% 5.1% 4.8% 4.4% 4.8%

Loan growth (y-o-y) 28.8% 15.5% 25.6% 16.8% 20.9% 16.2% 26.1% 32.4% 22.0% 14.9%
Asset quality - Gross NPA ratio (%) 1.4% 1.8% 2.7% 3.3% 2.2% 2.9% 3.3% 3.0% 2.3% 2.3%
Funding - loan/deposit (%) 72.1% 69.5% 71.7% 76.1% 89.5% 88.2% 80.1% 79.4% 80.2% 80.2%

Government ownership (%) 73.2% 67.7% 55.4% 57.1% 65.1% 65.1% 61.2% 65.9% 66.5% 69.5%
Total assets (INRbn) 3,002 3,624 2,157 2,422 2,211 2,559 1,590 2,072 1,442 1,673
Total assets (USDbn) 67 68 48 46 49 48 36 39 32 32
Source: Company data, HSBC. Note: Non-consolidated data.

90
 The View
Asia’s Bond Markets abc
April 2012

believe fundamental concerns are overdone as it

comes at the tail end of the policy tightening
cycle. Furthermore, the timing is a little odd as the
Indian government’s proposed budget (FY12-13),
announced last Friday, has set aside INR159bn
(USD3.2bn) to recapitalise public sector banks.
We have a Neutral long-term recommendation on
UNBKIN, with the upside/downside risks tied to a
sovereign rating upgrade/downgrade.

Devendran Mahendran

91
 The View
Asia’s Bond Markets abc
April 2012

Corporates

Asia-Pacific Thermal Coal bituminous) mined for export markets. Moreover, Keith Chan
Analyst
our expectations of static to modestly improving The Hongkong and Shanghai
Benchmark pricing likely set at an Banking Corporation Limited
credit profiles for the Indonesian coal credits is
11.3% y-o-y decline for the year (3 Apr) +852 2822 4522
partially from our projections of a 10% y-o-y decline keithkfchan@hsbc.com.hk
Xstrata and Tohoku Electric have agreed to supply
in average selling prices this year. Philip Wickham
thermal coal at USD115.20 per tonne of benchmark Analyst
Our investment thesis towards the Indonesian The Hongkong and Shanghai
material starting on 1 April 2012, according to the Banking Corporation Limited,
Financial Times (FT). The agreement represents a thermal coal credits remains unchanged. In terms of Singapore Branch
+65 6239 0630
decline of 11.3% y-o-y from last year’s USD129.85 fundamentals, we continue to regard Adaro philipwickham@hsbc.com.sg
per tonne. The benchmark pricing for thermal coal in Indonesia (Ba1 stable/NR/BB+ stable) as materially Louisa Lam
above the others, followed by Indika Energy (B1 Credit Associate
the region is usually set by Xstrata, with the recently The Hongkong and Shanghai
agreed price close to the mid-point of industry positive/NR/B+ stable), Berau Coal Energy (B1 Banking Corporation Limited
+852 2822 4527
expectations. We highlight that last year’s positive/BB- positive/NR) and Bumi Resources louisamclam@hsbc.com.hk
benchmark pricing was the highest ever for an (Ba3 stable/BB stable/NR), in descending order. Alex Zhang
annual contract, and the recent agreement would While we remain concerned about corporate Credit Associate
The Hongkong and Shanghai
rank as the third highest. governance for the latter two credits, the relatively Banking Corporation Limited
robust industry outlook underpins our Neutral +852 2822 3232
Indonesian thermal coal producers generally follow alexdzhang@hsbc.com.hk
fundamental recommendations. We maintain our
the Asia-Pacific benchmark pricing for their
Overweight recommendations on both Adaro
respective supply contracts. Note that the average
Indonesia and Indika Energy.
selling price per tonne for Indonesian miners is
below the benchmark level, given the lower calorific Philip Wickham, Louisa Lam
value of their coal (usually bituminous to sub-

Newcastle Coal spot price

200
180
160
140
120
USD/ton

100
80
60
40
20
0
1/06 7/06 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/12
Source: Bloomberg

92
 The View
Asia’s Bond Markets
April 2012
Berau Coal Energy/
Bumi Resources
Removal of Rothschild as co-
chairman expected; Trading call
raised to Hold (28 Mar)
Yesterday, Bumi plc, the holding company of
Berau Coal Energy (B1/BB-/NR) and Bumi
Resources (Ba3/BB/NR), announced the removal
of Nathaniel Rothschild as co-chairman. Samin
Tan was appointed chairman at Bumi plc, who
holds a 23.8% stake in the holding vehicle after
purchasing half the stake held by the Bakrie
family last year. The new chairman is the owner
of Borneo Lumbung Energi & Metal, a producer
of coking coal in Indonesia. Other changes for
Bumi plc include a new CEO (Nalin Rathod), new
CFO (Scott Merrillees), and a new co-chairman
(Indra Bakrie), all replacing executives tied to the
outgoing co-chairman.
The removal of Nathaniel Rothschild was not a
surprise, given the strained relationship between
the Bakrie family and him (following a leaked
letter calling for improved corporate governance
by the former co-chairman). The public
disagreement weighed on Bumi plc’s equity share
price, which has declined 15% since the dispute.
The new chairman has announced plans for a
corporate re-organisation to reduce the complexity
of group, which includes exploring a merger
between Bumi Resources and Berau Coal Energy.
However, the chairman’s coking coal company is
not expected to be part of the restructuring.
abc
Such credit-friendly actions are expected, in our
view, as Bumi plc tries to repair its relationship
with minority investors. However, we feel
merging operating entities and reducing
complexity of the group structure will be a
lengthy process, partially due to Indonesian
regulations, the multiple operating licences, and
potential tax implications, according to statements
by management.
Nonetheless, we have raised our trading call on
BUMIIJ’16 and BUMIIJ’17 to Hold from Trading
Sell to reflect lower event risk after the
boardroom changes. However, the wider spreads
between the notes from the Bumi complex against
the other Indonesian coal credits should persist, in
our view, given warranted corporate governance
concerns. Our fundamental recommendation for
Bumi Resources remains Neutral. The key upside
risks to our view would be a faster pace of de-
leveraging and/or a material improvement in
corporate governance. The key downside risks
include execution of planned expansion, adverse
regulatory developments, delays to the de-
leveraging program, or new corporate governance
concerns.
Our trading call remains Hold and our
fundamental recommendations remain Neutral for
BRAUIJ’15 and BRAUIJ’17. The key upside
risks to our view on Berau Coal Energy are better-
than-anticipated operating results and/or a
material improvement in corporate governance.
The key downside risks are execution of planned
expansion, adverse regulatory developments, or
new corporate governance concerns.
Philip Wickham, Louisa Lam
93
 The View
Asia’s Bond Markets abc
April 2012

Berau Coal Energy obligations of USD69m at end-December 2011. The

position has been boosted by the USD500m bond
Robust financial performance last
issue earlier this month, which was mainly to re-
year with strong credit metrics, but
finance outstanding bank loans.
valuation discounts these positives;
maintain trading call at Hold (29 Mar) However, the financial metrics are expected to
The coal miner released its full-year financial modestly weaken over the next few years as
results that were ahead of market expectations (the Berau Coal Energy expands production capacity
equity price rose 7% after the day after the release). and thermal coal prices decline. Nonetheless, we
Revenue increased 57% y/y to USD1,657m, anticipate a rating upgrade to Ba3 from B1 from
EBITDA increased 67% y/y to USD569m, while Moody’s this year given the agency’s positive
net profit rose 170% y/y to USD134m in 2011. outlook. We regard Berau Coal as being
Production volume reached 20m tonnes of thermal conservative with its expansion program.
coal, of which approximately 85% were export
We maintain our trading call at Hold for
sales. Berau Coal Energy plans for production of
BRAUIJ’15 and BRAUIJ’17 and our and
23m tonnes this year. The average price per tonne
fundamental rating on the credit at Neutral. The
sold increased 34% y/y during the period, but is
industry outlook remains supportive with demand
expected to decline modestly (~10% y/y) in 2012.
steadily rising and thermal coal prices projected to
Financial metrics remained robust for Berau Coal be only modestly weaker in 2012. However,
Energy’s ratings (B1 / BB- / NR), with total legitimate corporate governance concerns towards
debt/EBITDA of 1.4x and net debt/EBITDA was Berau’s holding company (Bumi PLC) should
0.5x for last year. The EBITDA/interest cover was a continue to cause spreads of the notes to remain
comfortable 5.2x. In addition, the total debt/capital wide of other Indonesian thermal coal issues. The
was 60% for the coal miner. Capital expenditure was key upside risks to our view on Berau Coal Energy
USD103m, which was covered by funds from are better-than-anticipated operating results and/or
operations of USD175m. We highlight that Berau a material improvement in corporate governance.
Coal Energy has been free cash flow positive for the The key downside risks are execution of planned
last four years. Liquidity is adequate, with cash and expansion, adverse regulatory developments, or
equivalents of USD520m against short-term debt new corporate governance concerns.

Asian Metals and Mining

1500

1300 WINSWY 16
HIDILI 15
1100
Z-spread (mid, bp)

900 CITPAC 49 CHOGRP 17

CHOGRP 15 VEDLN 18
BUMIIJ 16 VEDLN 16 VEDLN 21
700 BUMIIJ 17 NOBLSP 11/49
VEDLN
BERAUC 15 14
INDYIJ 16 BRAUIJ 17 CITPAC 21
CITPAC 18 OLAMSP
500 INDYIJ 18NOBLSP 1/20 NOBLSP208/20
ADAIND 19
CHMETL 16
NOBLSP 8/15 M. dur
300
1 2 3 4 5 6 7 8 9 10 11

Source: HSBC

94
 The View
Asia’s Bond Markets abc
April 2012

Income Statement Cash Flow Statement

Dec-A Dec-A Dec-A Dec-A Dec-A Dec-A
in USDm 2009 2010 2011 in USDm 2009 2010 2011
Revenue 800 1,055 1,657 EBIT 293 310 536
change y/y (%) 27 32 57 Dividend income 0 0 0
Cost of sales (465) (656) (969) Cash outflow to minorities 0 0 0
SG&A (33) (59) (120) Financial costs (26) (54) (87)
EBITDA 302 341 568 Taxation paid (66) (125) (256)
change y/y (%) 97 13 67 Depreciation 8 29 28
Depreciation (8) (29) (28) Change in working capital (19) 163 25
Operating leases (1) (1) (4) Other operating cash flows 33 84 (72)
EBIT 293 310 536 Funds from operations 223 407 175
change y/y (%) 101 6 73 Capital expenditure (99) (359) (103)
Interest expense (27) (100) (109) Change in associates 0 0 0
Interest income 29 5 6 Free cash flow 125 48 72
Associates 0 0 0 Non-recurring items 0 0 0
Other gains/(losses) (17) 7 (33) Other items 0 (1) (7)
EBT 278 222 401 Cash flow for dividends 125 47 65
change y/y (%) 100 -20 81 Dividends paid 0 0 (23)
Income tax (124) (153) (240) Debt issued (24) 149 (53)
Profit after tax 154 69 161 Equity issued 0 144 0
Minority interests 0 (19) (27) (Inc)/dec in cash 100 340 (12)
Extraordinary items 0 0 0 Cash at year start 92 192 532
Net profit 154 50 134 (Inc)/dec in cash 100 340 (12)
change y/y (%) 99 -68 170 Cash at year end 192 532 520

Balance Sheet Financial Ratios

Dec-A Dec-A Dec-A Income statement ratios:

in USDm 2009 2010 2011 EBITDA/revenue (%) 38 32 34
EBITDA/interest (x) 11 3 5
Cash and equivalents 192 532 520 EBITDA/net interest (x) -186 4 5
Current assets 281 422 529 Total debt/EBITDA (x) 1 2 1
Current liabilities (293) (597) (729) Net debt/EBITDA (x) 0 1 0
Fixed assets 420 497 596 EBITDA/capex (x) 3 1 6
Long-term investments 0 0 0 EBIT/revenue (%) 37 29 32
Other long-term assets 56 77 104 EBIT/interest (x) 11 3 5
Intangibles 0 277 286 EBIT/net interest (x) -181 3 5
Deferred items (12) (12) (12) Total debt/EBIT (x) 1 3 1
Capital employed 645 1,197 1,295 Net debt/EBIT (x) 0 1 1
EBIT/capex (x) 3 1 5
Short-term debt 300 53 69 EBIT/EBITDA (%) 97 91 94
Long-term debt 0 758 702 Adjusted ROA (%) 45 26 41
Total debt 300 810 771 Adjusted ROE (%) 45 15 30
Minority interests 0 54 72 Balance sheet ratios:
Share capital 17 385 385 Short-term debt/capital (%) 46 4 5
Reserves 328 (52) 67 Long-term debt/capital (%) 1 64 55
Capital employed 645 1,197 1,295 Total debt/capital (%) 47 68 60
Source: Company data, HSBC estimates Net debt/net capital (%) 24 43 34
Equity/capital (%) 53 32 40
Total debt/equity (%) 88 212 151
Net debt/equity (%) 32 74 52
Current ratio (x) 1 1 1
Cash/short-term debt (x) 1 10 8
Cash flow statement ratios:
FFO/capex (x) 2 1 2
Total debt/FFO (x) 1 2 5
Net debt/FFO (x) 1 1 2
FFO/interest (x) 8 4 2
FFO/net interest (x) -137 4 2
(EBITDA-capex)/interest (x) 8 0 4
(EBITDA-capex)/net int (x) -125 0 4
Dividend payout ratio (%) 0 0 17
Source: Company data, HSBC estimates

Philip Wickham, Louisa Lam

95
 The View
Asia’s Bond Markets
April 2012
Bumi Resources
Improved credit metrics last year from
rising EBITDA, rather than debt
reduction; maintain Hold trading call
and Neutral fundamental
recommendation (3 Apr)
Bumi Resources (Ba3 stable/BB stable/NR)
announced financial results for the year. Note that
the company changed its accounting treatment
towards its coal operations from the full
consolidation method to the proportionate
consolidation method, which is effective starting on
1 January 2011. Revenue increased 37% y-o-y to
USD4,001m, EBITDA increased 68% y-o-y to
USD1,240m, while net profit increased 6% y-o-y to
USD221m. The EBITDA margin improved 5.7
percentage points to 31.0% for the period, as the
average selling price per tonne increased 32% y-o-y.
Bumi Resources produced a total of 65.9m tonnes of
coal last year, against 60m tonnes in 2010, and
management is targeting 75m tonnes for 2012.
The financial ratios of Bumi Resources improved
over the year, as the total debt/EBITDA ratio
declined to 3.6x in 2011 against 5.5x in 2010, while
the net debt/EBITDA ratio declined to 3.4x from
4.9x over the same period. The EBITDA/interest
cover ratio increased to 1.9x last year from 1.1x in
2010. The total debt/capital ratio was 79% at the end
of the year. We highlight that the improved credit
Asia-Pacific Metals and Mining issues
1400
1300
1200
1100
Z-spread (mid, bp)
1000
900
800 BUMIIJ 16
700
BERAUC 15
600 VEDLN 14
INDYIJ 16
500
400
1 2
Source: HSBC
96
abc
metrics were from rising EBITDA, rather than debt
reduction during the period, but is a similar
experience to other Indonesian coal credits.
Liquidity is weak, with cash and equivalents of
USD311m against short-term debt of USD855m
at the end of 2011. However, Bumi Resources
refinanced a USD600m bridging loan due in
October 2012 with a USD600m loan from China
Development Bank in 1Q12. The cost of the new
bank loan is LIBOR+670bps against the bridging
loans at LIBOR+600bps. The capital expenditure
was high at USD401m, resulting in negative free
cash flow of USD212m that was funded via new
debt and existing cash balances. Guidance from
management is for capital expenditure of
USD360m in 2012.
Our trading call is maintained at Hold and the
fundamental recommendation remains Neutral for
BUMIIJ’16 and BUMIIJ’17. The industry outlook
remains supportive, with demand steadily rising and
thermal coal prices projected to be only modestly
weaker in 2012. However, we expect corporate
governance concerns at Bumi Resources and its
holding company (Bumi PLC), combined with high
balance sheet leverage, will continue to result in
spreads of the notes being the widest of the
Indonesian thermal coal issues. The key upside risks
to our view on Bumi Resources are a faster pace of
de-leveraging and/or a material improvement in
WINSWY 16
HIDILI 15
CHOGRP 15 CHOGRP 17
CITPAC 49
VEDLN 16 VEDLN 18
BUMIIJ 17 VEDLN 21
BRAUIJ 17 OLAMSP 20
INDYIJ 18 CITPAC 18 CITPAC 21
NOBLSP 1/20
ADAIND 19 NOBLSP 8/20
M. dur
3 4 5 6 7
 The View
Asia’s Bond Markets abc
April 2012

corporate governance. The key downside risks are Cash Flow Statement, USDm
delays to the planned deleveraging, execution of Dec-A Dec-A
2010 2011
planned expansion, adverse regulatory
EBIT 652 1,124
developments, and/or new corporate governance Dividend income 126 41
concerns. Cash outflow to minorities 0 0
Financial costs (453) (407)
Taxation paid (461) (580)
Income Statement, USDm Depreciation 88 116
Dec-A Dec-A Change in working capital (466) 43
2010 2011 Other operating cash flows 757 (148)
Funds from operations 243 189
Revenue 2,927 4,001 Capital expenditure (217) (401)
change y-o-y (%) 37 Change in associates 0 0
Cost of sales (1,874) (2,291) Free cash flow 26 (212)
SG&A (313) (470) Non-recurring items 0 0
EBITDA 740 1,240 Other items 0 0
change y-o-y (%) 68 Cash flow for dividends 26 (212)
Depreciation (88) (116) Dividends paid (59) (99)
EBIT 652 1,124 Debt issued 249 161
change y-o-y (%) 73 Equity issued (36) 0
Interest expense (652) (661) (Inc)/dec in cash 181 (149)
Interest income 105 50
Associates 236 125 Cash at year start 279 460
Other gains/(losses) 190 (40) (Inc)/dec in cash 181 (149)
EBT 530 599 Cash at year end 460 311
change y-o-y (%) 13
Income tax (264) (383) Financial Ratios
Profit after tax 266 215 Income statement ratios:
Minority interests (59) 5 EBITDA/revenue (%) 25.3 31.0
Net profit 207 221 EBITDA/interest (x) 1.1 1.9
change y-o-y (%) 6 EBITDA/net interest (x) 1.4 2.0
Total debt/EBITDA (x) 5.5 3.6
Net debt/EBITDA (x) 4.9 3.4
Balance Sheet, USDm EBITDA/capex (x) 3.4 3.1
EBIT/revenue (%) 22.3 28.1
Dec-A Dec-A Dec-A EBIT/interest (x) 1.0 1.7
2009 2010 2011 EBIT/net interest (x) 1.2 1.8
Cash and equivalents 279 460 311 Total debt/EBIT (x) 6.3 4.0
Current assets 1,568 2,116 2,270 Net debt/EBIT (x) 5.6 3.7
Current liabilities (1,208) (1,290) (1,487) EBIT/capex (x) 3.0 2.8
Fixed assets 1,205 1,187 1,267 EBIT/EBITDA (%) 88.0 90.7
Long-term investments 857 1,166 1,222 Adjusted ROA (%) 12.0 19.9
Other long-term assets 639 854 854 Adjusted ROE (%) 19.9 24.8
Intangibles 366 344 343 Balance sheet ratios:
Deferred items 761 578 877 Short-term debt/capital (%) 1 15
Capital employed 4,467 5,416 5,657 Long-term debt/capital (%) 74 64
Total debt/capital (%) 76 79
Short-term debt 482 76 855 Net debt/net capital (%) 73 78
Long-term debt 3,193 4,021 3,626 Equity/capital (%) 24 21
Total debt 3,675 4,097 4,481 Total debt/equity (%) 311 381
Minority interests 16 279 288 Net debt/equity (%) 276 354
Share capital 1,401 1,477 1,477 Current ratio (x) 1.9 1.1
Reserves (626) (437) (588) Cash/short-term debt (x) 6.1 0.4
Capital employed 4,467 5,416 5,657 Cash flow statement ratios:
FFO/capex (x) 1.1 0.5
Source: Company data, HSBC Total debt/FFO (x) 16.9 23.7
Net debt/FFO (x) 15.0 22.1
FFO/interest (x) 0.4 0.3
FFO/net interest (x) 0.4 0.3
(EBITDA-capex)/interest (x) 0.8 1.3
(EBITDA-capex)/net int (x) 1.0 1.4
Dividend payout ratio (%) 29 45
Source: Company data, HSBC

Philip Wickham, Louisa Lam

97
 The View
Asia’s Bond Markets
April 2012
Central China Real Estate
Proposed SGD bond issue eliminates
USD bond supply risk in the near
term; change call on CENCHI’15 to
Hold from Sell (2 Apr)
Central China Real Estate (CENCHI; rated
Ba3/BB-, bond rated B1/B+) reported good FY11
results on 29 March 2012. Recognised revenue
increased 47% y-o-y to RMB6.6bn, driven by a
46% y-o-y increase in the recognised average
selling price to RMB6,228 per sqm. The increase
in the recognised average selling price reflects a
higher proportion of high-end apartments
delivered during the year; as well as a higher
proportion of recognised revenue from Zhengzhou,
the provincial capital of Henan, which has higher
property price versus other cities within the
province. Profitability of the group normalised to
35% (gross margin) and 28% (EBITDA margin)
in 2H11 versus 46% and 39%, respectively, in
1H11, reflecting the exceptionally high
contribution from Zhengzhou projects in 1H11.
For full-year 2011, the group’s gross margin and
EBITDA margin reached 39% and 33%,
respectively, versus 34% and 26% in 2010. As
such, EBITDA grew at a faster pace than
recognised revenue, up 82% y-o-y to RMB2.2bn.
EBITDA covers interest expense during the year
by 3.7 times, while its debt-to-capitalisation ratio
and net debt-to-EBITDA ratio stood at 52% and
2.5 times. Balance sheet liquidity is adequate,
with unrestricted cash on hand of RMB3.3bn
covering short-term debt of RMB2.2bn, excluding
a RMB700m short-term loan due to Bridge Trust,
which will be eliminated in 1H12 upon project
transfer. These metrics were in line with its
current credit ratings.
During Central China’s FY11 results earnings
analyst meeting, the group refused to release 2012
cash flow guidance as it will commence a fixed
income investor road show that may lead to a
SGD bond offering, subject to investors’ appetite
and market conditions. The group’s debt fund
98
abc
raising plan comes to us as no surprise, as we
articulated in ACT dated 7 March 2012 that its
consent solicitation to cure technical defaults on
CENCHI’15 is to pave the way for bond issuance.
Note, the group’s HKD765m convertible bond
issued in August 2009 will be put to the group at
109.3 for HKD836m (USD108m) in August 2012.
As such, we believe the pending SGD bond
offering, if it materialises, is to refinance the
convertible bond coming due. At 96.75/97.75
(bid/ask), CENCHI’15 is yielding 13.4%/13.1%
(bid/ask), which we believe is now fairly valued
against peers. As such, we change our trading call
on CENCHI’15 to Hold from Sell. We have a
Neutral fundamental recommendation on Central
China, with a key upside risk a credit ratings
upgrade and a key downside risk changes to its
prudent financial management policy.
2012 outlook
 We expect Central China to grow its
contracted sales target in 2012 by 10% to
RMB8.9bn versus 2011 contracted sales of
RMB8.2bn. Using a contracted sales cash
collection ratio of 80%, and assuming
RMB1.6bn of 2011 contracted sales carried
forward to 2012 for cash collection, the group
should record RMB8.8bn cash inflows in
2012. Central China commented during the
analyst meeting that its 1Q12 contracted sales
will post y-o-y growth versus RMB1.8bn
recorded in 1Q11.
 Central China is increasing the gross floor
area commencement for construction to 3.1
million sqm in 2012 versus 2.9 million sqm in
2011. The gross floor area completion target
is also lifted to 1.9 million sqm in 2012 from
1.6 million sqm in 2011. As such, we expect a
10% y-o-y increase in construction
expenditure for the group to RMB5.5bn. In
other words, the group’s cash inflow from
pre-sales of RMB8.8bn shall cover the bulk of
 The View
Asia’s Bond Markets
April 2012
its cash outflows (RMB9bn in aggregate,
excluding financing), taking into account
RMB380m of land payment and other
expenditure of RMB3.1bn.
Keith Chan
China Overseas Land &
Investment Ltd
Free cash flow breakeven in 2H11
demonstrates financial prudence and
operational resilience; hold CHIOLI’17
at 5T+325/310 in light of USD supply
risk from peers (16 Mar)
China Overseas Land (CHIOLI; rated at
Baa2/BBB) reported steady FY11 results on 15
March 2012. Total revenue increased by 9.6% y-
o-y to HKD48.6bn in 2011 with gross profit
margin of 42.6%, 2.5% higher versus 2010.
Driven by its economies of scale and stringent
cost control, operating profit rose 18.3% y-o-y to
HKD18.8bn, covering interest expense of
HKD1.5bn by more than 12x, the highest among
China property peers with USD bonds
outstanding.
In 2011, the group acquired 20 land parcels while
its associate, China Overseas Grand Oceans
(COGO), acquired 7 land parcels, adding 10.6m
sq m of gross floor area to the land bank for
HKD24bn. The land acquisitions, together with
the payment of outstanding land premium carried
forward from 2010, resulted in HKD32bn cash
outflow for lands in 2011. With HKD31bn of
construction expenditure, cash collection ratio of
75% on HKD87bn contracted sales per our
estimate as well as other expenditures, the group
recorded negative free cash flow of HKD10.9bn
in 2011. As a result, its cash on hand dropped
40% y-o-y to HKD19.2bn and net debt increased
87% y-o-y to HKD23.4bn, translating into a
abc
higher net gearing ratio of 33% as of end-2011
versus 22% as of end-2010. The group turned free
cash flow breakeven in 2H11, which we believe is
a good demonstration of the group’s financial
prudence of balancing cash inflows with outflows.
Notable improvement was seen in the group’s
cash collection ratio of contracted sales in 2H11
versus 1H11, reflecting its operational resilience.
The group reiterates its financial policies of
maintaining its net gearing at below 40% (33% as
of end-2011) and cash on hand higher than 10%
of total assets (11% as of end-2011).
China Overseas sets its 2012 contracted sales
target at HKD80bn on the back of HKD125bn
saleable resources, reflecting its conservativeness
and cautious stance towards the market. Note the
group is one of the few developers with its sales
target for the year being lower than the
corresponding 2011 contracted sales (HKD87bn).
We notice a material pick-up in contracted sales
performance for the group in February 2012,
bringing its January to February 2012 contracted
sales to HKD17bn. Yet, the full-year outlook
remains uncertain, in our view. The group sets its
construction expenditure budget at HKD30bn in
2012. With outstanding land premium of
HKD5bn, we believe the group has a high level of
financial flexibility, and the HKD25bn budget for
new land acquisitions in 2012 will be adjusted in
accordance with market conditions.
At 5T+325/310, we establish hold call on
CHIOLI’17 in light of supply risk from similarly
rated China Resources Land (see ACT dated 12
March 2012). We have an Overweight
fundamental recommendation on China Overseas
Land & Investment with the key downside risk
linked to the uncertain policy backdrop against the
property sector.
Keith Chan, Alex Zhang
99
 The View
Asia’s Bond Markets
April 2012
China Resources Land
Balance sheet leverage increases on
land bank expansion, USD bond
supply risk lingers; hold CRHZCH’16
at 5T+335/305 (12 Mar)
China Resources Land (CRHZCH; rated
Baa2/BBB) reported FY11 results on 9 March
2012. Recognised revenue in 2011 increased 39%
y-o-y to HKD36bn, driven by a 15% increase in
recognised average selling price to HKD14,450
per sq m and a 21% increase in gross floor area
delivered to 2.2 million sq m. Albeit the increase
in recognised average selling price, the group’s
gross margin remained stable at 40% in 2011
versus 2010 on the back of its higher unit cost
base resulting from an increase in unit
construction and land cost. With selling and
administrative expenses more than doubled to
HKD3.7bn, a 62% y-o-y increase in contracted
sales to RMB36bn and an increase in head count
upon the group’s third-tier cities expansion,
EBITDA margin dropped to 30% in 2011 from
34% in 2010. As such, EBITDA increased at a
slower pace of 25% versus recognised revenue,
and covered the group’s interest expense during
the period by 6 times.
Given China Resources Land’s ample access to
liquidity as it is an important unit of the state-
owned China Resources Group, it continues to
pursue a relative aggressive land bank expansion
strategy. From January 2011-to-date, the group has
added 9.4 million sq m of new land bank at a total
consideration of RMB19.6bn, bringing its total
land bank size to 29.9 million sq m. As a result, net
debt of the group increased to HKD45bn as of end-
2011 from HKD36bn as of end-June 2011 and
HKD25bn as of end-2010. Net gearing increased to
68% as of end-2011 from 51% as of end-2010,
while net debt-to-EBITDA increased to 4.2 times
as of end-2011 from 2.9 times in 2010. Although
we don’t expect de-leveraging of the group in 2012,
100
abc
we take comfort from its recurrent rental income
from investment properties, which comfortably
covers interest expense. The sizeable recurrent cash
flow (HKD2.8bn rental income in 2011)
differentiates the group from its peers which are
overwhelmingly focused on property development,
in our view. This means the group could sustain a
higher level of debt without impeding its stable
financial profile.
China Resources Land sets its 2012 contracted
sales target at RMB40bn, representing an 11% y-o-
y increase versus the group’s RMB36bn contracted
sales achieved in 2011. The group is confident in
achieving its sales target, given the increase in its
saleable resources to RMB70bn (70 projects) in
2012e from RMB50bn (53 projects) in 2011, as
well as the increase in the number cities with sales
contribution (39 in 2012e from 31 in 2011). Out of
the RMB70bn saleable resources, RMB20bn is
attributable to inventories carried forward from
prior years, RMB24bn is attributable to new
phases/products of existing projects and RMB26bn
is attributable to 17 new projects, with the latter
having the highest pricing flexibility.
Barring new land acquisitions, the group’s
negative free cash flow in 2012 should narrow
substantially versus HKD20bn in 2011, with
RMB40bn cash inflows from property sales
covering the bulk of the major cash outflow
items – namely RMB22bn in construction
expenditure, RMB13bn in land premium,
RMB7.5bn of tax and RMB4.2bn of sales and
administrative expenses. Yet, the group has a high
level of short-term debt (HKD22bn) due in 2012,
of which HKD10bn is from the maturity of 3 and
5-year offshore bank loans arranged in 2009 and
2007, respectively. As of now, HKD3bn of
offshore bank loans have been refinanced. We
believe China Resources Land will seize the
market window and issue USD bonds to refinance
its debt and fund its growth. As such, we retain
 The View
Asia’s Bond Markets
April 2012
our hold call on CRHZCH’16 and Overweight
fundamental recommendation, with the key
downside risk being USD bond supply risk.
Keith Chan
China Resources Power
Stable FY11 results in tough operating
environment and much smaller capex
plan in 2012; switch RESOPW’15 into
CRHZCH’16 for a yield pick-up (20 Mar)
China Resources Power (RESOPW; rated
Baa2/BBB, bond rated Baa3/BBB-, hybrid rated
Ba2/BB) announced stable FY11 results on 19
March 2012. Total revenue increased 25% to
HKD60.7bn, with electricity sales and coal sales
to external parties contributing HKD50.7bn and
HKD8.0bn, respectively. Revenue from electricity
sales rose 21.5%, driven by a 15.8% increase in
total net generation volume to 112,080,283MWh
and a 3.6% pick-up in average tariff for coal-fired
power plants to 371.2RMB/MWh in 2011.
Revenue from coal sales to external parties surged
47% y-o-y mainly due to subsidiary coal mines
producing 37.1% more coals to 13.11m tones and
a 5.1% hike in average sales price of coal to
RMB509/tonne in 2011. Although the group
improved electricity generation efficiency by
decreasing the net coal consumption rate by 1.4%
y-o-y, given the rising coal price encroaching
profit (average unit fuel cost rose 11% to
RMB280.5/MWh in 2011) in electricity sales,
operating profit dropped 0.9% to HKD7.1bn with
the margin down from 17% to 15.7% y-o-y.
Reported EBITDA also grew slower than revenue
at 9.6% to HKD15.1bn, with a margin of 24.8%,
1% lower than 2010. In the long run, when the
group's self sufficiency rate of thermal coal
increases, we believe coal price fluctuation will
have less of an impact to the group's profitability.
Concerned about the slowdown in China’s
economy, electricity demand should follow the
abc
trend in 2012, as already witnessed from the 10%
drop in coal price y-t-d. As such, the group has set
aside a smaller capex budget of HKD11.6bn this
year (2011: HKD20.5bn), with HKD5bn for coal-
fired/wind power plant construction (2011:
HKD8.8bn), HKD3bn for coal mine development
(2011: HKD7.1bn) and the rest for renewable
energy and other costs. As at the end of 2011,
China Resources Power had cash of HKD4.5bn
(2010: HKD6.8bn) and total debt of HKD83.0bn
(2010: HKD75.0bn), implying a net gearing of
165.3% (2010: 161.5%). Reported EBITDA
interest coverage dropped from 4.28 to 3.86 y-o-y.
At 5T+199/159 or 101.78/103.08, RESOPW’15
appeared less attractive compared to China
Resources Land’s CRHZCH’16 (Baa2/BBB) at
5T+314/284 or 101.07/102.22. Thus, we
recommend investors to switch into CRHZCH’16
for an 85bp yield pick-up, taking into account the
bid/offer spread. We have an Overweight
fundamental recommendation on China Resources
Power with the key downside risk being the group
losing its low-investment grade credit ratings and
further USD bond supply risk.
Alex Zhang, Keith Chan
China SCE Property
Stable FY2011 results, adequate
balance sheet liquidity; Hold
CHINSC’16 (29 Mar)
China SCE Property (CHINSC; rated B1/B+,
bond rated B2/B) reported a stable set of FY2011
results on 28 March 2012. Recognised revenue of
the group decreased 9% y-o-y to RMB3.8bn, with
25% y-o-y increase in gross floor area delivered
to 553,990 sq m failed to offset 27% y-o-y decline
in recognised average selling price to RMB6,644
per sq m. Despite a decline in average selling
price, the group’s profitability remains steady on
the back of its stringent cost control and low cost
land bank, with gross margin and EBITDA
101
 The View
Asia’s Bond Markets
April 2012
margin at 41% and 34% in 2011 respectively
versus 39% and 33% in 2010. As such, the
group’s EBITDA move in tandem with
recognised revenue and declined 8% to
RMB1.3bn. This covers interest expense of the
group by 3 times.
Net debt of China SCE increased to RMB3.2bn as
of end 2011 from RMB2.0bn as of end June 2011
and RMB1.4bn as of end 2010. The increment in
net debt could be attributable to the group
spending RMB1.6bn on land premium payment in
2011 as well as slow down in cash collection on
the back of tight monetary environment in 2H11.
Yet, as of end 2011, the group’s balance sheet
leverage as measured by net gearing, Debt-to-
EBITDA and debt-to-capitalisation remains
healthy, at 54%, 4 times and 46% respectively. Its
liquidity is also adequate in our view, taking into
account its niche business scale. Unrestricted cash
on hand of as of end 2011 totalled RMB1.9bn,
which covers its short-term debt due of
RMB1.4bn. We believe both rating agencies will
affirm China SCE’s B1/B+ ratings with stable
outlook.
At 80/83 (bid/ask), CHINSC’16 synthetic bond is
yielding 18.8%/ 17.4%, which we deem as fair
against B-rated USD China property bonds, taking
into account the illiquidity of synthetic bond and
the currency volatilities. Among B-rated China
property bonds, our preferred pick is Yuzhou
Properties’ YUZHOU’15 (91 offer price, 16.8%
yield) as it presents attractive risk-reward to
investors (please refer to ACT dated 23 March
2012 for further analysis). We have Overweight
fundamental recommendation on China SCE with
key downside risk as the group changing its
prudent financial management policy.
102
abc
2012 outlook
 China SCE saw improvement in its contracted
sales performance in March 2012, with
contracted sales for the month expected to
exceed that of January and February 2012
combined (i.e. RMB289m). Contracted sales
target for 2012 is set at RMB4.5bn on
800,000 sq m of saleable resources, average
selling price assumption of RMB8,000 per sq
m and 70% sales-through rate. With
RMB800m of 2011 contracted sales carried
forward for collection in 2012 and cash flow
contracted sales collection ratio of 83% (same
as 2011), the group shall receive RMB4.5bn
from property sales.
 In terms of cash outflows, the group budgets
to spend RMB2.5bn on construction,
RMB700m on tax, RMB480m on interest
expense and RMB300m on sales and
administrative expenses. Outstanding land
premium is minimal, at RMB250m. These
major cash outflow items could be covered by
RMB4.5bn cash inflows from property sales
aforementioned.
 China SCE targets to spend RMB1-1.5bn on
land acquisitions in 2012. We believe whether
these acquisitions will materialise is
uncertain. This hinges on whether funding is
in place from external financing or stronger
than expected sales. We take comfort from
the group’s prudent acquisition track record in
2011. The group has stated that it is in the
progress of arranging offshore term loans
from banks.
Keith Chan
 The View
Asia’s Bond Markets abc
April 2012

ENN Energy revenue and natural gas sales volume. The

No surprise on FY2011 results, China
Gas offer likely to be sweetened in
April 2012; Reiterate Sell XINAOG’21
at T+435/405 (28 Mar)
ENN Energy (XINAOG; rated Baa3/BBB-)
announced FY2011 results on 27 March 2012 with
little surprises. Recognised revenue of the group
increased 34% y-o-y to RMB15bn in 2011, driven
by 32% y-o-y growth in natural gas sales to 5.0bn
cubic metres for the year. Reported EBITDA stood
at RMB3.1bn, up 32% y-o-y, implying decline in
EBITDA margin to 20.8% in 2011 from 21.2% in
2010. The decline in margin could be attributable to
two factors. Firstly, although the group has been able
to fully pass through the incremental increase in gas
cost to customers and maintain a stable dollar
margin per unit gas sold, operating margin of gas
sales declined to 16% in 2011 from 18% in 2010,
reflecting the larger revenue base on the back of a
gas tariff hike. Secondly, the contribution of the
higher margin one-off connection fees as a
percentage of recognised revenue is on a continual
declining trend, as the group’s projects turned
mature (and hence the revenue mix shifted more
towards recurrent gas sales).
We notice that excluding interest expense, ENN
Energy’s net cash generated by operating activities
was flat at RMB2.7bn in 2011 versus 2010, as
opposed to the 30%-plus growth seen in recognised
disconnection could be explained by the group’s
provision of longer credit period to customers in
light of the tight monetary backdrop. Taking into
account capital expenditure of RMB2.7bn, interest
and dividend payment during the year, the group’s
net debt increased to RMB4.8bn as of end-2011
from RMB3.4bn as of end-2010, translating into a
higher reported net gearing ratio of 54% versus 45%.
The group is guiding positive free cash flow in 2012,
excluding interest and dividend payment, and looks
to tighten credit terms granted to customers to
strengthen operating cash flows.
Turning to the proposed HKD3.5 per share
offering of China Gas (384.HK) by the ENN/
Sinopec consortium, ENN is seeking to
communicate with the board of directors of China
Gas, while liaising with China Gas’ majority
shareholders, including SK and Fortune Oil. We
believe sweetening the deal, if any, will happen
before ENN’s publication of the circular with
regards to the acquisition on 30 April 2012.
Should the deal be sweetened and go through, we
believe ENN Energy’s investment grade credit
ratings will be pressured. At T+435/405, we
reiterate Sell on XINAOG’21. We have a Neutral
fundamental recommendation on ENN with
upside/downside risk linked to failure/success of
the China Gas deal.
Keith Chan

1. China Gas trades consistently above HKD3.5 per share

offer price of ENN/ Sinopec consortium 2. China Gas major shareholders increasing stake in open
4.0 market at above HKD3.5 per share offer price
Date Shares Share HKDm Stake
3.5 (million) price post
(HKD) purchase
HKD

30-Dec-11 SK 9 3.58 30 6.09%

3.0 04-Jan-12 SK 26 3.66 95 7.04%
General offer made by ENN/ Sinopec
09-Jan-12 Fortune Oil 5 3.69 17 7.06%
consortium at HKD3.5 per share 16-Jan-12 SK 15 3.66 56 8.14%
2.5
18-Jan-12 SK 39 3.65 141 9.61%
1-Dec 25-Dec 18-Jan 11-Feb 6-Mar 19-Jan-12 Fortune Oil 6 3.49 20 8.01%
30-Jan-12 SK 5 3.58 18 10.06%
Share price of China Gas Holdings (384.HK)
07-Feb-12 Fortune Oil 3 3.63 11 9.03%
Offer price 23-Feb-12 Fortune Oil 11 3.71 40 10.13%
Source: Bloomberg, HSBC Source: Stock Exchange of Hong Kong

103
 The View
Asia’s Bond Markets
April 2012
Evergrande Real Estate
Margin pressure; Reiterate Sell
EVERRE’15 on weak contracted
sales to-date (29 Mar)
Evergrande Real Estate (EVERRE; rated B1/BB,
bond rated B2/BB-) reported decent FY2011
results on 28 March 2012, which comes at no
surprise with positive profit alert issued earlier.
Recognised revenue increased 35% y-o-y to
RMB62bn, driven by 16% y-o-y increase in gross
floor area delivered to 9.5 million sq m and 15%
y-o-y increase in average selling price to
RMB6,385 per sq m. EBITDA increased at a
faster pace, up 53% y-o-y to RMB16bn in 2011,
reflecting the y-o-y improvement in EBITDA
margin on the back of higher recognised average
selling price. EBITDA interest coverage declined
to 4 times in 2011 from 5 times in 2010 on the
back of a nearly doubled interest expense. The
group is one of the few developers which
managed to hit its full year contracted sales target
in 2011. Specifically, the group generated
RMB80bn of contracted sales which exceeds its
annual sales target of RMB70bn.
The group’s net debt didn’t change materially in
2H11 as opposed to the almost doubling of net
debt in 1H11, as it scaled back cash outflows and
materially slow down new land acquisitions.
Specifically, the group only paid RMB9bn on
land premium in 2H11 versus the original
guidance of RMB16bn, while construction
expenditure for 2H11 is scaled back to RMB19bn
from RMB22bn. Together with RMB2bn of
interest expenses as well as RMB11bn of other
cash outflows including tax, selling and
administrative expense, dividends and share
repurchases, this is covered by the group’s
RMB37bn of cash inflow from pre-sales in 2H11
and RMB3bn from the sale of 50% stake in
Qidong Phase 1 to Chinese Estates (127.HK).
Liquidity of the group appears adequate with
104
abc
unrestricted cash on hand of RMB20bn versus
short-term debt due of RMB10bn. Debt leverage
as measured by Debt-to-EBITDA stood at 3.2
times, with debt-to-capitalization stood at 60% as
of end 2011, inline with its current credit ratings,
in our view.
While the full year 2011 picture is rosy, we see
some warning signs on the group’s business
model when analysing the half-over-half (h-o-h)
statistics. On h-o-h basis, the group’s recognised
average selling price increased 1.3% to
RMB6,430 per sq m in 2H11 from RMB6,345 per
sq m in 1H11; yet, gross margin declined to 31%
in 2H11 from 35% in 1H11. This reflects
bottleneck in the group’s business model, as unit
cost base is increasing at a faster pace than
average selling price and erodes profitability. We
believe the group has limited pricing power on its
residential properties given the lack of niche
against peers aside from its low price.
Specifically, we notice that in 2H11, the group
had been able to generate monthly sales of
RMB8-9bn at average selling price of low
RMB6,000 per sq m. However, at the same level
of average selling price, the group’s monthly
contracted sales only reached RMB2bn per month
in the first 2 months of 2012. The group outlined
its plan in accomplishing its 2012 contracted sales
target of RMB80bn (flat versus 2011) while
keeping its average selling price at steady or
slightly higher levels versus RMB6,590 per sq m
in 2011. We believe maintaining a stable
profitability while keeping a fast asset turnover is
a very tough balancing act.
At 96.75/ 97.75, EVERRE’15 is yielding 14.4%/
14.0%. The risk-reward is not compelling, in our
view, taking into account the uncertainties of sales
performance and intensified competition in lower-
tier cities. As such, we reiterate our Sell call on
EVERRE’15 and Underweight fundamental
recommendation on Evergrande. Key upside risk
 The View
Asia’s Bond Markets
April 2012
to our Underweight fundamental recommendation
is the group being able to maintain fast asset
turnover and hold profitability steady.
2012 outlook
 Evergrande targets to collect 80% of the
RMB80bn contracted sales by end 2012.
Taking into account RMB16bn 2011
contracted sales carried forward for
collection, this implies RMB80bn of cash
inflows in 2012, covering RMB41bn
construction expenditure, RMB16bn land
premium payment (RMB11bn for previously
acquired lands and the rest for new land
purchases), RMB16bn sales, administrative
and other expenses; as well as RMB5bn of
interest payment. We believe the group will
scale back its cash expenditure should
contracted sales or cash collection ratio fall
behind expectation, as demonstrated in 2H11.
 Evergrande targets to step up its marketing
effort in May 2012 and launch 8-10 new
projects per month in May and June 2012.
Pre-marketing activities for the Qidong
project will start in Shanghai in April 2012.
Contracted sales per month could reach
RMB20bn per the group when it is actively
launching new projects to the market. It
remains to be seen on whether this could be
achieved given the challenging macro
backdrop and tight onshore liquidity.
 Evergrande targets to maintain its land bank
size at current level, i.e. 137 million sq m, and
to replenish lands which were pre-sold. The
group pre-sold 12 million sq m in gross floor
area in 2011. If we assume pre-sold gross
floor area in 2012 at the same level and
average land cost of RMB600 per sq m, the
group will have to earmark RMB7.2bn on
new land purchases. We believe the actual
cash outflow for land purchases will be
materially less, as the group is pursuing an
abc
asset light approach in land replenishment. A
good example is the group’s Jinan land
purchases in March 2012, with its joint-
venture partner responsible for bulk of the
RMB3.7bn land premium payment and
Evergrande contributing its development
expertise while holding majority stake in the
project.
 Evergrande’s chairman and largest
shareholder Mr. Hui Ka Yan mentioned the
group won’t consider equity and debt
issuance in 2012. We believe this pledge is in
relation to the group adopting an asset light
approach in land replenishment.
Keith Chan
Franshion Properties
Strong FY11 with increase in balance
sheet leverage as expected; hold
FRANSH’21 (22 Mar)
Franshion Properties (FRANSH; rated Baa3/BB+,
bond rated Ba1/BB) announced strong FY11
results on 21 March 2012. Classifying the sale of
Shanghai Cruise Terminal #1 as revenue instead
of other income, recognised revenue of the group
increased 31% y-o-y to HKD8.3bn. This was
driven by the first-time HKD1.7bn contribution
from Changsha primary land development project
upon successful land sales in October 2011.
Reported EBITDA of the group increased in
tandem, up 31% y-o-y to HKD4.0bn, with 59%
contribution from property development, 23%
from property rental and 17% from hotel. The
group’s recurrent EBITDA from property rental
and hotel of HKD1.6bn covers its interest expense
of HKD1.4bn for the year, albeit sharp increase in
interest expense (47%) on the back of increase in
borrowings. This is a good demonstration of the
group’s solid credit profile, underpinned by strong
recurrent cash flow from investment properties.
105
 The View
Asia’s Bond Markets
April 2012
Franshion’s contracted sales totalled RMB9.8bn
in 2011, close to the RMB10bn sales target set for
the year. Key sales contributors include Beijing
Jinmao Palace (RMB4.6bn) and Shanghai Cruise
Terminal (RMB3.8bn), with the rest coming from
Shanghai Shipping Centre (RMB800m) and
Shanghai Jin Mao Noble Manor (RMB600m).
The group’s net debt increased to HKD13.0bn as
of end-2011 from HKD7.0bn as of end-2010, on
the back of its investment in Changsha for
primary land development. This translated into a
higher net gearing ratio of 42% as of end-2011
versus 26% as of end-2010. Yet, liquidity remains
ample with unrestricted cash on hand of
HKD12.2bn versus short-term debt due of
HKD6.0bn. We have an Overweight fundamental
recommendation on Franshion with the key
downside risk being weakened support from state-
owned parent Sinochem (SINOCH; rated
Baa1/BBB). At 90/91.5 (8.3%/ 8.1%), we retain
our Hold call on FRANSH’21.
2012 outlook
 Franshion sets its contracted sales target at
RMB10bn for 2012; 40-50% is attributable to
office blocks under the Shanghai International
Shipping Centre project, which are not
subject to purchase restrictions. The sales
blockbuster for 2011, the Beijing Jinmao
Palace, is expected to contribute RMB3-4bn,
with the rest coming from Shanghai Jin Mao
Noble Manor, Qingdao and Lijiang. With
75% cash collection ratio in 2011 (RMB2.5bn
sales carried forward for collection in 2012),
the group should collect cash of RMB9.5-
10bn with a cash collection ratio of 70-75% in
2012e.
 Franshion stepped up its effort to acquire
lands since October 2011 and had earmarked
RMB3.8bn on attributable basis for land
acquisitions in Changsha, Chongqing, Beijing
and Lijiang. The group expects to spend
106
abc
RMB4bn on land premium payment and
RMB3.7bn on construction expenditure.
Taking into account further new land
acquisitions, we believe the group will seek to
raise funds opportunistically. The USD bond
market, particularly in the 5-year tenor area
given the low all-in funding cost, is one of the
possible funding routes, in our view.
Keith Chan
Glorious Property
Large refinancing needs to prompt 1-
2 notches downgrade from S&P; Hold
GLOPRO’15 with negative news
priced in (2 Apr)
Glorious Property (GLOPRO; rated B3/B+, bond
rated Caa1/B) reported lacklustre FY11 results on
30 March 2012. Recognised revenue increased
35% y-o-y to RMB9.6bn, driven by the doubling
of gross floor area delivered to 1.0 million sqm,
which was partially offset by a 33% y-o-y drop in
the recognised average selling price to RMB9,460
per sqm. This reflects the shift in its sales mix
away from Shanghai, its home base. The key
contributor of recognised sales for previous
financial years – Shanghai Bay, only accounts for
14% of the group’s recognised revenue in 2011
versus 45% in 2010. Profitability of the group
declined to 36% (gross margin) and 31%
(EBITDA margin) in 2H11 versus 50% and 38%,
respectively, in 1H11, reflecting the delivery of
projects in second and third tier cities (Harbin,
Nantong, Hefei), which are less profitable versus
its flagship Shanghai Bay project.
In the full-year 2011, Glorious Property’s gross
margin and EBITDA margin dropped to 40% and
33%, respectively, versus 48% and 40% in 2010.
As such, its EBITDA grew at a slower pace than
recognised revenue, up 12% y-o-y to RMB3.1bn,
covering its interest expense by 1.7 times. This,
together with further depletion of an unrestricted
 The View
Asia’s Bond Markets
April 2012
cash balance to RMB1.0bn as at end-2011 from
RMB2.2bn as at end-June 2011, could prompt at
least a 1, if not 2 notches downgrade from S&P,
in our view.
Glorious Property is fully aware of its imminent
debt refinancing needs, with more than 60%, or
RMB9.3bn, of its RMB14.9bn debt coming due in
2012. As at end-February 2012, the group had
repaid RMB1.3bn of short-term debt due. It aims
at reducing net debt and gross debt from its
positive free cash flow in 2012, and replacing
short-term entrusted loans or trust financing with
long-term construction financing. Specifically, the
group targets to reduce its net gearing ratio to less
than 60% in 2012 from its reported level of 69%
as at 2011. Recall that the group signed a
RMB10bn co-operative framework agreement
with China Development Bank in September 2011.
Although this is not a committed bank loan
facility, the group is one of the few developers
having support from China Development Bank.
At 87.5/88.5, GLOPRO’15 is yielding
17.9%/17.5%, which we believe is a fair value
against peers and pricing in potential negative
rating actions. As such, we reiterate our Hold
trading call on GLOPRO’15. We have a Neutral
fundamental recommendation on Glorious with
the key upside risk a material balance sheet
deleveraging from positive free cash flow/asset
sales and a key downside risk its significant
refinancing risk.
2012 outlook
 Glorious sets its 2012 contracted sales target
at RMB13bn, flat versus contracted sales in
2011. The group has four new project
launches starting from 3Q12, in Shanghai,
Tianjin, Nantong and Hefei, respectively.
Cash inflow from pre-sales is expected to
reach RMB12bn, of which RMB2bn was
carried forward from 2011 contracted sales.
Contracted sales in the first two months of
abc
2012 reached RMB1.0bn, down 43% y-o-y
from the corresponding period in 2011.
 Glorious has a limited outstanding land
premium of RMB1.6bn, of which RMB1bn is
due in 2012. Together with RMB3.5bn of
construction expenditure and RMB3.5bn of
other expenses, the group expects RMB4bn of
positive free cash flow from operations in
2012, which could be used for debt reduction.
Note the group’s construction expenditure for
2012 is 36% lower than that in 2011, with
gross floor area newly commenced for
construction halved in 2012 (1 million sqm)
versus 2011.
Keith Chan
Henderson Land Development
All ticks in for FY11; Hold HENLND’17
at T+335/315 and look for new
issuance for entry opportunities
(26 Mar)
Henderson Land Development (HENLND;
NR/NR) reported strong FY11 results.
Recognised revenue of the group more than
doubled to HKD15.2bn in 2011, driven by a
three-fold increase in property development
revenue to HKD9.7bn for the year. In Hong Kong,
the group sold 325 completed residential units and
generated HKD8.3bn, a substantial increase
versus HKD1.6bn in 2010. The group also
streamlined its asset mix during the year and
disposed of some of its non-core investment
properties for HKD2.5bn. Three projects in Hong
Kong were launched for pre-sales in 2011, with
sale proceeds of HKD3.4bn to be recognised in
the subsequent financial years upon delivery of
the properties. Solid performance was also seen in
property leasing operations. Gross rental income
increased 24% y-o-y to HKD3.9bn in 2011,
setting a new high for the group on the back of
positive rental reversion and high occupancy
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 The View
Asia’s Bond Markets abc
April 2012

1. Steadily growing dividend income from listed associates 2. Recurrent cash flow covers interests and overheads

2,000 2,500
2,000
1,500 1,500
1,000

HKDm
500
1,000 0
HKDm

-500
500 -1,000
-1,500
-2,000
0
FY06 FY07 FY08 FY09 FY10 FY11
LTM1H07

LTM1H08

LTM1H09

LTM1H10

LTM1H11

LTM1H12
FY06

FY07

FY08

FY09

FY10

FY11

Div idends receiv ed from listed associates

Net rental income
Gross interest ex pense
Administrativ e ex penses
Div idends from listed assoicates Surplus

Source: HSBC Source: Henderson Land, HSBC

(high 90%) for key investment properties in Hong
Kong; as well as contributions from new
investment properties in China. The group’s rental
income has been on a consistent uptrend since
2003 and it serves as a buffer against volatilities
in property development revenues.
Henderson received consistent and steadily
growing dividend income from three listed
associates, namely 40% owned Hong Kong and
China Gas (HKCGAS; A1/A+), 44% owned
Miramar Hotel, and 31% owned Hong Kong
Ferry (see Figure 1). In 2011, we estimate that the
group received HKD1.1bn in dividends from the
aforementioned listed associates. With Hong
Kong and China Gas declaring a special dividend
to commemorate its 150th year anniversary,
Henderson will receive HKD1.4bn in dividend
income in 1H12, according to our estimate. In a
stress scenario of which the group is not able to
sell a single residential property, the group’s
recurrent income stream (dividend income from
listed associates and net rental income) covers its
interest as well as overhead expenses (see Figure
2). This is a good demonstration of the group’s
strong and stable credit profile. We estimate the
group is in free cash flow breakeven in 2011.
Henderson continues to receive strong funding
support from its majority shareholder Dr. Lee
Shau Kee. In 1H11, Dr. Lee exercised warrants
and subscribed to HKD10.3bn worth of new
Henderson shares, with consideration offset by an
amount due from the group to him. Dr. Lee
granted an additional HKD6.3bn to the group in
2H11, according to our estimate.
In light with the maturity of HKD19.7bn in bank
and other borrowings in 2012, Henderson is
proactively seizing fund raising opportunities in the
international and local debt capital markets. In
1Q12, the group issued SGD200m 4-year,
USD700m 5-year and HKD640m 2-year bonds and
renewed a HKD4bn loan of 3-year tenor. As such,
the group only has HKD8.5bn of 2012 due debt to
be refinanced at this point, and it is at a comfortable
liquidity position taking into account a cash
balance of HKD18.9bn as of end-2011. The
group’s net gearing stood at 19% as of 2011, right
at its long-term average since 1998 (see Figure 3).
At T+335/315, we believe HENLND’17 is fairly
valued against its peers, taking into account its high
BBB credit quality and lack of credit ratings, and
hence we establish a hold call on the bonds. We
believe new bond issuance from Henderson, if any,
should provide better entry opportunities. We have
Neutral fundamental recommendation on Henderson
with key upside risks as the group is getting credit
ratings from either S&P or Moody’s and key
downside risk as the group is pursuing an aggressive
debt-funded expansion.

108
 The View
Asia’s Bond Markets abc
April 2012

3. Henderson’s net gearing stayed at prudent level

0.30

0.25

0.20

0.15
Long-term av erage: 20%
0.10

0.05

0.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net gearing

Source: Henderson Land, HSBC

4. Henderson Land: Income statements (LTH1H07 to FY11)

HKDm (Year end Dec) LTM1H07 LTM1H08 FY09 FY10 FY11
Income statements
Revenue 8,356 13,492 10,411 7,092 15,188
- Property development 4,658 9,173 6,029 2,522 9,692
- Property leasing 2,484 2,625 2,814 3,157 3,920
- Construction 101 317 296 37 44
- Infrastructure 189 272 285 317 299
- Hotel 133 186 144 184 224
- Department store 0 257 266 307 347
- Others 791 662 577 568 662
Cost of sales and services (3,647) (7,343) (4,925) (3,843) (8,418)
Gross profit 4,709 6,149 5,486 3,249 6,770
Selling, admin & operating expenses (1,741) (2,135) (1,987) (2,166) (2,345)
Operating profit 2,968 4,014 3,499 1,083 4,425
Finance costs (508) (576) (901) (970) (1,169)
Interest income 269 243 133 120 189
Other revenue and gains 2,232 6,889 9,887 11,182 10,348
Share of profit in associated & JCEs 7,711 7,162 4,781 5,824 6,635
Tax (698) (1,410) (2,515) (1,601) (1,618)
Minority interest (2,156) (849) (133) 182 (179)
Net profit 9,818 15,473 14,751 15,820 18,631
Memo item:
Depreciation and amortisation 115 171 190 175 200
Dividends from associates and JCEs 1,243 2,643 3,527 2,157 2,221 *
EBITDA 4,326 6,828 7,216 3,415 6,846
Total interest (990) (1,096) (1,172) (1,441) (1,812)
* HSBC estimate
Source: Henderson Land, HSBC

109
 The View
Asia’s Bond Markets abc
April 2012

5. Henderson Land: Balance sheets and credit statistics (LTH1H07 to FY11)

HKDm (Year end Dec) LTM1H07 LTM1H08 2009 2010 2011
Balance sheet
Cash and cash equivalents 9,520 15,675 10,525 9,797 18,850
Trade receivables and others 3,525 5,072 7,365 4,497 4,495
Inventories 31,418 42,464 47,435 67,642 76,637
Other short-term assets 487 154 242 119 514
Fixed assets 54,044 61,068 70,804 84,547 93,225
Interest in associates and JCEs 31,704 47,884 52,280 58,928 63,839
Other long-term assets 2,199 2,561 2,591 4,782 4,910
Bank loans and borrowings 3,007 3,307 4,858 7,516 19,699
Trade and other payables 4,397 4,589 5,359 5,812 9,030
Other short-term liabilities 738 879 752 733 798
Long-term bank and other borrowings 17,710 34,191 33,361 47,099 36,041
Others 6,301 7,750 9,402 4,729 6,977
Minority interest 8,525 2,966 4,383 5,385 4,589
Shareholders' equity 92,219 121,196 133,127 159,038 185,336
Memo items:
Cash 9,520 15,675 10,525 9,797 18,850
Debt* 20,717 37,498 38,219 54,615 55,740
Net debt 11,197 21,823 27,694 44,818 36,890
Total equity 100,744 124,162 137,510 164,423 189,925
Total capitalisation 121,461 161,660 175,729 219,038 245,665
Total assets 132,897 174,878 191,242 230,312 262,470

Credit statistics
Gross margin (%) 56.4% 45.6% 52.7% 45.8% 44.6%
Operating margin (%) 35.5% 29.8% 33.6% 15.3% 29.1%
EBITDA margin (%) 51.8% 50.6% 69.3% 48.2% 45.1%
EBITDA/total interest (x) 4.37 6.23 6.16 2.37 3.78

Return on equity (%) 10.1% 13.8% 11.1% 10.5% 10.5%

Return on total assets (%) 7.6% 10.1% 7.9% 7.5% 7.6%

Debt/EBITDA (x) 4.79 5.49 5.30 15.99 8.14

Net debt/EBITDA (x) 2.59 3.20 3.84 13.12 5.39

Debt/equity (x) 0.21 0.30 0.28 0.33 0.29

Net debt/equity (x) 0.11 0.18 0.20 0.27 0.19
Debt/total capitalisation (%) 17.1% 23.2% 21.7% 24.9% 22.7%
Net debt/net total capitalisation (%) 10.0% 14.9% 16.8% 21.4% 16.3%
Cash/total assets (%) 7.2% 9.0% 5.5% 4.3% 7.2%
* Inclusive of amounts due to Dr. Lee Shau Kee
Source: Henderson Land, HSBC

Keith Chan RMB15,175 per sqm. The group’s gross margin

Hopson Development
Weak FY11 results without surprises,
USD350m HDPLF’12 due in
November will be repaid in full;
Reiterate Hold HPDLF’16 (2 Apr)
Hopson Development (HPDLF; rated B3/B+, bond
rated Caa1/B) reported weak FY11 results without
surprises, in our view. Recognised revenue almost
halved y-o-y to HKD8.0bn on the back of a 50%
drop in gross floor area delivered to 391,277 sqm
and a steady recognised average selling price of
improved to 46% in 2011 from 40% in 2010,
reflecting the shift in the delivery mix towards high-
end projects with high profitability, particularly
Hopson Beijing No. 8 Royal Park. Yet, its EBITDA
margin remained steady at 29%, with an increase in
sales and administrative expenses as a percentage of
pre-sales revenue on the back of higher payrolls and
greater outlays for promotional activities of new
projects. As such, EBITDA moved in tandem with
recognised revenue, decreasing by 45% y-o-y to
HKD2.4bn. This only covers its interest expense of
the same amount in 2011.

110
 The View
Asia’s Bond Markets
April 2012
Hopson reported contracted sales of RMB9.9bn in
2011, down 10% y-o-y on the back of its focus in
first tier cities that are more susceptible to property
policy tightening, particularly home purchase
restrictions. We believe the group’s lacklustre sales
performance also reflects its reluctance to cut
property price to speed up the pace of sales. With
slow cash inflow from sales and cash outflows on
construction and land premium payment, its net debt
further increased in 2H11 to HKD32.7bn as at end-
2011 from HKD29.1bn as at end-June 2011. For
2011, we estimate that the group’s cash inflow from
pre-sales of RMB9bn was insufficient in covering
RMB7bn in construction expenditure, RMB6bn in
land premium payments, RMB2bn in interest
expenses, and RMB3bn of other expenses. This led
to the group’s HKD11.6bn increase in net debt to
HKD32.7bn as at end-2011 and translated into net
gearing of 74% (2010: 52%).
Hopson’s balance sheet liquidity appears tight, in
our view. Its cash balance was further depleted to
HKD2.6bn as at end-2011 from HKD4.2bn as at
end-June 2011, while short-term debt increased to
HKD13.6bn as at end-2011 from HKD10.1bn as
at end-June 2011. According to Hopson, some
HKD3bn of onshore bank/ trust loans had been
refinanced in 1Q12, leaving HKD8bn onshore
bank/trust loans for refinancing in the rest of 2012,
in addition to the USD350m HPDLF’12 due in
November 2012. In our view, the group’s
reluctance to cut prices to speed up cash inflow
from sales reflects its better than peers’ access to
onshore financing on the back of its high quality
land bank. Specifically, Hopson managed to
borrow an additional HKD2bn from Chinese
banks in 2H11 amid a tight monetary backdrop.
According to Hopson, multiple proposals are under
consideration to shore up its balance sheet liquidity
in preparation for the maturity of the USD350m
HDPLF’12. This includes sale of investment
properties and property development projects,
abc
disposal of available-for-sale financial assets (book
value: HKD5.2bn, including 5% stake in A-share
listed BBMG, pre-IPO investments in Guangzhou
Rural Commercial Bank and Beijing Rural
Commercial Bank) and issuance of new offshore
bonds. We have been reiterating that the HPDLF’12
will get repaid (see The View – August 2010, when
we first articulate the view). To be specific, it does
not make economic sense for Hopson to walk away
from just USD350m of offshore debt when its
current equity market capitalisation stood at
USD1bn. We have a Neutral fundamental
recommendation on Hopson with a key upside risk a
material balance sheet deleveraging on asset
disposals and a key downside risk its failure to repay
the USD350m HPDLF’12. At 87/88 (bid/ask),
HPDLF’16 yields 16.5%/16.1% (bid/ask). Reiterate
Hold HPDLF’16 with bonds fairly valued.
2012 outlook
 Hopson sets its 2012 contracted sales target at
RMB15-18bn, a substantial growth versus
RMB9.9bn in 2011. The 2012 sales target
looks stretched, in our view, given the
group’s focus on first tier cities and our
anticipation of a tight property policy
backdrop for 2012. According to the group,
more than 10 new projects will be launched
for sale from 2Q12. In 1Q12, the group
generated RMB1.8bn of contracted sales, of
which RMB1.2bn was from March 2012.
 Hopson is guiding positive free cash flow for
2012. In our view, this is achievable if the
high end of its contracted sales target (i.e.
RMB18bn) is reached, barring new land
acquisitions. The group budgets to spend
RMB7bn on construction expenditures,
RMB2.5bn on tax payments and RMB1.2-
1.3bn on land premium payments in 2012.
 Hopson has 2 million sqm of investment
properties in its pipeline, including Shanghai
Hopson International Plaza (500,000 sqm),
111
 The View
Asia’s Bond Markets abc
April 2012

Shanghai Hopson Fortune Plaza (100,000 Hutchison Whampoa

sqm), Guangzhou Hopson TIT (600,000 sqm)
Delevered in 2011, which underpins
and Beijing Times Regal (300,000 sqm). The
steady credit outlook; maintain
group also holds available-for-sale financial
Neutral fundamental
investments with a book value of HKD5.2bn
recommendation; prefer hybrid issue
as at end-2011, including a 5% stake in A-
among HUWHY curve (2 Apr)
share listed BBMG-601992.CH, and pre-IPO
Hutchison Whampoa (A3 negative/A- stable/A-
investments in Guangzhou Rural Commercial
stable) released full-year financial results that
Bank and Beijing Rural Commercial Bank.
underlined the cash generation of the period, which
These could be sold to help shoring up its
was utilised for debt deleveraging by management.
balance sheet liquidity in preparation for the
The conglomerate’s announced revenue rose 22% y-
repayment of the USD350m HPDLF’12 in
o-y to HKD387.7bn, EBITDA increased 32% y-o-y
November.
to HKD80.4bn, and net profit rose 178% y-o-y to
 Hopson’s frequent senior management HKD56.0bn; (note the figures include the
reshuffling is not a surprise to us. Currently, proportional contribution from associated entities).
its group’s deputy chairman and CFO Mr. The full-year dividend was also increased by 8.3%
Zhang Yi is assuming the CEO post after the y-o-y to HKD8.8bn.
resignation of ex-CEO Mr. Xue Hu in mid-
Management projected that the conglomerate will
March 2012. In our view, the introduction of
operate with less total debt and a reduced appetite for
Ms. Chu Katyung into the group’s board of
acquisitions moving forward than has been the
directors in November 2011 is positive, as
historic pattern. While Hutchison Whampoa has the
this implies its chairman and largest
funds and capital structure to support large-scale
shareholder Mr. Chu Mangyee is
acquisitions with material credit implications by our
implementing a succession plan with Ms. Chu
estimates, we believe management is committed to
being Mr. Chu’s daughter. This is the first
purchase quality assets with funding consistent with
time the second generation of the Chu family
a low A credit rating. Moreover, we feel additional
is introduced to the group’s board of directors.
purchases in Europe of a significant scale are
Keith Chan unlikely, given its already high exposure to the
region (31% of EBITDA in 2011).

EBITDA breakdown by geography, 2011 EBITDA breakdown by activity, 2011

Canada Hong Kong
Others Ports
16% Telecoms
20% 1% 14%
16%
Real Estate
China 12%
14% Energy
20%
Retail
Europe Asia-Pacific
15%
31% others /
19% Infra
22%
Source: Company data, HSBC estimates Source: Company data, HSBC estimates

112
 The View
Asia’s Bond Markets abc
April 2012

Debt maturity profile, 31 December 2011

100,000

80,000

60,000
HKDm

40,000

20,000

0
at Dec 2011 2012 2013 2014 2015 2016 2017-21 Bey ond 2022

Cash, liquid funds, and listed inv estments Bank and other loans Notes and bonds
Source: Company data, HSBC estimates

The financial metrics of Hutchison Whampoa
improved during the year, with net debt/EBITDA
(including estimated dividends from associates) at
3.9x and EBITDA/interest cover of 4.1x. Moreover,
the announced net debt/capital was 23.8%, with
management stating a new target of not exceeding
25% moving forward. We highlight that our net
debt/capital figure of 37% for end-2011 includes off-
balance sheet liabilities, and compares well with
Moody’s figure of 41% for the period. We believe
the negative outlook by Moody’s on its A3 rating
should be raised to stable if additional capital
structure deleveraging occurs this year.
Liquidity is strong for Hutchison Whampoa, with
cash and equivalents of HKD86.8bn (of which
HKD66.5bn was cash and HKD20.2bn was liquid
funds and listed investments) against short-term debt
obligations of HKD28.8bn. Reported total debt
declined by HKD40.0bn to HKD225.1bn by the end
of the period, primarily from hybrid and equity fund
raising at the group. The conglomerate’s debt
maturities are well termed out with existing cash and
equivalents sufficient to cover maturing debt for the
next two years. We regard supply risk as moderate,
given USD3.1bn of bonds maturing next year, but
any new issuance will be predominately used for
refinancing needs, in our view.
We maintain our fundamental recommendation at
Neutral for Hutchison Whampoa, with a Hold
trading call on the senior notes (previously Buy for

Hong Kong Investment-Grade Conglomerate and Real Estate Issues

500 Zspread
NWDEVL 20
450 HUWHY perp-15c
NWDEVL 20
400

350 HENLND 19
NANFUN 17 WHEELK 17
300 HENLND 17

WHARF 17 SUNHUN 20SUNHUN 22

250 SUNHUN 17
SUNHUN 16 LIFUNG 17 HUWHY 04/19 LIFUNG 20 HUWHY 27
HUWHY 09/19 SWIRE 22 HKLAND 25
HUWHY 1/17 SWIRE 18 SWIRE 19 HUWHY 01/22
200 SWIRE 16
HUWHY 15
HKLAND 14 HUWHY 8/17
150HUWHY 14
M. duration
100
1 2 3 4 5 6 7 8 9 10 11

Source: HSBC

113
 The View
Asia’s Bond Markets abc
April 2012

HUWHY’33) and a Buy trading call on the Balance Sheet, HKDm

perpetual note (rated Baa2 negative/BBB Dec-A Dec-A Dec-A
2009 2010 2011
stable/BBB stable). We continue to regard the
Cash and equivalents 115,734 116,237 86,778
valuation of the junior notes as attractive due to their Current assets 64,739 74,962 78,753
excessively wide spread for a mid-BBB credit, in our Current liabilities (76,278) (83,789) (80,524)
Fixed assets 247,706 238,652 208,116
view. While the outlook for operations in the Long-term investments 133,880 159,560 205,265
Other long-term assets 71,516 71,817 78,399
Eurozone and China/Hong Kong real estate are Intangibles 36,209 40,197 38,953
concerns, we take comfort from the conglomerate’s Deferred items 1,302 (185) 8,099
Capital employed 594,808 617,451 623,839
less-cyclical and cash flow generating operations,
such as container terminals, utilities (both in electric Short-term debt 17,589 23,122 28,835
Long-term debt 256,275 241,627 196,221
and water services), and investment real estate, Total debt 273,864 264,749 225,056
Minority interests 37,413 43,205 39,171
combined with strong liquidity and geographic Share capital 1,066 1,066 16,666
diversity. Management has a strong track record of Reserves 282,465 308,431 342,946
Capital employed 594,808 617,451 623,839
maintaining low A credit ratings from the global Source: Company data, HSBC estimates
agencies through economic cycles.
Financial Ratios
The key upside risks to our investment thesis are
Dec-A Dec-A Dec-A
faster-than-expected capital structure de-leveraging. 2009 2010 2011
While the key downside risks include debt-funded
Income statement ratios:
acquisitions, high 4G spectrum auction costs in EBITDA/revenue (%) 21.7 24.9 21.5
EBITDA/interest (x) 3.0 4.0 4.1
Europe, and/or a deepening of the Eurozone crisis EBITDA/net interest (x) 3.3 4.3 4.4
impacting European (retail and telecoms) and trade- Total debt/EBITDA (x) 7.4 6.1 5.3
Net debt/EBITDA (x) 5.1 4.1 3.9
related activities (container ports). EBITDA/capex (x) 19.3 2.9 5.0
EBIT/revenue (%) 6.1 9.9 8.8
Income Statement, HKDm EBIT/interest (x) 1.1 1.9 2.1
EBIT/net interest (x) 1.1 2.0 2.2
Dec-A Dec-A Dec-A Total debt/EBIT (x) 21.3 12.7 10.5
2009 2010 2011 Net debt/EBIT (x) 14.7 8.7 7.6
EBIT/capex (x) 6.7 1.4 2.5
Revenue 208,808 209,180 233,700 EBIT/EBITDA (%) 28 40 41
change y/y (%) -11 0 12 Adjusted ROA (%) 2.5 4.0 4.2
Cost of sales (119,128) (123,102) (146,044) Adjusted ROE (%) 5.0 6.5 15.6
SG&A (44,365) (33,921) (37,445)
EBITDA 45,315 52,157 50,211 Balance sheet ratios:
change y/y (%) -17 15 -4 Short-term debt/capital (%) 3 3 4
Depreciation (16,258) (14,932) (14,080) Long-term debt/capital (%) 51 48 40
Operating leases (16,404) (16,535) (15,610) Total debt/capital (%) 54 51 44
EBIT 12,653 20,690 20,521 Net debt/net capital (%) 44 41 37
change y/y (%) 1 64 -1 Equity/capital (%) 46 49 56
Interest expense (10,811) (9,391) (9,340) Total debt/equity (%) 116 103 80
Capitalized interest (276) (158) (131) Net debt/equity (%) 80 70 58
Interest income 1,198 915 925 Current ratio (x) 1.9 1.8 1.5
Associates 9,604 15,856 19,696 Cash/short-term debt (x) 6.6 5.0 3.0
Other gains/(losses) 13,589 855 43,147
EBT 26,233 28,925 74,949 Source: Company data, HSBC estimates
change y/y (%) 29 10 159
Income tax (4,496) (3,199) (1,087)
Profit after tax 21,737 25,726 73,862 Philip Wickham, Louisa Lam
Minority interests (7,569) (5,547) (17,843)
Net profit 14,168 20,179 56,019
change y/y (%) 12 42 178
Source: Company data, HSBC estimates

114
 The View
Asia’s Bond Markets abc
April 2012

Indika Energy debt (net issuance of IDR2,075bn). Liquidity is

sufficient, with cash and equivalents of IDR4,533bn
Strong financials and credit metrics in
against short-term debt obligations of IDR2,399bn as
2011; valuations remain fair; maintain
at end-December 2011.
fundamental recommendation at
Overweight with trading call at Hold The financial metrics of Indika Energy are expected
(2 Apr) to be essentially static moving forward, as the pace
Indika Energy (B1 positive/NR/B+ stable) released of acquisitions slows and thermal coal prices decline.
financial results for last year, with revenue We highlight that the main operating cash flow asset
increasing 38% y-o-y to IDR5,210bn, EBITDA of the company, the Kideco thermal coal miner,
rising 188% y-o-y to IDR818bn, and net profit remains essentially debt free (USD7m debt against
rising 44% y-o-y to IDR1,111bn. The thermal coal USD293m in cash) and paid out as dividends 99%
mining operation, at 46% owned Kideco, had a 41% of net profits for 2011 (USD450m of USD456m,
y-o-y rise in revenue to USD2,267m and a 46% y-o- respectively). A rating upgrade from Moody’s
y rise in EBITDA to USD850m. The associate remains a possibility, in our view, given the agency’s
produced 31.5m tons of coal during the year, an positive outlook on its B1 ratings on the notes.
8.4% y-o-y increase over 2010. The average selling
We maintain our trading call at Hold and
price for the coal sales increased 29.8% y-o-y to
fundamental rating at Overweight for INDYIJ’16
USD71.64 per tonne during the period.
and INDYIJ’18. The industry outlook remains
The financial ratios of Indika Energy weakened supportive with demand steadily rising and
over the year, but remained safely within its high thermal coal prices projected to be only modestly
B ratings from the global agencies. Total weaker in 2012. However, the valuation of the
debt/EBITDA reached 4.1x in 2011 from 2.8x in notes is fair, in our view, trading at narrow
2010, while net debt/EBITDA reached 2.1x from spreads relative to other mining credits in the
0.8x over the same periods. Indika Energy’s region. The key downside risks to our investment
EBITDA/interest cover was an estimated 3.2x, thesis are regulatory, specifically restrictions on
with total debt/capital of 55% as at the end of last coal exports or heavy domestic market
year. Capital expenditure was high, with the obligations, execution of planned expansion,
negative free cash flow of IDR1,152bn funded via and/or relatively large-scale acquisitions.

Asia-Pacific Metals and Mining issues

900
CITPAC 49
850 CHOGRP 15

800 VEDLN 18
BUMIIJ 16 VEDLN 16
750
VEDLN 21
Z-spread (mid, b p)

BUMIIJ 17
700

650 BERAUC 15
600 VEDLN 14
INDYIJ 16 BRAUIJ 17
550 CITPAC 21
CITPAC 18
INDYIJ 18 OLAMSP 20
500 NOBLSP 1/20
NOBLSP 8/20
450 ADAIND 19
M. dur
400
1 2 3 4 5 6 7 8

Source: HSBC

115
 The View
Asia’s Bond Markets abc
April 2012

Income Statement, IDRbn Cash Flow Statement, IDRbn

Dec-A Dec-A Dec-A Dec-A Dec-A Dec-A
2009 2010 2011 2009 2010 2011
Revenue 2,487 3,765 5,210 EBIT 191 (66) 165
change y/y (%) 7 51 38 Dividend income 1,140 1,598 1,471
Cost of sales (1,698) (2,803) (3,430) Cash outflow to minorities 0 0 0
SG&A (428) (678) (963) Financial costs (184) (365) (411)
EBITDA 360 284 818 Taxation paid (141) (205) (150)
change y/y (%) 141 (21) 188 Depreciation 142 286 511
Depreciation (142) (286) (511) Change in working capital (151) (64) (24)
Operating leases (27) (64) (141) Other operating cash flows 216 116 57
EBIT 191 (66) 165 Funds from operations 1,214 1,300 1,620
change y/y (%) 55 (134) (351) Capital expenditure (962) (330) (1,697)
Interest expense (298) (488) (658) Change in associates (1,062) (32) (1,075)
Interest income 84 63 63 Free cash flow (810) 938 (1,152)
Associates 1,475 1,443 1,946 Non-recurring items 0 0 0
Other gains/(losses) (556) (43) (175) Other items (448) (97) 62
EBT 897 908 1,342 Cash flow for dividends (1,258) 841 (1,090)
change y/y (%) (24) 1 48 Dividends paid (437) (613) (135)
Income tax (158) (130) (141) Debt issued 2,143 (41) 2,075
Profit after tax 739 778 1,200 Equity issued 0 0 0
Minority interests (13) (6) (89) (Inc)/dec in cash 448 187 850
Extraordinary items 0 0 0 Cash at year start 3,048 3,496 3,683
Net profit 726 773 1,111 (Inc)/dec in cash 448 187 850
change y/y (%) (33) 6 44 Cash at year end 3,496 3,683 4,533

Balance Sheet, IDRbn Financial Ratios

Cash and equivalents 3,496 3,683 4,533 Income statement ratios:

Current assets 1,380 1,283 1,814 EBITDA/revenue (%) 14 8 16
Current liabilities (1,131) (970) (1,478) EBITDA/interest (x) 4.9 3.7 3.2
Fixed assets 1,189 1,896 5,360 EBITDA/net interest (x) 6.7 4.2 3.6
Long-term investments 2,779 2,562 3,250 Total debt/EBITDA (x) 3.5 2.8 4.1
Other long-term assets 2,125 1,322 1,294 Net debt/EBITDA (x) 1.1 0.8 2.1
Intangibles 630 609 1,813 EBITDA/capex (x) 1.6 5.7 1.3
Deferred items (72) (73) (340) EBIT/revenue (%) 8 -2 3
Capital employed 10,396 10,310 16,245 EBIT/interest (x) 4.3 3.0 2.3
EBIT/net interest (x) 0.1 0.0 0.1
Short-term debt 251 389 2,399 Total debt/EBIT (x) 3.9 3.4 5.7
Long-term debt 4,800 4,465 6,118 Net debt/EBIT (x) 1.3 1.0 3.0
Total debt 5,051 4,854 8,516 EBIT/capex (x) 1.4 4.6 1.0
Minority interests 13 18 1,292 EBIT/EBITDA (%) 53 -23 20
Share capital 521 521 521 Adjusted ROA (%) 15.8 12.9 12.3
Reserves 4,811 4,918 5,916 Adjusted ROE (%) 13.6 14.2 17.3
Capital employed 10,396 10,310 16,245 Balance sheet ratios:
Short-term debt/capital (%) 2 4 14
Source: Company data, HSBC estimates
Long-term debt/capital (%) 47 45 41
Total debt/capital (%) 49 49 55
Net debt/net capital (%) 24 22 38
Equity/capital (%) 51 51 45
Total debt/equity (%) 98 96 121
Net debt/equity (%) 32 29 63
Current ratio (x) 3.5 3.7 1.6
Cash/short-term debt (x) 13.9 9.5 1.9
Cash flow statement ratios:
FFO/capex (x) 0.6 3.6 0.6
Total debt/FFO (x) 4.3 4.0 5.8
Net debt/FFO (x) 1.4 1.2 3.0
FFO/interest (x) 4.0 2.6 2.3
FFO/net interest (x) 5.4 2.9 2.5
(EBITDA-capex)/interest (x) -1.7 3.0 -0.7
(EBITDA-capex)/net int (x) -2.3 3.4 -0.8
Dividend payout ratio (%) 60 79 12
Source: Company data, HSBC estimates

Philip Wickham, Louisa Lam,

116
 The View
Asia’s Bond Markets abc
April 2012

Kaisa Group of RMB3.9bn, versus short-term debt of RMB2.1bn

as of end-2011. Net debt increment in 2H11 was
Shifting towards an asset turnover
RMB758m, materially less than our forecast which
model, opportunistic offshore
reflected its decent cash collection in 2H11 (the
equity/debt fund-raising anticipated;
group's contracted sales cash collection ratio was
Hold KAISAG'15 (20 Mar)
80% in 2011, in line with its peers).
Kaisa Group (KAISAG; rated B1/B+, bond rated
B2/B) reported a neutral set of FY11 result on 19 As such, the group's net gearing stood at 81% as
March 2012. Recognised revenue increased 40% of end-2011, largely stable versus 82% as of June-
to RMB10.8bn on the back of a 67% increase in 2011. Debt-to-capitalisation reached 53% as of
gross floor area delivered to 1.2 million sq m, end-2011.
which offsets a 16% drop in recognised average
At 97.5/99, we believe KAISAG'15 is fairly
selling price to RMB8,977 per sq m, with decline
valued against its peers and we reiterate our hold
in contribution from Shenzhen and Guangzhou.
call on the bonds. Given the difficulties in getting
Gross margin of the group declined to 30% in
onshore construction financing for third-tier city
2011 from 39% (35% excluding en-bloc sale of
property projects, we believe the group will seek
Guangzhou Kaisa Centre) in 2010, reflecting the
to raise funds opportunistically via offshore
lower recognised average selling price, the driver
equity/debt markets. We have a Neutral
of profitability. As the increase in recognised
fundamental recommendation on Kaisa. The key
revenue could not compensate for the decline in
upside risk is if the group is able to de-leverage
profitability, EBITDA of the group decreased 6%
materially and the key downside risk is if the
to RMB2.3bn, covering interest expense by 1.8
group faces construction funding issues for third-
times in 2011. Debt-to-EBITDA increased to 5.9
tier city projects.
times in 2011, breaching the downgrade
thresholds of Standard and Poor's and propelled 2012 outlook
the agency's change in ratings outlook on Kaisa to  The group has RMB3bn of 2011 contracted
negative. We believe the chance of a 1-notch sales carried forward to collection in 2012. It
ratings downgrade from both agencies is high in sets its contracted sales target at RMB16.5bn
the next 6-9 months. in 2012, 8% higher than that in 2011. With
80% cash collection ratio, the group should
On the other hand, as Kaisa pursues an asset
have RMB16.2bn of cash inflows from
turnover business model (sacrificing margin) and
property sales in 2012. This should cover its
expands into third-tier cities without purchase
RMB8bn construction expenditure,
restrictions, the group is one of the few developers
RMB2.6bn land premium, RMB2bn tax
which managed to meet its full-year sales target in
expenditure, RMB1.5bn interest expense and
2011. Contracted sales totalled RMB15.3bn versus
RMB1bn sales and administrative expenses,
its full-year target of RMB15bn, driven by a 149%
and leave RMB1.1bn of positive free cash
y-o-y increase in gross floor area sold to 2.2 million
flow. However, should the group pursue
sq m and a 39% y-o-y drop in average selling price
opportunistic land purchases (RMB3-4bn),
to RMB7,022 per sq m. As sales mix further shifts
external funding needs will arise in our view.
towards third-tier cities, the group expects its gross
margin to drop to high-20% from 30% in 2011.  The group has RMB1.6bn of trust financing
Liquidity is adequate with unrestricted cash on hand outstanding, of which RMB1.5bn is due in

117
 The View
Asia’s Bond Markets abc
April 2012

2012. We believe the group may seek to
refinance the high-cost trust financing via
offshore markets.
 We believe Kaisa's pursuit of an asset
turnover business model on one hand implies
higher turnover and outperformance in
contracted sales; on the other hand, it implies
lower profitability and continual needs for
offshore funding as seed monies to kick-start
the construction of projects in third-tier cities.
Keith Chan
Kerry Properties
Busy year of acquisitions in 2011;
Hold KERPRO’17 at 5T+320/305 in
light of further USD supply from Hong
Kong property sector (19 Mar)
Kerry Properties (KERPRO; rated NR/BBB-)
reported FY11 results on 15 March 2012. Total
recognised revenue dropped 3% in 2011, to
HKD20.7bn, due mainly to 68% slump in revenue
from property sales, to HKD2.7bn, with a lack of
residential property project delivery, partly offset
by revenue from logistics, which surged 47% for
the year, to HKD16.0bn. Operating profit had a
sharper decrease of 23% in 2011, to HKD3.0bn,
reflecting the profit mix shift towards the logistics
division, which has lower profitability versus
property sales and rentals. With operating profit
from rental operations of HKD1.1bn, we take
comfort from the fact that its total interest cost of
HKD837m for the year was well covered.
opportunities in Hong Kong and China. At end-
2011, the group had cash of HKD17.5bn (2010:
HKD10.5bn) and total debt of HKD29.5bn (2010:
HKD20.7bn), implying a net gearing ratio of 19%
(2010: 18%). With a normalized net gearing target
of 35%, we believe the group will continue to
pursue an acquisitive strategy. In February 2012,
Kerry issued USD600m 5-year bonds to refinance
a convertible bond due for redemption of
USD350m and to provide funding for land
purchases.
Kerry has set its 2012 contract sales target at
HKD10bn, with a 70% contribution from Hong
Kong and the rest from China. This will cover the
group’s capital expenditure of HKD9-10bn for the
year. As in 2011, we believe any slack from China
is likely to be filled by projects in Hong Kong.
Till now, Kerry has not joined the price cut wave
initiated by China property peers started 2H11. To
speed up sales, the group might consider a 10-
20% discount in 2012 if sales momentum remains
weak.
At 5T+320/305, we establish a Hold call on
KERPRO’17. We a have Neutral fundamental
recommendation on Kerry. An upside risk to our
recommendation would be a credit rating upgrade.
Downside risk relates to the group pursuing
aggressive debt-funded acquisitions that could
jeopardise its low investment-grade credit rating.
In general, upside and downside risks to our view
also relate to the status of the Hong Kong and
China property markets.

With the group’s net gearing (net debt to equity, Alex Zhang, Keith Chan
excluding minority interest) at its lowest level
since 1997 (13%) at end-June 2011, Kerry turned
acquisitive in 2H11 on land replenishment, which
was no surprise to us. Specifically, two sites in
Zhengzhou and Putian and five sites in Hong
Kong were acquired (two via auctions and three
via urban redevelopment) in 2H11. Management
remains keen on further land bank replenishment

118
 The View
Asia’s Bond Markets
April 2012
Longfor Properties
Longfor Properties: Best non-SOE
China property credit, in our view, given
strong FY11 results and balance sheet
de-leveraging; Sell LNGFOR’16 at
above par, bonds fully valued (19 Mar)
Longfor Properties (LNGFOR; Ba2/BB+, bond
rated Ba3/BB) reported strong FY11 results on 12
March. Recognised revenue increased 60% y-o-y
to RMB24bn on the back of 72% surge in
recognised average selling price to RMB13,930
per sqm. Profitability in 2011 is enhanced by the
delivery of more profitable projects, especially
Beijing Summer Palace Splendor. Specifically,
the group gross margin improved to 40.5% in
2011 from 33.8% in 2010, while the EBITDA
margin improved to 35.0% from 28.9%. EBITDA
almost doubled to RMB8.4bn in 2011, covering
interest expense by 5.5x.
Longfor is the only non-state-owned enterprise
(non-SOE) developer to have recorded an
absolute decline in net debt in 2H11, aside from
the state-owned and highest-rated China Overseas
Land (CHIOLI; rated Baa2/BBB), demonstrating
its financial prudence in matching cash inflows
with outflows amid slowing property sales. With
net debt decreasing to RMB9.8bn as of end-2011
from RMB10.7bn at end-June 2011, its net
gearing decreased to 41% from 55%; while debt
to capitalisation decreased to 50% as of end-2011
from 54% at end-June. Unrestricted cash on hand
of RMB14.1bn comfortably covers short-term
debt due of RMB3.6bn. The company’s 83% cash
collection ratio for 2011 contracted sales is among
the highest in the sector. These are evidence that
the group is the best non-SOE China property
credit, in our view.
With a HKD2bn 3-year offshore term loan under
arrangement, according to Bloomberg, and no
sizeable land acquisitions, we believe the group
has no additional funding needs. However, we
abc
think the chances of further offshore debt
financing – including a USD bond offering or a
convertible bond offering – cannot be ruled out,
should Longfor decide to capitalise on market
weakness and accelerate its land bank expansion.
At 100/102 (bid/ask), LNGFOR’16 is yielding
9.5%/8.9%, which we believe is fully valued. We
therefore recommend selling LNGFOR’16 at
current levels and looking for better re-entry
points. We have an Overweight fundamental
recommendation on Longfor with change in its
prudent financial policy as the key downside risk.
Outlook for 2012
 Longfor sets its 2012 contracted sales target
at RMB39bn, roughly flat versus RMB38.3bn
contracted sales generated in 2011. The group
has some RMB78bn of saleable inventories in
2012, which means 50% sales through rate
will push the group through its target. The
RMB39bn sales target has likely budgeted in
some further deterioration in the property
market, in our view, as the group was able to
maintain a pre-sales rate above 60% through
the last property down-cycle in 2008. In line
with peers, contracted sales saw some month-
on-month improvement in February 2012.
Contracted sales in the first two months of the
year totalled RMB3.3bn, or 8.5% of its full
year sales target.
 Taking into account RMB6.5bn in 2011
contracted sales carried forward to 2012 for
cash collection, the group will have
RMB38.9bn in cash inflow from property
sales in 2012 should it maintain its sales
through rate at 83% and reach its RMB39bn
sales target for the year. This comfortably
covers RMB16bn in construction expenditure,
RMB7bn in land premium payments,
RMB5.5bn in taxes, RMB1.8bn in interest
expense, RMB1.7bn in sales and
administrative expenses, and RMB902m in
119
 The View
Asia’s Bond Markets abc
April 2012

dividend payments, leaving RMB6bn in average selling price to RMB7,222 per sqm. Due
positive free cash flow as a margin for error. to a shift in revenue mix towards less lucrative
residential property sales versus commercial
 Under a stressed scenario, we expect Longfor
property sales, gross margin of the group dropped
to record RMB2.6bn in negative free cash
to 44% in 2011 from 54% in 2010. EBITDA of
flow should its contracted sales reach half of
the group decreased 13% y-o-y to RMB1.7bn,
its RMB39bn sales target for 2012 and if it
covering interest expense by 2.5x.
can scale back 25% of its construction
expenditure for the year. The group still has a We take comfort from the stabilisation of
comfortable liquidity position, in our view, Powerlong’s liquidity position in 2H11 amid
under this scenario, with a HKD2bn offshore weak contracted sales, with unrestricted cash on
3-year loan under arrangement, according to hand of RMB1.4bn and short-term debt of
Bloomberg. RMB2.4bn as of end-2011 versus RMB1.3bn and
RMB2.3bn, respectively, as of end-June 2011.
 From a long-term strategic perspective,
This reflects the group’s effort in scaling back
Longfor is looking to further diversify its
expenditures to cope with a slowdown in sales. To
geographical footprint into southern China in
be specific, construction expenditure for 2011 was
the next five years, including Fujian province
cut to RMB4.8bn from the original RMB6.5bn
and Pearl River Delta. We do not expect the
plan, while payment of the RMB800m land
group to materially speed up its land bank
premium for the Hangzhou project was delayed in
acquisitions until notable improvement is
2012. Yet, its end-2011 liquidity position remains
seen in its pre-sales. There is one shopping
relatively stretched, in our view. As one of the
mall coming on stream each year from 2012
highest yielding B-rated China property bonds
and onward, including Chongqing Times
(high-teens yield), we believe PWRLNG’14
Paradise Walk Phase 1 (2012), Chengdu
and ’15 are fairly valued, taking into account the
North Paradise Walk (2013) and Beijing
risk factors involved. We have a Neutral
Changying Paradise Walk (2014). The group
fundamental recommendation on Powerlong with
now generates 4.4% of its net profit from
key upside risk as material balance sheet de-
investment properties and has a long-term
leveraging upon asset sales and key downside risk
target of raising the proportion of net profit
as breach of offshore bank loan covenants.
from investment properties to 30% by 2026.
2012 outlook
Keith Chan
 Powerlong has RMB12-14bn of saleable
Powerlong Real Estate resources in 2012 to support a contracted
sales target of RMB6bn. It recorded
No surprises from lacklustre FY11
contracted sales of RMB498m in the first two
results; Hold PWRLNG’14, ’15 (26 Mar)
months of 2012, down 13% y-o-y. This
Powerlong Real Estate (PWRLNG; rated B1/B+,
outperformed 25 peers that witnessed a 36%
bond rated B2/B) announced a lacklustre set of
y-o-y decrease in contracted sales during the
FY11 results without surprises. Recognised
same period. Construction expenditure was
revenue of the group increased 19% y-o-y to
further shrunk to RMB3.5bn in 2012 versus
RMB5.3bn on the back of a 28% increase in gross
RMB4.8bn in 2011, as the group only has two
floor area delivered to 657,575 sqm, which is
new shopping malls slated for opening. The
partially offset by an 11% drop in recognised

120
 The View
Asia’s Bond Markets
April 2012
group carried forward RMB6-7bn worth of
saleable inventory from 2011. Taking into
account RMB3bn of other expenses (land
premium, interest, tax, sales and
administrative expenses, dividends), the
group should be close to, if not at cash flow
breakeven, barring new land acquisitions and
asset sales.
 Powerlong’s growth of rental income in 2012
will likely continue to lag behind the sizeable
enlargement of its investment property
portfolio, which almost doubled in size in
2011. This is due to the provision of rental
incentives to tenants to boost occupancies. In
2012, the group expects its rental income to
grow by at least 50% y-o-y from RMB195m
in 2011. We don’t expect material growth in
rental income until 2014-5, when the three-
year leases for non-anchor tenants in the 2011
opened malls expire.
 Powerlong is evaluating various options to
help to shore up its liquidity position. Out of
the RMB2.4bn short-term debt as of end-
2011, RMB700m had been refinanced to date.
The group has six newly opened shopping
malls in 2011with gross floor area of 512,000
sqm and a small amount of construction
financing (cRMB100m) attached to each
project. That being said, using RMB10,000
per sqm as a conservative estimate for capital
values and a 30% loan-to-value ratio for
encumbered loans, an additional RMB900m
could be borrowed from banks. Furthermore,
the group is evaluating the possibility of
introducing joint-venture partners to some of
its projects.
Keith Chan
abc
Renhe Commercial
Weak FY2011 results in the price,
cash flow management key; Hold
RNHEF’15, ’16 with bonds yielding
20%+ (28 Mar)
Renhe Commercial (RNEHF; rated B1/B+)
reported weak FY2011 results as expected.
Considering proceeds from the sale of five
underground shopping malls through BVI
company transfers in 2010 as revenue, the group’s
top line dropped 65% y-o-y to RMB2.2bn in
2011, with EBITDA moving in tandem to
RMB1.2bn in 2011 versus RMB3.1bn in 2010.
We notice that the group cancelled the bulk of the
RMB3bn pre-sales contracts at the Dongguan
Humen project in 2H11, given its inability to
collect cash from buyers on the back of the tight
monetary backdrop. This should be viewed
positively as the group finally adopts a more
stringent accounting policy; as in the past,
revenue would have been recognised in its profit
and loss accounts regardless of cash collection.
Indeed, for first time since 2006, the group
recorded a y-o-y decline in account receivables on
its balance sheets, with trade and other receivables
decreasing 28% y-o-y to RMB5.3bn as of end-
2011 from RMB7.5bn as of end-2010. This
mainly reflects the collection of RMB2.9bn
receivables from BVI company transfers in 2011.
In 1Q12, a further RMB858m of receivables in
relation to the BVI company sale of Chengdu
project was collected, which helped to boost the
group’s current cash balance to RMB3bn from
RMB2.2bn as of end-2011.
Per our calculation, Renhe’s fixed charge
coverage ratio (FCCR) dropped to 1.4 times in
2011, below the 3.5 times threshold sets in the
RNHEF high-yield bond indenture for restricted
payment inclusive of dividend payment. This
matches with the group not declaring 2011 final
dividends yesterday. On the back of weak results
121
 The View
Asia’s Bond Markets
April 2012
and no dividend payment, Renhe’s share price
dropped 16% on 28 March morning. Although the
drop in the share price may create a negative spill-
over impact on the bonds, the halt of dividends
should be viewed positively from a credit
perspective, as it helps the group in preserving
capital.
Renhe’s business model of strata selling
underground shopping space is seriously
challenged by the currently tight monetary
backdrop in China. As it appears, individual
buyers are less keen on buying operating rights of
underground shopping space, given the
difficulties in obtaining bank financing. We take
some comfort in that the group is abandoning its
expansion stance to cope with its cash depletion.
Specifically, the goal outlined in 2011, namely a
30% y-o-y increase in construction
commencement, is abolished. The focus of the
group in 2012 is shifting towards collection of
receivables, with a target 70% collection rate of
its RMB5.3bn trade and other receivables for
RMB3.7bn. The group also targets to collect
RMB2.6bn in 2012 from the yet to be recognised
pre-sales of RMB3bn done in 2011. We believe
both of these tasks could be challenging,
especially for the latter, as buyers may opt to walk
away, given the low level of deposits paid by
buyers in 2011 (RMB400m out of RMB3bn, or
13%, mainly reflecting the low down payment of
buyers in the Shenyang Zhongjie project). Yet,
should sales remain anaemic or collection of
receivables fall behind the group’s schedule, we
believe the group will halt the construction
commencement plan of 100,000-200,000 sqm for
2H12, which could help preserving up to
RMB1.5bn of construction expenditure. Note the
group is guiding to positive free cash flow of
RMB1-1.2bn for 2012.
At 77/81 (bid/ask) and 75/77.5 (bid/ask),
RNHEF’15 and ’16 is yielding 22.3%/20.2% and
122
abc
23.0%/21.8%, respectively, as two of the highest
yielding bonds in the China property space. As
such, we retain our Hold call on RNHEF bonds.
We have an Underweight fundamental
recommendation on Renhe Commercial with key
upside risk linked to the revival of its business
model upon loosening of the monetary backdrop.
Keith Chan
Shanghai Industrial Urban
Development (Neo-China)
On the right track, CNH bond
issuance candidate, in our view;
Reiterate Hold NECHIN’14 with
bonds fairly valued (2 Apr)
Shanghai Industrial Urban Development
(previously known as Neo-China, NECHIN; rated
B1/B, bond rated B2/B-) reported FY11 results on
28 March 2012. Recognised revenue decreased
9% y-o-y to HKD4.3bn in 2011, with a 28% y-o-y
increase in gross floor area delivered to 511,800
sqm failed to offset a 33% y-o-y decline in the
recognised average selling price to HKD7,812 per
sqm. The lower recognised average selling price
for the year reflects the shift in delivery mix
towards lower priced property projects,
particularly Neo Water City in Xian, which
accounts for 22% of its 2011 recognised property
sales. Profitability of the group improved as it
completed its merger with the more profitable
Shanghai Urban Development (59% owned)
during the year. Specifically, gross margin
improved to 25% in 2011 from 17% in 2010,
while it recorded EBITDA of HKD303m in 2011
versus EBITDA of HKD182m in 2010.
Shanghai Industrial Urban Development’s cash on
hand was halved in 2011 to HKD3.5bn from
HKD6.9bn as at end-2010. Its net debt increased
HKD5.3bn to HKD10.7bn as at end-2011 from
HKD5.4bn as at end-2010. This reflects the
settlement of the outstanding land premium for
 The View
Asia’s Bond Markets abc
April 2012

the 69% owned Shanghai Meilong Town project contracted sales in 2011. Contracted sales
and the 21% owned Shanghai Xinzhuang Metro reached HKD500-600m year-to-date. While
Superstructure project; as well as cash inflows the 2012 contracted sales target looks
from pre-sales not covering cash outflows on stretched, we believe the group will adjust its
construction in 2011, per our estimate. Its net construction schedule to cope with the
gearing ratio was increased to 54% as at end-2011 underperformance in sales. The group’s
from 28% as at end-2010. Out of the HKD4.8bn monthly cash outflow on construction totalled
short-term debt as at end-2011, RMB1bn HKD300m on average.
(HKD1.2bn equivalent) is an onshore entrusted
 Shanghai Industrial Urban Development’s
loan from an affiliate of its parent company
focus in 2012 is to report positive net profit
Shanghai Industrial (363.HK), while another
(net loss in 2011: HKD478m). The group
HKD1.0bn is an offshore shareholder’s loan from
targets to recognise 60-70% of its HKD9bn
Shanghai Industrial. These loans from Shanghai
deferred revenue in 2012.
Industrial and its affiliate could further be
extended, if necessary. In other words, the group’s Keith Chan
cash position is adequate, in our view, as cash on
Shimao Property
hand of HKD3.5bn covers its short-term debt
from banks of HKD2.6bn. Failure to de-lever its balance sheet
as pledged; Hold SHIMAO’17 and ’18
We reiterate our Overweight fundamental
(30 Mar)
recommendation on Shanghai Industrial Urban
Shimao Property (SHIMAO; rated Ba3/BB, bond
Development with a key downside risk a
rated B1/BB-) reported FY11 results on 29 March
weakening of support from the parent company
2012. Recognised revenue for 2011 increased
Shanghai Industrial. We believe the group’s
20% y-o-y to RMB26bn, driven by 20% y-o-y
current B1/B credit ratings are too low and fail to
growth of recognised property sales on the back
reflect the strategic importance of Shanghai
of an 18% y-o-y increase in recognised average
Industrial Urban Development to Shanghai
selling price to RMB11,786 per sq m and a 2%
Industrial, the largest overseas conglomerate
y-o-y growth in recognised gross floor area sold
under the Shanghai Municipal Government. At
to 2.1 million sq m. Profitability of the group
101.25/102.25, NECHIN’14 yields 9.1%/8.6%,
improved, with gross margin and EBITDA margin
which we believe is fairly valued against peers,
at 38% and 32%, respectively, in 2011 versus
including Country Garden’s (Ba3/BB, bond rated
37% and 31% in 2010. As such, EBITDA of the
Ba3/BB-) COGARD’14 at 104/105, 9.9%/9.4%.
group increased at a faster pace than its
As such, we reiterate our Hold call on
recognised revenue, up 24% to RMB8.2bn.
NECHIN’14 bonds. We believe the group will
seek to raise funds from the equity or bond market As opposed to the previous pledge made during
in 2012, depending on market conditions. A CNH the group’s 1H11 results analyst meeting to de-
bond offering is most probable, in our view. lever its balance sheet on positive free cash flow
generation in 2H11, the group added additional
2012 outlook
amounts of net debt on its book in 2H11, with net
 Shanghai Industrial Urban Development sets
debt increasing RMB4bn to RMB30bn as of end
its 2012 contracted sales target at HKD6bn, a
2011 from RMB26bn as of end June 2011. We
substantial growth versus HKD3.3bn
believe this reflects its contracted sales falling

123
 The View
Asia’s Bond Markets abc
April 2012

behind its expectation in 2H11 on the back of the sales performance in March 2012, with more
weak market sentiment, particularly in 4Q11 than RMB4bn contracted sales generated
(RMB30.7bn contracted sales accomplished in versus RMB2bn in February and RMB910m
2011 versus a RMB36bn sales target). It also in January 2012, it remains to be seen
appears that the group’s construction expenditure whether it could meet its contracted sales
in 2H11 was higher than the previous guidance of target of RMB34bn for 2012.
RMB7.5bn, as the group altered interior layouts of
 The group has saleable resources of 5.5
some of its projects (e.g. re-designing large-sized
million sq m worth RMB60bn for sale in
units into smaller ones) to cater for genuine
2012. Note that the group budgets RMB30bn
demand from end-users rather than speculative
inflows from property sales in 2012, which
demand from investors. The group’s net debt to
will cover construction expenditure of
equity increased to 86% as of end 2011 from 78%
RMB12.5bn, land premium of RMB5.9bn and
as of end June 2011 and 73% as of end 2010,
other expenses of RMB7.6bn, and leave
higher than most peers.
positive cash flow of RMB4.3bn for net debt
With interest expense increasing 81% y-o-y to reduction. We believe whether this could be
RMB3bn in 2011 on the back of higher level of achieved hinges on its ability to meet the
debt and interest rate, EBITDA interest coverage contracted sales target while staying prudent
deteriorated to 2.7 times in 2011 from 4 times in on expansion.
2010, lower than S&P’s downgrade threshold of 3
Keith Chan
times. Together with its debt-to-EBITDA of 5.2
times in 2011 exceeding S&P’s downgrade Shui On Land
threshold of 5 times, we believe a 1-notch rating
Large refinancing needs for offshore
downgrade to BB- (bond to B+) by the rating
bonds starting in 2013; reiterate Sell
agency is imminent. Moody’s could react
USD SHUION’15 on expensive
negatively on the group’s 2011 result
valuation (23 Mar)
announcement as well, in our view, with the
Shui On Land (SHUION; NR/NR) reported
group’s higher balance sheet leverage and tighter
FY2011 results on 21 March 2012. Recognised
liquidity. We have Neutral fundamental
revenue increased 74% y-o-y to RMB8.5bn in
recommendation on Shimao with the key upside
2011 on the back of an 83% y-o-y increase in
risk being a successful deleveraging of balance
property development revenue to RMB7.6bn. This
sheets as planned and the key downside risk being
is in turn driven by a 38% increase in gross floor
prolonged weakness in sales. At 89/91 and 90/ 93,
area delivered and a 25% increase in recognised
SHIMAO’17 and ’18 are yielding 12.5%/12.0%
average selling price. Profitability improved as
and 13.5%/12.7%, respectively. Hold
reflected by gross margin of 44% in 2011 versus
SHIMAO’17 and ’18. We believe YUZHOU’15
41% in 2010. With 45% of the group’s 2011
at 86/88.5 (18.9%/17.9%) offers better risk-
contracted sales of RMB10.7bn arising from en-
reward (Please refer to ACT dated 23 March 2012
bloc sales of office buildings, its sales and
for further analysis).
administrative expenses as percentage of revenue
2012 outlook decreased to 10% in 2011 from 14% in 2010. As
 While we take some comfort from the such, EBITDA margin increased to 35% in 2011
substantial improvement in its contracted from 28% in 2010. Yet, with a 40% increase in

124
 The View
Asia’s Bond Markets
April 2012
the group’s debt balance (to finance land
acquisitions/resettlements and faster asset churn),
the group’s interest expense doubled to
RMB1.5bn. This gives rise to a weaker than peers
EBITDA interest coverage of 1.9 times. Net
gearing of the group increased to 75% as of end-
2011 from 52% as of end-2010. Pro-forma for the
SGD and USD bond issues in 2012, the group’s
debt-to-capitalisation increased to 50% using end-
2011 numbers.
Shui On had RMB8.8bn of debt or more than one-
third of its debt due in 2012. As of now,
RMB2.1bn of loan with the offshore/onshore
tranche tied to Shanghai Taipingqiao had been
refinanced by new loan of size RMB2.2bn. There
is an additional RMB1.7bn of loan coming due in
December 2012, with an offshore/onshore tranche
tied to Shanghai Corporate Avenue, which we
believe will be refinanced without difficulties.
Taking into account RMB4.2bn raised from the
issuance of three-year SGD and USD bonds in
January and February 2012, as well as
unrestricted cash on hand of RMB3.5bn as of end-
2011, the RMB5bn onshore construction loan due
in 2012 is covered.
At 100.5/ 102, SHUION’15 yields 9.5%/8.9%,
which we view as expensive versus peers with credit
ratings, including Country Garden’s COGARD’15 at
10.9%/10.3% and Agile’s AGILE’16 at
10.3%/9.8%. As such, we reiterate our Sell call on
SHUION’15. In light with the large refinancing
needs for bonds starting in 2013 (see Table 1), we
change our fundamental recommendation on Shui
1. USD2.1bn of bonds coming due from Sep-13 to Feb-15
Issue Due date/ put date
SHUION'15-13p Sep-13
SHUION'13 Dec-13
SHUION'15 Jan-15
SHUION'15 Jan-15
SHUION'15 Feb-15
Source: Bloomberg, HSBC
abc
On Land to Underweight from Overweight, with a
key upside risk a material debt reduction upon asset
disposals.
2012 outlook
 Shui On has RMB15bn of saleable resources
(RMB12bn residential and RMB3bn
commercial) in 2012 to support contracted
sales target of RMB12bn. With RMB2.7bn of
2011 contracted sales carried forward to 2012
for collection, and assumption, and a 75%
cash collection rate for RMB12bn 2012
contracted sales, the group shall record
RMB11.7bn of inflows from property sales.
Taking into account cash inflow from rental
income and major cash outflow items,
including RMB5.5bn for construction,
RMB4bn for relocation, and RMB1.5bn for
land premium, the group should record
negative free cash flow of RMB3bn in 2012.
This is covered by the issuance of SGD250m
three-year bond and USD475m three-year
bond for RMB4.2bn in 1Q12.
 The group targets to keep its net gearing at
below 80% in 2012 versus the reported net
debt-to-equity ratio of 65%. We believe this is
achievable, barring further land purchases.
The group also looks to spin off commercial
property assets to raise capital. However, we
believe this is highly susceptible to the market
conditions, and hence we have not factored
this into our base case analysis.
Keith Chan
Coupon Redemption amount Note
(RMBm)
4.5% 2,720 Convertible bond
6.875% 3,000 Synthetic bond
7.625% 3,500 Synthetic bond
8% 1,250 SGD bond
9.75% 2,993 USD bond
13,463
125
 The View
Asia’s Bond Markets abc
April 2012

Sun Hung Kai Properties
47bp widening on SUNHUN’22
overdone, Tactical Buy (30 Mar)
On 29 March 2012, Sun Hung Kai Properties
(SUNHUN; rated A1/A+) suspended trading of its
equity on the stock exchange of Hong Kong and
released a statement with regards to the arrest of
Mr. Thomas Kwok and Mr. Raymond Kwok, the
group’s joint chairmen and managing directors, by
the Independent Commission Against Corruption
(ICAC) in connection with an investigation into
an offence suspected to be committed under the
Prevention of Bribery Ordinance. The group has
also been required by the ICAC to provide
information with regards to the allegations
pursuant to a search warrant pertaining to the
group’s premises. At the time of writing, Sun
Hung Kai’s share price has dropped 12% from the
pre-news level, while the SUNHUN’22 widened
30bp today in addition to the 17bp widening
yesterday, reaching 10T+280/270 from
10T+233/223 pre-news level. The 47bp widening
appears overdone, in our view.
While we are not in a position to gauge whether the
allegations will be valid or not, we believe the
investigation has little credit implications to the
group. In our view, the group’s core credit strength is
linked to its steadily growing recurrent rental income
base. Inclusive of contribution from associates and
joint ventures, the group’s net rental income
consistently covers its interest expense and
overheads in every financial years starting from
1995 (see Figure 1). That means even if the group’s
property development operation were to be
negatively impacted by any hypothetical potential
changes in senior management, we believe property
investment would continue to provide stable cash
inflows to the group. We understand that in the
syndicated loan covenants, there is no change of
management put in place.
Indeed, we could take some cue or draw some
parallel from the arrest of Hyundai Motor
(HYNMTR; rated Baa2/BBB+) ex-chairman Mr.
Chung Mong-koo by the Korean authority in an
embezzlement and slush fund scandal in April 2006.
It took two and a half months for the share price to
bottom and five months for its share price to reach
the pre-news level. We believe when the share price
of Sun Hung Kai stabilises, the bond spreads will
follow suit. We reiterate our Overweight
fundamental recommendation on Sun Hung Kai and
changed our call on SUNHUN’22 to Tactical Buy
from Hold. Key risk to our Overweight fundamental
recommendation is the group changing its prudent
financial management policy.
Keith Chan

1. Net rental income covers finance and administrative costs 2. Hyundai Motor provides some cue to Sun Hung Kai
consistently

1,500 4.0 100000 Apr 06: Arrest of Hy undai Motor chairman

3.0 Mr. Chung Mong-koo
1,000 90000
USDm

Sep 06: share price recov ered to pre-

2.0
500 80000 new s lev el
1.0
70000
0 0.0
Jul 06: share price bottomed
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

60000
Oct-06

Oct-07
Apr-06

Jul-06

Jan-07

Apr-07

Jul-07

Net rental income - inc. contribution from asso. and

JCEs
Net rental income/ (interest + administrativ e cost) Hy undai Motor (005380.KS, KRW)

Source: SHKP, HSBC Source: Bloomberg, HSBC

126
 The View
Asia’s Bond Markets abc
April 2012

Vedanta Resources Over the medium term, the re-organized Vedanta

Resources will simplify the corporate structure via
Buyout of government equity stakes
the elimination of cross-holdings, along with
(22 Mar)
improved efficiencies. Management at the
Vedanta Resources (VEDLN, Ba3 / BB / BB) has
company projects USD200m of annual savings
offered USD3.4bn to fully buy out the government’s
upon completion. Moreover, reduced dividends
remaining minority equity interests in both
up-streamed from operating entities to the holding
Hindustan Zinc (29.5%) and Bharat Aluminium
company level will be required to service debt at
(49%), according to an Indian government official
the holding company (where the USD bonds are
on Bloomberg. The government is deciding on
issued from).
whether to accept the offer, but the timing of any
decision remains unknown. Vedanta Resources has Vedanta Resources has a history of opportunistic
tried to buy out the government’s minority interests acquisitions and aggressive expansion, which
under call options for several years, ever since the heightens event risk for the credit, in our view.
acquisitions were made in 2001-02, but has been While the corporate re-organization announced in
delayed due to government inertia and political February 2012 is a credit positive over the medium
concerns. term, structural subordination remains for USD
bondholders. In addition, liquidity remains tight, in
The complex corporate structure of Vedanta
our view. However, we believe the valuation of the
Resources remains a concern of ours – primarily the
notes does discount these concerns. Our fundamental
limited access to cash balances and cash flows at the
rating remains Neutral and our trading call remains
subsidiaries. While the corporate re-organization
Hold for the notes from Vedanta Resources. The key
announced last month is supportive, it will require
upside risks are a quick resolution to the announced
several quarters to complete given the numerous
corporate re-organization and/or material equity
approvals required from various regulators and
fund-raising. The key downside risks are rating
shareholders. Moreover, liquidity is tight at Vedanta
downgrades from both Moody's and S&P (both with
Resources, and a quick approval from the
Negative outlooks) and/or a significant decline in
government on the buyout of its minority stakes
global commodity prices.
would only worsen it. Nonetheless, we don’t
anticipate a quick decision regarding the buyout Philip Wickham, Louisa Lam
given the history.

Asia-Pacific Metals and Mining Issues

Z-spread (mid, bp)
1000 BMTRIJ 15

900
CHOGRP 15 CHOGRP 17
800
VEDLN 18
VEDLN 21
700 BUMIIJ 17 BUMIIJ 16
VEDLN 16
FMGAU 18
600 FMGAU 19 MMIINT 17
BERAUC 15 INDYIJ 16 CITPAC 21
500 STAREN 15 FMGAU 16
FMGAU 17 INDYIJ 18
FMGAU 15 FMGAU 22
400 ADAIND 19

Tenor
300
2 3 4 5 6 7 8 9 10 11
Source: HSBC

127
 The View
Asia’s Bond Markets
April 2012
The Wharf (Holdings)
Strong FY11 results underpinned by
Hong Kong investment properties,
lingering China risk; Sell WHARF’17
at T+260/240 on expensive valuation
(27 Mar)
The Wharf (Holdings) (WHARF; NR/NR)
reported strong FY11 results on 22 March.
Recognised revenue of the group increased by
24% versus FY10, to HKD24bn, driven by rental
income growth of its flagship investment
properties – Harbour City in TST (HKD6.6bn
rental income, up 14%) and Times Square
(HKD1.7bn rental income, up 13%) in Causeway
Bay. With buoyant retail sales in Harbour City (up
34% in 2011), rental income from retail space
leasing in Harbour City increased 22%, to
HKD3.6bn, in 2011, setting new record for the
group. The same is observed in Times Square (up
24% in 2011), with rental income from retail
space leases increasing 17%, to HKD1.3bn. Retail
sales in the two properties account for 9% of
Hong Kong’s retail sales in 2011.
In the first two months of the year, retail sales in the
two investment properties remain robust (21% y-o-y
for Harbour City and 10% y-o-y for Times Square),
and this should further fuel rental income growth of
the two properties in 2012. Yet, given the high base
and expected drop in occupancy of Times Square
upon the closure and relocation of the cinema to
12th and 13th floors, we expect its rental income
growth to slow. We estimate these two prime
investment properties generate more than HKD6bn
in free cash flow to the group per year and represent
the core credit strength of the group. Note that no
update has been provided on the renewal of the
Ocean Terminal lease, which expires in June 2012.
Our equity team has done a comprehensive analysis
on the Ocean Terminal renewal issue in their note of
13 March, OW: Ocean Terminal’s Value Emerges.
128
abc
In the China property space, the group is one of
the most aggressive among Hong Kong property
peers. We estimate that the group earmarked at
least RMB14bn in 2010 and RMB13bn in 2011
for new land purchases in China. As some of
these land parcels (especially the 2010
acquisitions) were purchased during the peak of
the market, the group’s China property
development business will face margin pressure in
the medium term.
Given the weak market backdrop, the group has
set its 2012 China property contracted sales target
at RMB10bn, 21% lower than the group’s 2011
contracted sales of RMB12.7bn. Its capital
expenditure budget for the year was also adjusted
downward to HKD21bn (HKD18bn for China)
versus the HKD26-30bn guided in early 2012.
Note that the group’s China property assets
accounted for 40% of its business assets at end-
2011 versus its 50% medium-term target while, in
2011, China property contributed 20% of the
group’s operating profit. While we expect the
group to slowly transform into a China cum Hong
Kong property play, we believe it will take a
balanced approach in funding its China property
expansion initiatives, as demonstrated by two
equity rights issuance, in 2008 and 2011.
Turning to its leverage position, the group’s net
debt grew to HKD43bn as of end-2011 from
HKD33bn at end-2010 on the back of its China
investments. EBITDA interest coverage weakened
to 8x from 13x while net debt to EBITDA
increased to 3.4x from 3.1x. Net gearing,
however, remained stable at 20%, with HKD10bn
raised from shareholders in 1H11. The group’s
balance sheet liquidity is adequate, with
HKD32.5bn in cash at end-2011 and USD900m
(HKD7bn) from issuance of 5-year bond in 1Q12
versus HKD8.9bn in short-term debt and
HKD21bn in capital expenditure in 2012.
 The View
Asia’s Bond Markets abc
April 2012

1. WHARF’17 is expensive versus peers, in our view

400
SOT (mid, bp)
NANFUN'17
350
HENLND'17 WHEELK'17
300 KERPRO'17
HKLAND'25
250 WHARF'17
SUNHUN'22
200 SUNHUN'16 SWIRE'22

150

100
50

0
A+ A A- BBB+ BBB BBB-

Note: We deem HENLND as high BBB credit, WHARF as mid BBB credit and WHEELK as low BBB credit
Source: HSBC

At 5T+260/240, WHARF’17 is expensive, in our upside risk to our view is the possibility of the
view, versus ‘BBB’ rated Hong Kong peers (see group scaling back its China expansion, and the
Figure 1). As a result, we establish a Sell trading key downside risk is related to medium-term
call on WHARF’17. We have a Neutral profitability pressure on China property
fundamental recommendation on Wharf; the key development.

2. The Wharf: Income statements (FY07-11)

HKDm (Year ended Dec) 2007 2008 2009 2010 2011
Revenue 16,208 15,940 17,553 19,380 24,004
Property investments 6,539 7,606 8,192 8,669 10,085
Property developments 2,336 710 3,065 3,609 6,343
CME 3,797 3,722 3,404 3,682 3,863
Logistics and others 3,536 3,902 2,892 3,420 3,713
Cost of sales and services (5,660) (5,359) (6,069) (7,072) (9,095)
Gross profit 10,548 10,581 11,484 12,308 14,909
Selling, admin & operating expenses (2,766) (3,038) (2,930) (2,936) (3,521)
Operating profit 7,646 7,271 8,483 9,213 11,081
Finance costs (1,142) (1,521) (338) (996) (2,567)
Interest income 136 272 71 159 307
Other revenue and gains 11,220 1,744 13,489 29,903 25,118
Share of profit in associated & JCEs 349 141 356 385 395
Tax (4,247) (1,189) (2,207) (2,358) (3,304)
Minority interest (819) (471) (598) (715) (769)
Net profit 13,143 6,247 19,256 35,591 30,261
Memo item:
Depreciation and amortisation 1,273 1,392 1,301 1,328 1,395
EBITDA 8,919 8,663 9,784 10,541 12,476
Total interest (1,233) (1,109) (596) (827) (1,627)
Source: The Wharf (Holdings), HSBC

129
 The View
Asia’s Bond Markets abc
April 2012

3. The Wharf: Balance sheets and credit metrics (FY07-11)

HKDm (Year ended Dec) 2007 2008 2009 2010 2011
Balance sheet
Cash and cash equivalents 7,717 15,886 18,412 16,900 32,528
Trade receivables and others 1,396 1,727 4,554 3,518 3,420
Inventories 9,332 17,384 17,904 29,845 47,641
Other short-term assets 54 8 987 164 225
Net fixed assets 114,613 119,593 134,002 166,638 203,041
Interest in associates 8,737 11,998 11,789 20,860 27,132
Listed investments 2,858 706 1,331 3,362 2,703
Other assets 1,464 1,252 1,482 1,481 1,283
Short-term debt 6,720 4,443 8,328 7,829 8,903
Trade and other payables 5,678 6,924 8,240 13,937 20,020
Other short-term liabilities 1,527 1,425 1,681 1,486 1,833
LT debt 24,562 33,566 31,516 41,760 67,090
Others 15,682 4,681 5,108 7,107 9,253
Minority interest 5,638 6,440 7,042 7,560 7,617
Shareholders’ equity 86,364 111,075 128,546 163,089 203,257
Memo items:
Cash 7,717 15,886 18,412 16,900 32,528
Debt 31,282 38,009 39,844 49,589 75,993
Net debt 23,565 22,123 21,432 32,689 43,465
Total equity 92,002 117,515 135,588 170,649 210,874
Total capitalisation 123,284 155,524 175,432 220,238 286,867
Total assets 146,171 168,554 190,461 242,768 317,973

Credit statistics
Gross margin (%) 65.1% 66.4% 65.4% 63.5% 62.1%
Operating margin (%) 47.2% 45.6% 48.3% 47.5% 46.2%
EBITDA margin (%) 55.0% 54.3% 55.7% 54.4% 52.0%
EBITDA/total interest (x) 7.23 7.81 16.42 12.75 7.67

Return on equity (%) 15.3% 6.0% 15.2% 23.2% 15.9%

Return on total assets (%) 9.9% 4.0% 10.7% 16.4% 10.8%

Debt/EBITDA (x) 3.51 4.39 4.07 4.70 6.09

Net debt/EBITDA (x) 2.64 2.55 2.19 3.10 3.48

Debt/equity (x) 0.34 0.32 0.29 0.29 0.36

Net debt/equity (x) 0.26 0.19 0.16 0.19 0.21
Debt/total capitalisation (%) 25.4% 24.4% 22.7% 22.5% 26.5%
Net debt/net total capitalisation (%) 20.4% 15.8% 13.6% 16.1% 17.1%
Cash/total assets (%) 5.3% 9.4% 9.7% 7.0% 10.2%
Source: The Wharf (Holdings), HSBC

Keith Chan

130
 The View
Asia’s Bond Markets abc
April 2012

Wheelock and Company commercial site in Hung Hom for HKD4.0bn in

August 2011. On the back of the land acquisitions
Stepping up its gear in Hong Kong;
in Hong Kong, net debt at Wheelock level
Initiate with Neutral and establish Hold
(excluding the listed companies - The Wharf and
call on WHEELK’17 at T+330/315
Wheelock Properties Singapore) increased to
(27 Mar)
HKD15bn as of end 2011 from HKD10bn as of
Wheelock and Company (WHEELK; NR/NR)
end 2010. Netting off HKD32.5bn cash at The
announced strong FY11 results on 22 March.
Wharf and HKD6.7bn cash at Wheelock
Unlike previous financial years, when its 50%-
Properties Singapore, we estimate there is
owned Hong Kong listed subsidiary The Wharf
HKD3.5bn of cash at Wheelock level as of end
(Holdings) (WHARF; NR/NR) and 76%-owned
2011. Taking into account USD535m
Singapore listed subsidiary Wheelock Properties
(HKD4.1bn) raised from issuance of 5-year bond
(Singapore) contributed the bulk of its operating
in February 2012, Wheelock’s acquisition of the
profit, FY11 saw the group’s 100% owned
HKD1.9bn Tseung Kwan O residential site in
Wheelock Properties generating good profit from
January 2012 and its capital commitment of
the One Island South commercial property project
HKD2.8bn in 2012 are well covered. Yet, we
in Hong Kong (i.e. 19% of underlying profit for
believe the group will seek to further expand its
Wheelock and Company).
land bank in Hong Kong and further opportunistic
For the first time since the consolidation of The fund raising in private placement and international
Wharf (Holdings) into its financial statements in debt capital markets are likely.
2008, The Wharf has contributed less than half of
At T+330/315 or 70-75bp wider versus
the group’s underlying profit. This reflects
WHARF’17, we believe WHEELK’17 is fairly
Wheelock and Company’s initiative in
valued versus WHARF’17, taking into account
transforming itself away from being a pure
the holding company discount and Wheelock’s
holding company. Indeed, in February 2012, the
expansion initiative in Hong Kong. We therefore
group hired Mr Stewart Leung, a Hong Kong
establish Hold trading call on WHEELK’17.
property development veteran from New World
Although it is not rated by Moody’s and S&P, we
Development (NWDEVL; NR/NR), to serve as
view Wheelock and Company as a low ‘BBB’
vice chairman of Wheelock and Company as well
credit and The Wharf (Holdings) one notch
as chairman of Wheelock Properties.
higher, as a mid ‘BBB’ credit. We initiate credit
Wheelock and Company has been actively research coverage on Wheelock and Company
expanding its land bank in Hong Kong since with Neutral fundamental recommendation. The
2H11. To replicate the success of the One Island key upside risk to our view is the group getting
South commercial property project, Wheelock credit rating from either Moody’s or S&P, while
Properties acquired a commercial site in Kwun the key downside risk is aggressive debt-funded
Tong for HKD3.5bn in July 2011 and another expansion (and hence bond supply risk).

Keith Chan

131
 The View
Asia’s Bond Markets abc
April 2012

1. Wheelock and Company: Income statements (FY07-11)

HKDm (Year ended Dec) 2007 2008 2009 2010 2011
Revenue 17,915 22,583 18,957 24,186 34,558
- Property investment 6,863 8,112 8,744 9,206 10,670
- Property development 3,283 6,606 3,782 7,676 16,021
- Logistics 3,625 3,875 3,091 3,426 3,520
- Communications, media 3,797 3,751 3,404 3,682 3,863
- Investment and others 794 681 392 573 883
- Inter-segment revenue (447) (442) (456) (377) (399)
Cost of sales (6,427) (10,141) (6,386) (9,705) (13,093)
Gross profit 11,488 12,442 12,571 14,481 21,465
Selling, admin & operating expenses (2,890) (3,159) (3,064) (3,097) (3,735)
Operating profit 8,598 9,283 9,507 11,384 17,730
Finance costs (1,212) (1,695) (395) (1,089) (2,747)
Interest income 244 324 92 185 365
Other revenue and gains 12,567 775 14,324 31,459 27,915
Share of profit in associated & JCEs 296 12 310 396 859
Tax (4,639) (1,201) (2,307) (2,630) (4,338)
Minority interest (8,239) (4,066) (11,072) (19,511) (16,918)
Net profit 7,615 3,432 10,459 20,194 22,866

Memo item:
Depreciation and amortization 1,276 1,395 1,305 1,332 1,398
EBITDA 9,874 10,678 10,812 12,716 19,128
Total interests (1,212) (1,695) (395) (1,089) (2,747)
Source: Wheelock and Company, HSBC

2. Wheelock and Company: Balance sheets and financial metrics (FY07-11)

HKDm (Year ended Dec) 2007 2008 2009 2010 2011
Cash and cash equivalents 13,079 22,927 27,756 27,540 42,668
Trade receivables and others 1,878 2,686 5,243 4,344 4,680
Inventories 97 112 107 113 130
Other short-term assets 19,859 24,672 26,857 37,399 61,134
Fixed assets 125,390 130,696 145,311 180,363 219,499
Interest in associates and JCEs 9,651 13,427 13,064 24,210 27,628
Other long-term assets 9,171 3,686 6,468 12,267 8,373
Bank loans and borrowings 7,020 4,547 9,049 16,362 8,903
Trade and other payables 6,038 6,603 6,457 8,600 11,368
Other short-term liabilities 7,002 5,325 7,979 11,595 12,395
LT bond and convertible bonds 27,971 41,076 37,585 49,320 86,779
Others 16,935 17,412 5,185 7,283 9,473
Minority interest 57,508 64,510 81,653 92,704 112,632
Shareholders’ equity 56,651 58,733 76,898 100,372 122,562
Memo items:
Cash 13,079 22,927 27,756 27,540 42,668
Debt 34,991 45,623 46,634 65,682 95,682
Net debt 21,912 22,696 18,878 38,142 53,014
Total equity 114,159 123,243 158,551 193,076 235,194
Total capitalisation 149,150 168,866 205,185 258,758 330,876
Total assets 179,125 198,206 224,806 286,236 364,112

Credit statistics
Gross margin (%) 64.1% 55.1% 66.3% 59.9% 62.1%
EBITDA margin (%) 55.1% 47.3% 57.0% 52.6% 55.4%
EBITDA/total interest (x) 8.15 6.30 27.37 11.68 6.96
Return on equity (%) 4.7% 2.9% 7.4% 11.5% 10.7%
Return on total assets (%) 3.2% 1.8% 4.9% 7.9% 7.0%
Debt/EBITDA (x) 3.54 4.27 4.31 5.17 5.00
Net debt/EBITDA (x) 2.22 2.13 1.75 3.00 2.77
Debt/equity (x) 0.31 0.37 0.29 0.34 0.41
Net debt/equity (x) 0.19 0.18 0.12 0.20 0.23
Debt/total capitalisation (%) 23.5% 27.0% 22.7% 25.4% 28.9%
Net debt/net total capitalisation (%) 14.7% 13.4% 9.2% 14.7% 16.0%
Cash/total assets (%) 7.3% 11.6% 12.3% 9.6% 11.7%
Source: Wheelock and Company, HSBC

132
 The View
Asia’s Bond Markets
April 2012
Yanlord Land Group
Substantial improvement in March
2012 contracted sales; spread
positive (3 Apr)
Yanlord Land Group (YLLG; rated Ba3/BB-,
bond rated B1/B+) recorded a substantial
improvement in contracted sales in March 2012.
Driven by the launch of new units in Shanghai
Yanlord Sunland Garden, Tianjin Yanlord
Riverside Garden, Tianjin Yanlord Riverside
Plaza Phase 2, and Nanjing Yanlord Yangtze
Riverbay Town, the group’s contracted sales in
March reached RMB1.6bn, representing a
substantial improvement versus RMB254m and
RMB276m of contracted sales in January and
February 2012, respectively. This brings the
group’s 1Q12 contracted sales to RMB2bn, 13%
y-o-y growth versus contracted sales of
RMB1.8bn in 1Q11.
Yanlord obtained pre-sales permits for 164 units
at Shanghai Yanlord Sunland Garden on 25
February 2012 with a total gross floor area of
34,180 sqm. Some 70 units have been sold,
according to local newswire reports, since the
launch in end-February 2012, with the sales-
through rate close to 50% and estimated
contracted sales of more than RMB400m. We
deem this as satisfactory, given the project’s high-
end nature and high average selling price of
RMB40,000 per sqm. 188 units of Nanjing
Yanlord Yangtze Riverbay Town were launched
to the market on 15 March 2012. Within the first
week of launch, 135 units have been sold with a
sales-through rate of more than 70% and
contracted sales proceeds of more than
RMB400m, according to our estimate. In addition,
the group launched 288 SOHO units (not subject
to purchase restrictions) at Tianjin Yanlord
Riverside Plaza Phase 2 for sale on 25 March
2012. 190 units had been sold at an average
selling price of RMB23,000 per sqm and a sales-
abc
through rate of 66% as at end-March, generating
more than RMB600m in pre-sales proceeds.
We take comfort from the satisfactory pre-sales
rate of 50-70% for Yanlord’s new launches in
March 2012. As articulated in our FY2011
Yanlord results commentary in ACT dated 29
February 2012, the group has RMB25bn of
saleable resources for 2012. In other words, the
group’s contracted sales target of RMB12bn could
be reached if the sales-through rate is above 48%.
Note that its sales-through rate in 2011 stood at
49%, with RMB7.4bn contracted sales for the
year on RMB15bn of saleable resources.
At 88.5/89.5 and 89.25/90.25, YLLG’17 and ’18
are yielding 12.6%/12.3% and 13.3%/13.0%,
respectively, which we deem as fairly valued. We
have Overweight fundamental recommendation
on Yanlord with the key downside risk a
prolonged weaknesses in property sales in first-
tier cities. We believe Yanlord will seek to
refinance the SGD375m convertible bonds, which
are putable to the group in July 2012, in due
course. The most probable funding route, in our
view, is the issuance of a SGD-denominated
straight bond, given the group’s high recognition
in Singapore on the back of its Singapore listing,
as well as GIC’s involvement as a minority
shareholder of seven of the group’s projects.
Keith Chan
Yuzhou Properties
Decent FY2011 results with good
sales progress made in 1Q12;
change call on YUZHOU’15 to Buy
from Hold (23 Mar)
Yuzhou Properties (YUZHOU; rated B1/B+, bond
rated B2/B) announced decent FY2011 results on
22 March 2012. Recognised revenue decreased
10% to RMB3.8bn on a 34% y-o-y decline in
gross floor area sold to 350,601 sqm, partially
offset by a 34% y-o-y increase in the recognised
133
 The View
Asia’s Bond Markets
April 2012
average selling price to RMB10,654 per sqm.
Gross margin of the group moved in tandem with
its higher recognised average selling price, the
key driver of profitability. Specifically, gross
margin and EBITDA margin reached 49% and
43%, respectively, in 2011, one of the highest
among its peers. Inclusive of RMB200-300m of
cash deposits pledged onshore to banks to secure
offshore financing in 2H11 (to pay for 2010 final
dividends), and taking into account the slowdown
in cash collection, the group’s net debt increased
to RMB3.9bn as of end-2011 from RMB3.3bn as
of end-June 2011. This translates into a
marginally higher net gearing ratio of 68% as of
end-2011 versus 65% as of end-June 2011. The
debt-to-capitalisation ratio held steady at 50%.
We don’t expect any negative rating actions on
Yuzhou following its FY2011 result
announcement.
To preserve balance sheet liquidity, Yuzhou
Properties halted land acquisitions in 2H11 and
materially slowed down its primary land
development project in Beijing (RMB50m paid as
deposit). Unrestricted cash on hand totalled
RMB1.4bn, which together with RMB200-300m
of cash deposits pledged onshore to banks as of
end-2011 helped to cover RMB1.3bn of debt due
in 2012. At this point, the group has an
outstanding land premium of RMB111m, but no
payment for land is expected in 2012, barring new
land acquisitions. With cash collection of half of
cRMB600m contracted sales carried forward from
2011 to 1Q12, as well as recent improvement in
sales performance (the group generated
RMB1.1bn contracted sales year-to-date and
another RMB1.1bn under subscription
agreement), its cash balance totalled RMB2.5bn at
present, which we deem as an adequate liquidity
position for a niche player like Yuzhou.
134
abc
At 89/90 (bid/ask), YUZHOU’15 yields
17.6%/17.2%, which we think offers an attractive
risk-reward to investors. As such, we change our
call on YUZHOU’15 to Buy from Hold. We have
Neutral fundamental recommendation on Yuzhou
with a key upside risk sizeable asset disposals for
debt reduction and a key downside risk
aggressively debt-funded land purchases.
2012 outlook
 Yuzhou sets its 2012 contracted sales target
as RMB5bn. To date, the group made good
progress in accomplishing its sales target of
RMB1.1bn of contracted sales and
RMB1.1bn of subscription sales generated.
Taking into account the collection of
cRMB600m 2011 contracted sales carried
forward for cash collection and an 80% cash
collection ratio for contracted sales in 2012,
the group should have RMB4.5bn of cash
inflows from property sales, which covers
RMB2.8bn of construction expenditure and
RMB1.6bn of other expenses (interest, tax,
dividend and others). In other words, further
land acquisitions will need to be externally
funded (by debt or equity) or otherwise its
cash balance will likely be depleted. We don’t
expect the group to turn acquisitive, unless
sales momentum remains strong in the
coming quarters.
 The group sets its net gearing target at below
70% for 2012. We note that under the
HKD1bn bond issued to China Life due 2013,
the group has to maintain a net debt-to-equity
ratio of less than 85%. The group had
initiated talks with China Life with regards to
refinancing the bonds.
Keith Chan
The View
Asia’s Bond Markets abc
April 2012

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135
 The View
Asia’s Bond Markets abc
April 2012

Asian Economics Desk Reference

HSBC Global real GDP growth forecast (% yr) — (red denotes above consensus, grey denotes below consensus)
4Q 11 1Q 12f 2Q 12f 3Q 12f 4Q 12f 2010 2011 2012f Consensus 2013f Consensus
US 3.0 1.5 1.3 1.2 1.6 3.0 1.7 1.7 2.3 1.8 2.6
UK 0.7 0.6 0.5 0.4 0.7 2.1 0.8 0.5 0.6 1.9 1.8
Eurozone 0.7 -0.4 -0.8 -0.8 -0.4 1.8 1.5 -0.6 -0.4 0.7 0.9
Australia 2.3 3.5 3.0 3.1 3.6 2.5 2.0 3.3 3.1 3.5 3.4
New Zealand 1.8 1.7 2.3 2.5 3.2 1.2 1.4 2.4 2.4 3.4 3.2
China 8.9 8.0 8.3 8.8 8.9 10.4 9.2 8.6 8.4 8.8 8.6
Hong Kong 3.0 2.0 2.4 3.4 5.1 7.0 5.0 3.3 3.0 5.2 4.6
India 6.1 6.1 6.2 7.1 8.5 8.4 6.7 7.5 7.2 8.2 8.2
Indonesia 6.5 6.0 6.0 6.1 6.1 6.2 6.5 6.1 6.0 6.5 6.4
Japan -0.6 1.3 1.1 0.7 1.1 4.4 -0.7 1.0 1.9 0.5 1.5
Korea 3.4 2.6 3.0 3.1 3.5 6.2 3.6 3.1 3.1 3.7 3.9
Malaysia 5.2 3.2 2.4 3.2 5.9 7.2 5.1 3.7 4.0 5.3 5.0
Philippines 3.7 2.7 3.6 4.1 4.0 7.6 3.7 3.6 3.9 5.2 4.9
Singapore 3.6 0.1 1.9 3.1 5.4 14.8 5.0 2.6 2.8 5.8 4.7
Sri Lanka 8.3 7.2 6.5 6.0 6.3 8.0 8.3 6.5 6.6 7.4 7.1
Taiwan 1.9 0.1 0.7 2.5 6.2 10.7 4.0 2.4 3.0 5.7 4.6
Thailand -9.0 -7.5 2.2 11.2 17.5 7.8 0.1 5.5 4.9 4.5 4.7
Vietnam 6.1 6.1 5.6 5.7 5.4 6.8 5.9 5.7 5.8 6.1 6.6
Asia 4.2 4.3 4.6 5.0 5.7 7.6 4.6 5.0 5.2 5.2 5.4
Asia x C 1.6 2.3 2.6 2.9 3.8 6.1 2.0 3.0 3.4 3.2 3.6
Asia. x J 6.6 5.8 6.4 7.2 8.0 9.2 7.3 7.0 6.8 7.5 7.4
Asia. x. J & C 3.9 3.3 4.2 5.4 6.9 7.9 5.0 5.1 5.0 6.1 5.9
NB: consensus as of March 2012; India annual data are for fiscal year; Asia aggregate data are nominal GDP USD weighted; US quarterly data are q/q annualised;
forecasts in italics, actual in normal font. Regional Consensus forecasts are calculated using Consensus Economics country forecasts re-weighted on a PPP basis,
in order to make them comparable to HSBC Asia aggregate forecasts.
Source: HSBC, CEIC, Consensus Economics

HSBC Asia inflation forecast (headline CPI, avg.% yr) — (red denotes above consensus, grey denotes below consensus)
4Q11 1Q12f 2Q12f 3Q12f 4Q12f 2010 2011 2012f Consensus Target* 2013f Consensus
Australia 3.1 2.0 1.8 2.6 3.4 2.8 3.4 2.5 2.5 2 to 3 3.2 3.1
New Zealand 1.8 1.8 1.5 1.8 2.9 2.3 4.0 2.0 1.8 1 to 3 3.0 2.5
China 4.6 3.9 2.8 2.2 2.7 3.3 5.4 2.9 3.3 n/a 2.6 3.7
Hong Kong 5.7 5.6 4.6 5.4 5.4 2.3 5.3 5.3 4.3 4.0 4.8 3.7
India 8.4 5.9 6.7 7.0 7.1 10.4 8.1 7.2 7.0 n/a 6.7 6.7
Indonesia 4.1 3.7 5.5 6.1 7.0 5.1 5.4 5.6 5.2 3.5-5.5 6.3 5.3
Japan -0.3 -0.4 -0.6 -0.3 -0.1 -0.7 -0.3 -0.4 -0.2 n/a -0.1 0.0
Korea 4.0 3.2 3.4 3.5 3.7 2.9 4.0 3.4 3.2 2 to 4 3.5 3.1
Malaysia 3.2 2.6 2.3 2.5 2.8 1.7 3.2 2.6 2.4 2.5 to 3.0 3.1 2.8
Philippines 4.7 3.1 2.9 3.4 3.6 3.8 4.8 3.3 3.6 3 to 5 4.7 4.2
Singapore 5.5 5.1 5.0 3.4 2.8 2.8 5.2 4.1 3.4 2.5 to 3.5 2.1 2.9
Sri Lanka 4.9 3.2 5.0 7.1 8.4 6.2 6.7 5.9 6.2 n/a 7.6 7.0
Taiwan 1.4 1.1 1.0 1.5 1.6 1.0 1.4 1.3 1.4 1.3 2.2 1.7
Thailand 4.0 3.2 2.5 3.5 4.4 3.3 3.8 3.4 3.3 0.5 to 3.0 3.8 3.2
Vietnam 20.6 16.1 10.1 8.2 8.8 9.2 18.6 11.0 10.9 less than 10 9.8 9.3
NB: India annual data are for Fiscal year; *Thailand target for core inflation; Sri Lanka targets money supply; Malaysia has implicit preference; Hong Kong government forecasts underlying CPI for 2012 at 3.5%; and composite CPI at
4.0%; Taiwanese directorate general of budget’s forecasts for 2012 is 1.3%; forecasts in italics
Source: HSBC, CEIC, Various central banks

136
 The View
Asia’s Bond Markets abc
April 2012

HSBC Asia policy rate forecast % pa, (red denotes rate hikes or HSBC above implied rate, grey denotes rate cuts or HSBC below implied rate)
Next 3M 6M 12M
Current Last Move MPC Q1 12 Q2 12f Q3 12f Q4 12f Q1 13f implied implied implied
Australia 4.25 -25bp (Dec-2011) 3-Apr 4.25 4.00 4.00 4.00 4.25 4.07 3.95 3.83
New Zealand 2.50 -50bp (Mar-2011) 25-Apr 2.50 2.50 2.75 3.00 3.25 2.50 2.50 2.60
China 6.56 +25bp (Jul-2011) n/a 6.56 6.31 6.31 6.31 6.31 n/a n/a n/a
Hong Kong 0.50 -100bp (Dec-2008) n/a 0.50 0.50 0.50 0.50 0.50 n/a n/a n/a
India Repo 8.50 +25bp (Oct-2011) 17-Apr 8.50 8.00 7.75 7.75 7.75 8.03 7.55 7.30
Indonesia 5.75 -25bp (Feb-2012) 12-Apr 5.75 5.75 5.75 5.75 6.25 n/a n/a n/a
Japan 0.0-0.10 (Oct-2010) 10-Apr 0.05 0.05 0.05 0.05 0.05 n/a n/a n/a
Korea 3.25 +25bp (Jun-2011) 12-Apr 3.25 3.25 3.25 3.50 3.50 3.10 3.29 3.29
Malaysia 3.00 +25bp (May-2011) 11-May 3.00 3.00 3.00 3.00 3.25 3.19 3.14 3.10
Philippines 4.00 -25bp (Mar-2012) 19-Apr 4.00 4.00 4.00 4.00 4.25 n/a n/a n/a
Singapore 0.39 n/a n/a 0.40 0.40 0.40 0.40 0.40 0.79 0.38 0.75
Sri Lanka 9.00 +50bp (Feb-2012) 17-Apr 9.00 9.50 9.75 9.75 10.00 n/a n/a n/a
Taiwan 1.875 +12.5bp (Jun-2011) 28-Jun 1.875 1.875 1.875 2.000 2.125 2.20 1.97 2.01
Thailand 3.00 -25bp (Jan-2012) 2-Apr 3.00 3.00 3.00 3.25 3.50 3.19 3.07 3.27
Vietnam 13.00 -100bp (Mar-2012) n/a 13.00 12.00 11.00 10.00 9.00 n/a n/a n/a
NB: forecasts in italics, New Zealand and Australia implied rates are OIS swap rates. Singapore implied rates is calculated through “the Bloomberg FWCV function”;
the rest implied rates are based on recommendation from our local rates strategy team; for implied rate comparison, 3M compares to 2Q-2012, 6M to 3Q-2012 and 12M to 1Q-2013.
Source: HSBC, CEIC

HSBC Asia reserve requirement outlook (%)

Pre-crisis level (15 Sep 2008) Cumulative change to date Current HSBC forecast
China 17.5/16.5 +300/200 bps 20.5/18.5 at least 100 bps cut in 1H 2012
India 9.0 -425 bps 4.75 Currently expect no change in 2012
NB: Two RRR rates for China refer to the ratio for large banks and the ratio for small banks, respectively
Source: HSBC & Bloomberg

HSBC Asia public debt forecast — ( grey denotes improvement, red denotes deterioration)
________Budget balance (Local currency bn)_______ ________Budget balance (% of GDP) _______ _________ Public debt (% of GDP) ________
2011 2012f 2013f 2011 2012f 2013f 2011 2012f 2013f
Australia -49.0 -37.6 1.6 -3.4 -2.5 0.1 22.8 23.8 23.0
New Zealand -18.5 -11.1 -4.9 -9.0 -5.1 -2.0 35.3 34.6 34.1
China -532 -807 -813. -1.1 -1.5 -1.4 40.1 39.7 38.3
Hong Kong 75.3 70.0 9.6 4.0 3.6 0.5 33.8 32.1 29.2
India -4,993 -5,690 -5,762 -5.9 -5.5 -5.0 72.4 70.4 68.0
Indonesia -155,969 -180,456 -168,510 -2.1 -2.2 -1.8 28.8 27.9 26.5
Japan -43,998 -49,521 -44,968 -9.4 -10.5 -9.5 236.0 241.0 243.0
Korea 24,944 21,001 33,228 2.2 1.8 2.5 35.0 31.3 25.3
Malaysia -45.6 -44.3 -42.6 -5.3 -4.9 -4.3 58.1 59.1 55.3
Philippines -198 -269 -273 -2.0 -2.6 -2.4 51.1 50.0 47.9
Singapore 2.3 1.4 2.6 0.7 0.4 0.7 104.6 97.0 97.0
Sri Lanka -466 -527 -474 -7.1 -6.6 -5.5 78.0 74.2 75.1
Taiwan -319 -104 -77 -2.3 -0.7 -0.5 38.5 37.9 35.5
Thailand -125 -390 -353 -1.2 -3.4 -2.8 42.2 49.0 46.3
Vietnam -101,108 -117,097 -131,464 -3.9 -3.8 -3.7 51.5 51.0 51.0
NB: India figures are in fiscal year, forecasts in italics, Japan is gross central government debt; HK public debt figures are sourced from IMF, WEO Sept 2011
Source: HSBC, CEIC

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April 2012

HSBC Asia bond yields forecast (% pa)

___________________ 5yr ____________________ ___________________ 10yr ____________________ Rates strategy comment
current +3m +6m +12m current +3m +6m +12m 12m view
US 1.1 0.9 1.0 1.0 2.2 2.1 2.2 2.3 n/a
UK 1.1 1.2 1.4 1.4 2.2 2.4 2.5 2.6 n/a
Euro 0.8 1.1 1.3 1.5 1.8 3.4 3.5 3.6 n/a
Australia 3.7 3.9 3.6 3.9 4.1 4.3 4.0 4.3 Flattening
New Zealand 3.7 3.7 3.7 4.2 4.2 4.1 4.0 4.5 Flattening
China 3.1 3.0 2.6 2.7 3.4 3.1 3.0 3.4 Steepening
Hong Kong 0.6 0.7 0.7 0.8 1.3 1.6 1.5 1.4 Flattening
India 8.6 8.6 8.2 7.5 8.6 8.5 8.2 7.7 Steepening
Indonesia 5.2 6.0 5.5 6.4 5.9 7.0 6.5 7.5 Steepening
Japan 0.3 0.4 0.4 0.4 1.0 1.0 1.1 1.1 Flattening
Korea 3.7 3.7 3.8 4.0 3.7 4.0 4.2 4.5 Steepening
Malaysia 3.3 3.4 3.0 3.6 3.7 3.6 3.5 4.1 Flattening
Philippines 4.5 5.0 4.8 5.5 5.2 5.7 5.4 5.8 Flattening
Singapore 0.6 0.7 0.7 0.7 1.6 1.8 1.6 1.5 Flattening
Taiwan 1.0 0.9 0.8 1.0 1.3 1.5 1.5 1.6 Steepening
Thailand 3.7 3.5 3.6 4.0 3.6 4.0 4.2 4.6 Neutral
Note: rates strategy recommendations from HSBC Asian Pacific Rates Strategy: Portfolio: Focus on FX & bond inflows as of 28 March 2012; forecasts in italics
Source: HSBC, CEIC & Bloomberg

HSBC Asia FX forecast (period end, vs. USD) — (red denotes appreciation or HSBC above forward rate, grey denotes depreciation or HSBC below forward rate)
1Q12 2Q12f 3Q12f 4Q12f 1Q13f % chg 2012 3M FW 6M FW 12M FW
Australia 1.06 1.03 1.00 0.95 0.95 -8.7 1.03 1.02 1.00
New Zealand 0.76 0.75 0.73 0.73 0.72 -11.0 0.81 0.81 0.80
China 6.31 6.22 6.17 6.12 6.07 -2.9 6.33 6.34 6.35
Hong Kong 7.77 7.80 7.80 7.80 7.80 0.5 7.76 7.76 7.75
India 50.7 50.0 49.5 49.0 49.0 -3.7 52.3 53.1 54.3
Indonesia 9,191 9,050 8,950 8,850 8,750 -3.5 9,277 9,388 9,622
Japan 83.4 77.0 75.0 74.0 72.0 -10.8 83.0 83.0 82.0
Korea 1,136 1,110 1,095 1,080 1,070 -5.0 1,145 1,151 1,157
Malaysia 3.07 3.03 2.98 2.93 2.88 -4.2 3.08 3.09 3.12
Philippines 43.0 42.3 42.0 41.0 40.5 -4.7 43.1 43.3 43.5
Singapore 1.26 1.24 1.22 1.20 1.19 -4.8 1.26 1.26 1.25
Sri Lanka 130.0 123.0 124.0 125.0 126.0 -3.3 n/a n/a n/a
Taiwan 29.6 29.2 28.8 28.5 28.2 -3.7 29.5 29.4 29.3
Thailand 30.7 30.2 29.6 29.2 28.8 -5.2 31.0 31.1 31.4
Vietnam 20,900 21,500 21,500 21,500 21,500 3.2 21,343 21,799 22,375
Euro 1.34 1.37 1.40 1.44 1.45 8.3 1.33 1.33 1.33
Sterling 1.55 1.57 1.57 1.60 1.60 0.6 1.59 1.59 1.58
NB: forecasts in italics;% change from March 29, 2012 to end 4Q 12; FW rates are from Bloomberg FXFC function using forward rate; for forward rate comparison, 3M compares to 2Q-2012, 6M to 3Q-2012 and 12M to 1Q-2013
Source: HSBC, Bloomberg

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Asia’s Bond Markets abc
April 2012

HSBC US and Europe policy rate outlook (% pa ) —(rate hikes/increases denoted in red , grey denotes rate cuts)
Q3 2011 Q4 2011 Q1 2012 Q2 2012f Q3 2012f Q4 2012f Q1 2013f Q2 2013f
United States 0- 0.25 0- 0.25 0- 0.25 0- 0.25 0- 0.25 0- 0.25 0- 0.25 0- 0.25
UK 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50
Eurozone 1.50 1.00 1.00 1.00 1.00 1.00 1.00 1.00
NB: Forecast in italics, Source: HSBC, CEIC

HSBC Asia FX policy sustainability dashboard — (negative readings denoted in red)

S.T. ext debt FX reserves S.T. debt C/A 2012f C/A 2013f _________________ Export % yr _________________
(USD bn) (USD bn) Cover (%) (% of GDP) (% of GDP) 3mma (Latest) 2012f 2013f
Australia n/a 53 n/a -3.6 -5.5 15.4 5.5 6.7
New Zealand n/a 13 n/a -5.5 -4.4 12.1 0.2 6.2
China 525.7 3,181 16.5 2.0 1.6 10.4 9.0 12.0
Hong Kong 562.5 295 n/a 4.3 6.6 4.7 6.8 10.5
India 71.0 293 24.2 -3.5 -3.1 4.2 27.6 31.0
Indonesia 42.0 112 37.5 -0.4 -0.5 5.9 11.3 14.3
Korea 136.0 316 43.1 2.3 2.7 7.1 8.9 8.0
Malaysia 37.6 121 31.1 10.4 11.0 3.8 4.0 9.1
Philippines 7.0 77 9.1 3.3 3.5 -11.7 -3.9 9.5
Singapore n/a 247 n/a 18.3 22.1 18.0 10.6 19.4
Sri Lanka 2.9 6 48.3 -7.8 -6.4 10.7 12.7 15.0
Taiwan 75.0 394 19.0 7.5 7.0 -2.8 1.2 15.3
Thailand 30.0 180 16.7 4.3 4.6 -4.4 8.2 6.2
Vietnam 6.5 13 51 -3.6 -3.0 30.1 22.9 23.0
NB: short term debts are 2012 estimates and FX reserves are the latest released; forecasts in italics,
AU and NZ exports are exports of both G&S, rest is merchandise exports (denominated in USD)
Source: HSBC, CEIC

HSBC Asia equity market recommendations — (negative readings denoted in red)

Market Current HSBC recommendation Previous HSBC Rel 3M Performance Rel 12M Performance
recommendation
China Over Over -3.60% -5.90%
Hong Kong Neutral Neutral 3.10% 3.80%
India Over Neutral 0.90% -13.80%
Indonesia Under Neutral -9.70% 10.80%
Korea Neutral Under 0.40% 4.60%
Malaysia Neutral Neutral -3.00% 9.30%
Philippines Under Under 5.40% 32.40%
Singapore Under Over 4.40% 2.60%
Taiwan Over Over 2.30% -0.30%
Thailand Under Under 7.80% 18.10%
Note: Relative performance (w.r.t. MSCI Asia Pacific index). Rel 3M and 12 M perf as of 27 Mar 2012
Source: Bloomberg, HSBC

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 The View
Asia’s Bond Markets abc
April 2012

Asia Credit Coverage

Company Current Bond Ticker Company Current Bond Ticker
Banks coverage Corporates coverage (cont’d)
Axis Bank Neutral AXSBIN Gajah Tunggal Tbk Underweight GJTLIJ
Bangkok Bank Neutral BBLTB Glorious Property Neutral GLOPRO
Bank Mandiri Persero Tbk Neutral BMRIIJ Greentown China Neutral GRNCH
Bank of Baroda Neutral BOBIN Guangzhou R&F Properties Neutral GZRFPR
Bank of China Neutral BCHINA Henderson Land Development Neutral HENLND
Bank of East Asia Underweight BNKEA Hidili Industry Underweight HIDILI
Bank Of India Neutral BOIIN Hong Kong and China Gas Neutral HKCGAS
BOC Hong Kong Neutral BCHINA Hongkong Land Holdings Overweight HKLAND
Canara Bank Neutral CANARA Hopson Development Neutral HPDLF
China Development Bank Neutral SDBC Hutchison Whampoa Overweight HUWHY
Chong Hing Bank Neutral CHOHIN Hynix Semiconductor Overweight HYUELE
CIMB Berhad Neutral CBBMK Indian Oil Corporation Neutral IOCLIN
Citic Bank Neutral CINDBK Indika Energy Tbk PT Overweight INDYIJ
Dah Sing Banking Group Neutral DAHSIN Indosat Neutral ISATIJ
DBS Bank Neutral DBSSP International Container Terminal Services Inc. Neutral ICTSI
Equitable PCI Bank Neutral EBCPM Kaisa Group Holdings Neutral KAISAG
Export-Import Bank Of China Neutral EXIMCH KEPCO Neutral KORELE
Export-Import Bank Of Korea Neutral EIBKOR Kerry Properties Neutral KERPRO
Fubon Bank Underweight FUBON Korea Expressway Neutral HIGHWY
Hana Bank Neutral HANABK Korea Gas Neutral KORGAS
ICBC Neutral ICBCAS Korea Hydro & Nuclear Power Neutral KOHNPW
ICBC Asia Neutral ICBCAS Korea National Housing Neutral KOLAHO
ICICI Bank Neutral ICICI KT Corp Neutral KOREAT
IDBI Neutral IDBI KWG Property Overweight KWGPRO
Industrial Bank of Korea Neutral INDKOR Lai Fung Holdings Neutral LAIFNG
Kookmin Bank Neutral CITNAT Li & Fung Neutral LIFUNG
Korea Development Bank Neutral KDB Longfor Properties Overweight LNGFOR
Korea Exchange Bank Neutral KEB MNC Skyvision Neutral BMTRIJ
Krung Thai Bank Neutral KTB MTR Corporation Neutral MTRC
Malayan Banking Neutral MAYMK New World Development Neutral NWDEVL
NACF Neutral NACF Noble Group Ltd Overweight NOBLSP
OCBC Neutral OCBC Parkson Retail Group Neutral PRKSON
Public Bank Neutral PUBKBD PCCW Neutral PCCW
Shinhan Bank Neutral SHNHAN Perusahaan Listrik Negara (PLN) Overweight PLNIJ
State Bank Of India Neutral SBIIN Petroliam Nasional Berhad (Petronas) Overweight PETMK
United Overseas Bank Ltd Neutral UOBSP PLDT Neutral TELPM
Wing Hang Bank Neutral WINHAN POSCO Neutral POHANG
Woori FHC Neutral WOORI Powerlong Real Estate Neutral PWGLNG
PSALM Underweight PSALM / NATPOW
Corporates coverage PTT Exploration & Production (PTTEP) Overweight PTTEPT
Adaro Energy PT Overweight ADAIND Reliance Industries Neutral RILIN
Agile Property Overweight AGILE Renhe Commercial Holdings Underweight RENHE
Axiata Group Neutral AXIATA Road King Infrastructure Neutral ROADKG
Beijing Capital Land Overweight BJCAPT Shanghai Industrial Urb Dev. (Neo China) Overweight NECHIN
Berau Coal PT Neutral BERAU Shanghai Zendai Property Underweight ZENDA
Bumi Resources Tbk PT Neutral BUMIIJ Shimao Property Neutral SHIMAO
BW Group Neutral BWGRP Shui On Land Overweight SHUION
Central China Real Estates Neutral CENCHI Singapore Telecommunications Neutral STSP
Chandra Asri Underweight TPIAIJ SingTel Optus Neutral STSP
Cheung Kong Infrastructure Neutral HUWHY Sino-Forest Corporation Underweight TRECN
China Fishery Group Neutral CFGSP Sino-Ocean Land Holdings Overweight SINOCE
China Forestry Underweight CHTREE SK Broadband Co Ltd (Hanaro Telecom) Neutral HATELE
China Lumena New Materials Underweight LUMENA SK Telecom Neutral SKM
China Oriental Group Overweight CHOGRP SRE Group Underweight SHANG
China Overseas Land & Inv Overweight CHCONS ST Engineering Neutral STECHS
China Properties Group Underweight CHINPR Star Energy Geothermal Neutral STAREN
China Resources Land Overweight CHIBEI STATS ChipPac Neutral STATSP
China Resources Power Holdings Overweight CHRECO Sun Hung Kai Properties Overweight SUNHUN
China SEC Property Holdings Overweight CHINSC Swire Pacific Neutral SWIRE
China Shanshui Cement Neutral SHASHU Tata Power Neutral TPWRIN
Cikarang Listrindo Neutral CIKLIS Telekom Malaysia Neutral TELMAL
Citic Pacific Neutral CITPAC Tenaga Nasional Neutral TENAGA
Citic Resources Holdings Underweight CITIC Texhong Textile Overweight TEXTEX
CLP Holdings Neutral CHINLP Towngas China Overweight PANVA
Coastal Greenland Neutral CSTGR Vedanta Neutral VEDLN
Country Garden Overweight COGARD West China Cement Neutral WESCHI
ENN Energy (Xinao Gas) Neutral XINAOG Wharf Holdings Neutral WHARF
Evergrande Real Estates Underweight EVERRE Wheelock & Company Neutral WHEELK
Fantasia Holdings Neutral FTHDGR Yanlord Land Group Overweight YLLG
Franshion Properties Overweight FRANSH Yuzhou Properties Neutral YUZHOU

Source: HSBC estimates

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 The View
Asia’s Bond Markets abc
April 2012

Spread and Curve Charts

1. New issuance amount 2. Primary issuance sector distribution

15000 Sov ereign 9% Sov ereign

Bank
Bank
Conglomerate
10000 29% Industries
USDm

7%
Property
5000 Telecom
Utility 10%
Utility
0 Property Industries Energy
Telecom 3%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 24% 17% Conglomerate
2010 2011 2012 Av erage Quasi

Source: HSBC Source: HSBC

3. Performance of new issues since launch 4. HSBC Financial Clog Index

600 2000
90
70 500
1500
50 400
30
bp

300 1000
10
-10 200
500
-30 100
LIHHK 17-retap
ASRIIJ 17
CAPITA 18

DBMMN 17

AGILE 17
BRAUIJ 17

CITPAC 18
HYUCAP 17

CHRES 22

KOROIL 17

ICBCAS 17

ZOOMLI 17
MONMIN 17
DBSSP 22
KWGPRO 17
OCBCSP 15

SLACP 17
STSP 17

MTRC 17

SCBTB 17

UOBSP 17-

0 0
01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 01/12
Interbank Agency Volatiity
Ov erall CDS (RHS)
Source: HSBC Source: Bloomberg, HSBC

5. ADBI vs AHBI (Average spread) 6. ADBI High Grade vs US High Grade

800 1200 300

700
1000 250
600
OAS (bp)

500 800 200

bp

400
600 150
300
100
200 400
1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12
1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12
ADBI HG ML US HG
Differentials ADBI AHBI-Corp (High y ield corp) - RHS
Source: HSBC Source: Bloomberg, HSBC

141
 The View
Asia’s Bond Markets abc
April 2012

7. AHBI High Yield Corp vs US High Yield 8. Global sovereign 5Y CDS

14 500

12 400 CRO
Avg yield (%)

5Y CDS (bp)
300
10 TUR
RUS
200 POL SAF INO
8 CHN KOR BRZ
100 THAMEX COL PHI
CHL MAL PAN
6
1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12 0
US HY Corp Asian HY Corp 8
AA- 11
A+ 14
A 17
A- 20
BBB+ 23 BBB-
BBB 26 29
BB+ 32
BB 35
BB-

Source: Bloomberg, HSBC Source: Credit ratings used are averages of Moody’s and S&P ratings

9. UST curve moves 10. UST 2Y vs UST 10Y

4 4

3 3
Yield (bid, %)
Yield (%)

2 2

1 1
Tenor
0 0
0 5 10 15 20 25 30 1/09 5/09 9/09 1/10 5/10 9/10 1/11 5/11 9/11 1/12
30-Dec-11 5-Apr-12 2y UST 10y UST

Source: Bloomberg, HSBC Source: Bloomberg, HSBC

11. Relative value of Asian high grade sovereigns 12. Relative value of Asian high yield sovereigns

5 7
6
Yield (bid, %)

4
Yield (bid, %)

5
3
4
2 3
Mdur (yr) 2
1 Mdur (yr)
0 2 4 6 8 10 12 1

CHINA (Aa3\AA-) KOREA (A1\A) MALAY (A3\AA-) 0 5 10 15

HK 14 (Aa1\AAA) TEMASE (Aaa\AAA) ROP (Ba2\BB) ROI (Baa3\BB+) VIETNM (B1\BB) SRILAN (B1\B)

Source: Bloomberg, HSBC Source: HSBC

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 The View
Asia’s Bond Markets abc
April 2012

13. Spread differential between 5Y CDS of ROI and ROP 14. Spread differential between PLNIJ ‘20 and INDON ‘20

150 300
100 250
50 200
150

bp
0
bp

-50 100
-100 50
-150 0

01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12

Indonesia 5Y CDS - Philippines 5Y CDS Spread of PLNIJ 2020 - INDON 2020

Source: Bloomberg, HSBC Source: HSBC

15. Hutchison Whampoa: Z-spread curve 16. Hutchison Whampoa: 10Y basis

300 Hutchison Whampa -150

37 -100
250 4/19
Z-spread (bp)

Basis (bp)

27
8/17 9/19 22 33
200 -50
15 1/17
150 14 0
13 M duration
100 50
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 01/12 04/12
Current Prev ious month HUWHY 2019 (Z-spd) - HUWHY 10Y CDS
Source: HSBC Source: HSBC

17. Asia credit premium

3000
2500
2000
1500
bp

1000
500
0
A+

BBB+

BB+

B+
AAA
AA

BBB

BB

B
A-

BBB-

BB-

B-

Spread ov er Treasury (bps) SOT - end 2011

Asia Premium (bps) Asia Premium - end 2011

Source: HSBC

143
144

Asian credits relative value

April 2012
Asia’s Bond Markets
The View
1. Asian sovereigns
450

SRILAN 20
SRILAN 15 SRILAN 21
400

350
VIETNM 20

VIETNM 16
SRILAN 12
300

PHILIP 27
250
Z-spread (mid)

INDON 35 INDON 38
PHILIP 30 INDON 37
200 INDOIS 18 PHILIP 24 PHILIP 25
INDON 19 PHILIP 31 INDON 42
PHILIP 34
INDON 18 PHILIP 24 PHILIP 32 PHILIP 37
KOREA 4/14 INDON 20
INDON 15 INDON 17
INDON 16 KOREA 19 INDON 21 PHILIP 26
INDON 03/14 PHILIP 17 PHILIP 01/19 PHILIP 20
150 PHILIP 01/16 PHILIP 10/16 PHILIP 9/24 MALAYS 21 KOREA 25
PHILIP 21
PHILIP 1/16 PHILIP 10/16 MALAYS 16
KOREA 9/14 KOREA 16 TEMASE 39
MALAYS 15
INDON 5/14 TEMASE 19
KOREA 09/14
100 KOREA 04/14
PHILIP 13
CHINA 13
HK 14
TEMASE 15
50

abc
0
0 5 10 15 20 25 30
Tenor

Source: HSBC
 2. Asian banks

April 2012
Asia’s Bond Markets
The View
500
ICICI 7% 20

KBANK 16
450

BOIIN 21
CINDBK 20
400
DAHSIN 20 ICICI 5.75% 20
AXSBIN 16 ICICI 11/16
AXSBIN 09/15 BNKEA 22
IDBI 16
IOBIN 16 LIUCHO 20
350
Z-spread (mid)

CANARA 16
ICICI 15 FUBON 20
BOBIN 16 BNKEA 20
BOIIN 15
BOBIN 15
300

BCHINA 20
WOORIB 04/21
ICBCAS 20
BBLTB 20
250
SBIIN 14 SBIIN 15 OCBCSP 22 ICBCAS 21
UOBSP 19 WOORIB 04/15
DBSSP 19 KEB 16
OCBC 19 NACF 17 HANABK 4.25 6/17
HANABK 16
NACF 16 SHNHAN 16 SCBTB 16 EIBKOR 21
WOORIB 01/16
200 CITNAT 17 EIBKOR 20
WOORIB 10/15 BBLTB 15 INDKOR 16
WOORIB 02/15 HANABK 15 KDB 17
KDB 08/15 SHNHAN 09/15 KDB 09/16
INDKOR 15
INDKOR 14
BCHINA 16
150
2 3 4 5 6 7 8 9 10
Tenor

abc
Source: HSBC
145
146

3. Asian high grade corporates

April 2012
Asia’s Bond Markets
The View
550

NOBLSP 1/20
500
NOBLSP 8/20
NWDEVL 20

XINAOG 21
450 HUWHY perp-15c
CKI perp-15c

400
NOBLSP 8/15
CHMETL 16 IOCLIN 21
KERPRO 21
HENLND 19
Z-spread (mid)

350 CHIOLI 20
CHIBEI 16
NTPCIN 21

INRCIN KERPRO
16 16
RILIN 20
RELECL 16
300
SINOCH 20
NOBLSP 13 INCIRO 4/16 SUNHUN 20

IOCLIN 15 PTTEPT 21
SUNHUN 17 AXIATA 20
250 WHARF 17 LIFUNG 20 POHANG 20
CHRECO 15 POHANG 21
LIFUNG 17
HUWHY 04/19 BEIENT 21
POHANG 16 DAEHIM 16
SWIRE 18 SWIRE 19 HUWHY 09/19
KIAMTR 16
200 KOLAHO 14 HYNMTR 16 HYUCAP 16
CAPITA 15 SWIRE 16 HUWHY 17 CHINLP 20 KORELE 21
HYNMTR 15 PTTEPT 15
HKE 20
HIGHWY 3/15 HUWHY 15 CHINLP 21
SINTEL 19
HIGHWY 14 KOROIL 14 HIGHWY 5/15 KOROIL 15 HKCGAS 18 PETMK 19
KORELE 14 KORELE 15 PETMK 22
HIGHWY 13 POHANG 14 HKLAND 14 KORELE 15 KCRC 19 CNOOC 21 CNPCCH 21
150 CHIOLI 12 HUWHY 14 PSASP 21
CNPCCH 16 STECHS 19 PSASP 19
PETMK 14

HUWHY 13 CNOOC 13
100 PETMK 15 PSASP 16

SPOWER 13

50

abc
0 2 4 6 8 10 12
Tenor

Source: HSBC
 4. Asian high yield corporates

April 2012
Asia’s Bond Markets
The View
2000

GRNCH 13
1800
YUZHOU 15
CHINPR 14
GLOPRO 15

1600 LUMENA 14
HPDLF 16
GZRFPR 16
CNAUTO 16
1400 WINSWY 16
KAISAG 15
EVERRE 15
KWGPRO 16 KWGPRO 17
CENCHI 15
1200
ROADKG 14 HIDILI 15 ROADKG TEXTEX
15
16
YLLG 18
SHIMAO 17
FUFENG 16
Z-spread (mid)

BRPTIJ 15 YLLG 17
WESCHI 16
PACNET 15
COGARD 17
1000 BMTRIJ 15 COGARD 18
SHIMAO 16
LAIFNG 14 GJTLIJ 14
COGARD 15 AGILE 17
AGILE 16 CHOGRP 17
CHOGRP 15 MIEHOL 16
COGARD 14 CITPAC 49
BTELIJ 15 LNGFOR 16 LIANSU 16
800 SHASHU 16 VEDLN 18
BUMIIJ 16 FOSUNI 16
TPWRIN 71 ICTPM 49 BUMIIJ 17
RESOUR 49 FRANSH 21
BERAUC 15
600 VEDLN 14
INDIKA 16 BWGRP 17
CITPAC 21
INDYIJ 18
CITIC 14 ADAIND 19
400 ISATIJ 20
STATSP 15 MEGPM 18 ICTSI 20

PLDT 17 PLNIJ 19 PLNIJ 20

PLNIJ 16 PLNIJ 17
200
NATPOW 16

abc
1 2 3 4 5 6 7
Tenor

Source: HSBC
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Appendix
 HSBC Databank

 Asian Yankee/Eurobond
Secondary Trading
Levels as of 3/4/2012
 Asian Rating Timeline

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HSBC Databank
People's Republic of China
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Aa3 AA- A+
Outlook Positive Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-1+ F1
Local Currency Rating Long term Aa3 AA- AA-
Local Currency Rating Short term NR A-1+ NR
China Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 9.6 9.2 10.4 9.2 8.6 8.8
Nominal GDP (USDbn) 4,534.8 4,990.2 5,938.4 7,299.2 8,485.2 9,771.6
GDP per capita (USD) 3,432.1 3,757.6 4,428.4 5,416.1 6,264.7 7,178.6
Gross domestic saving (% GDP) 51.4 51.8 52.6 51.5 51.0 50.5
Unemployment rate, average (%) 4.2 4.3 4.1 4.1 4.3 4.3
Prices & wages
CPI, average (% y-o-y) 5.9 -0.7 3.3 5.4 2.9 2.6
PPI, end-year (% y-o-y) -1.1 1.7 5.9 1.7 5.5 5.0
Manufacturing wages, nominal (% y-o-y) 15.8 9.9 15.3 13.0 12.0 13.5
Money, FX & interest rates
Central bank money M0, average (% y-o-y) 12.4 12.1 14.9 16.0 12.0 13.0
Broad money supply M2, average (% y-o-y) 16.7 26.5 23.7 16.4 14.3 15.8
Policy rate, end-year (%) 5.31 5.31 5.81 6.56 6.31 6.31
RMB /USD, end-year 6.82 6.83 6.62 6.30 6.12 5.92
RMB /USD, average 6.93 6.83 6.76 6.46 6.21 6.02
External sector
Merchandise exports (USDbn) 1,428.5 1,201.7 1,578.4 1,898.9 2,069.8 2,318.1
Merchandise imports (USDbn) 1,133.1 1,005.6 1,393.9 1,741.0 1,949.9 2,222.9
Trade balance (USDbn) 295.5 196.1 184.5 157.9 119.9 95.2
Current account balance (USDbn) 426 284 305 201 170 160
Current account balance (% GDP) 9.4 5.7 5.1 2.8 2.0 1.6
Net FDI (USDbn) 108.3 90.0 105.8 116.2 128.9 144.4
Net FDI (% GDP) 2.4 1.8 1.8 1.6 1.5 1.5
Current account balance plus FDI (% GDP) 11.8 7.5 6.9 4.3 3.5 3.1
Exports (% y-o-y) 17.2 -15.9 31.4 20.3 9.0 12.0
Imports (% y-o-y) 18.5 -11.3 38.6 24.9 12.0 14.0
International FX reserves (USDbn) 1,946.0 2,399.2 2,850.0 3,181.0 3,450.0 3,600.0
Import cover (months) 20.6 28.6 24.5 21.9 21.2 19.4
Short-term external debt (USDbn) 226.3 259.3 375.7 475.7 525.7 555.7
Short-term external debt (% nominal GDP) 5.0 5.2 6.3 6.5 6.2 5.7
Short-term external debt (% exports) 15.8 21.6 23.8 25.1 25.4 24.0
Public and external solvency indicators
Commercial banks’ FX assets (USDbn) 181.3 115.3 128.1 147.5 168.7 191.5
Gross external debt (USDbn) 390.2 428.6 548.9 653.9 708.9 743.9
Short term external debt (% of int'l reserves) 11.6 10.8 13.2 15.0 15.2 15.4
Consolidated government balance (% GDP) -0.8 -2.8 -1.7 -1.1 -1.5 -1.4
Note: Industrial production is the output of all industrial companies
Source: HSBC

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April 2012

Hong Kong SAR

Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Aa1 AAA AA+
Outlook Positive Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-1+ F1+
Local Currency Rating Long term Aa1 AAA AA+
Local Currency Rating Short term NR A-1+ NR
HK Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 2.3 -2.6 7.0 5.0 3.3 5.2
Nominal GDP (USDbn) 215.5 209.3 224.2 243.3 247.4 261.9
GDP per capita (USD) 30,971 30,020 31,916 34,410 34,152 35,844
Gross domestic saving (% GDP) 34.1 29.9 29.9 29.2 29.1 29.3
Unemployment rate, end-year (%) 4.1 5.0 3.9 3.3 3.3 3.3
Prices & wages
CPI, average (% y-o-y) 4.3 0.6 2.3 5.3 5.3 4.8
PPI, end-year (% y-o-y) 3.8 -0.3 7.6 6.6 5.3 4.1
Manufacturing wages, nominal (% y-o-y) 0.9 0.8 3.3 5.5 6.0 5.9
Money, FX & interest rates
Central bank money M1, average (% y-o-y) 4.6 29.6 24.2 13.4 20.0 18.0
Broad money supply M3, average (% y-o-y) 7.0 7.1 5.2 12.9 8.8 9.0
Policy rate, end-year (%) 0.50 0.50 0.50 0.50 0.50 0.50
HKD /USD, end-year 7.75 7.76 7.77 7.77 7.80 7.80
HKD /USD, average 7.78 7.75 7.77 7.78 7.79 7.80
External sector
Merchandise exports (USDbn) 365.4 321.9 394.0 438.0 467.8 516.9
Merchandise imports (USDbn) 388.6 348.7 437.0 494.2 528.4 581.2
Trade balance (USDbn) -23.1 -26.9 -43.0 -56.1 -60.6 -64.2
G & S balance (USDbn) 22.1 15.6 12.2 9.0 11.0 7.9
G & S balance (% GDP) 10.3 7.5 5.4 3.7 4.4 3.0
Net FDI (USDbn) 9.0 -11.6 -24.3 1.5 5.3 5.0
Net FDI (% GDP) 4.2 -5.5 -10.9 0.6 2.1 1.9
G & S balance plus FDI (% GDP) 14.5 1.9 -5.4 4.3 6.6 4.9
Exports (% y-o-y) 5.6 -11.9 22.4 11.2 6.8 10.5
Imports (% y-o-y) 6.3 -10.3 25.3 13.1 6.9 10.0
International FX reserves (USDbn) 182.5 255.8 268.7 285.4 332.2 340.2
Import cover (months) 5.6 8.8 7.4 6.9 7.5 7.0
Public and external solvency indicators
Commercial banks’ FX assets (USDbn) 867.4 791.8 962.4 1,111.6 960.0 1,100.0
Gross external debt (USDbn) 663.4 668.5 822.7 850.0 750.0 700.0
Consolidated government balance (% GDP) 0.1 1.6 4.3 4.0 3.6 0.5
Note: Public debt refers to government debt only
Source: HSBC

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April 2012

Republic of India
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Baa3 BBB- BBB-
Outlook Stable Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-3 F3
Local Currency Rating Long term Baa3 BBB- BBB-
Local Currency Rating Short term P-3 A-3 NR
India Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 6.7 8.4 8.4 6.7 7.5 8.2
Nominal GDP (USDbn) 1,252 1,343 1,688 1,903 2,029 2,377
GDP per capita (USD) 1,031 1,076 1,320 1,463 1,536 1,788
Gross domestic saving (% GDP) 33.1 32.4 33.9 32.5 32.7 34.5
Prices & wages
CPI, average (% y-o-y) 9.1 12.4 10.4 8.1 7.2 6.7
WPI, end-year (% y-o-y) 1.6 10.4 9.7 6.3 7.1 6.1
Money, FX & interest rates
Central bank money M0, average (% y-o-y) 17.0 15.7 18.8 18.0 15.0 14.5
Broad money supply M3, average (% y-o-y) 20.5 19.2 16.2 15.0 16.1 16.6
Policy rate, end-year (%) 6.50 4.75 6.25 8.50 7.75 7.75
INR /USD, end-year 48.46 46.69 44.81 53.26 49.00 49.00
INR /USD, average 44.58 48.39 45.74 46.67 50.33 49.00
External sector
Merchandise exports (USDbn) 198.6 168.2 225.9 301.5 384.6 503.7
Merchandise imports (USDbn) 324 275 358 461 584 749
Trade balance (USDbn) -125.3 -107.0 -131.8 -159.5 -199.8 -245.5
Current account balance (USDbn) -31.0 -25.9 -52.2 -59.1 -72.8 -78.2
Current account balance (% GDP) -2.5 -1.9 -3.1 -3.1 -3.6 -3.3
Net FDI (USDbn) 26.7 19.5 11.0 18.4 15.0 24.0
Net FDI (% GDP) 2.1 1.5 0.7 1.0 0.7 1.0
Current account balance plus FDI (% GDP) -0.3 -0.5 -2.4 -2.1 -2.9 -2.3
Exports (% y-o-y) 29.1 -15.3 34.3 33.4 27.6 31.0
Imports (% y-o-y) 39.8 -15.0 30.0 28.9 26.8 28.2
International FX reserves (USDbn) 247 259 268 263 277 323
Import cover (months) 9.1 11.3 9.0 6.8 5.7 5.2
Short-term external debt (USDbn) 43.3 52.3 65.0 72.0 71.0 82.0
Short-term external debt (% nominal GDP) 3.5 3.9 3.9 3.8 3.5 3.4
Short-term external debt (% exports) 21.8 31.1 28.8 23.9 18.5 16.3
Public and external solvency indicators
Commercial banks’ FX assets (USDbn) 265.4 270.0 300.0 320.0 320.0 320.0
Gross external debt (USDbn) 224 261 305 340 355 410
Private sector external debt (USDbn) 168.6 194.0 N/A N/A N/A N/A
Gross public sector debt (% GDP) 76.8 73.1 72.9 72.4 70.4 68.0
Note: Data pertains to fiscal year starting April
Source: HSBC

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Republic of Indonesia
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Baa3 BB+ BBB-
Outlook Stable Positive Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR B F3
Local Currency Rating Long term Baa3 BB+ BBB-
Local Currency Rating Short term NR B NR
Indonesia Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 6.0 4.6 6.2 6.5 6.1 6.5
Nominal GDP (USDbn) 510.6 538.6 708.4 846.4 918.0 1,082.3
GDP per capita (USD) 2,234.5 2,327.9 2,980.9 3,572.0 3,794.4 4,473.1
Gross domestic saving (% GDP) 31.0 31.7 34.4 36.4 37.3 38.2
Unemployment rate, end-year (%) 8.4 7.9 7.1 6.6 6.5 6.5
Prices & wages
CPI, average (% y-o-y) 9.8 4.8 5.1 5.4 5.6 6.3
WPI, end-year (% y-o-y) 9.7 4.6 3.9 4.2 7.2 8.0
Manufacturing wages, nominal (% y-o-y) 7.6 5.3 12.2 10.0 9.0 10.0
Money, FX & interest rates
Broad money supply M2, average (% y-o-y) 13.7 8.3 8.4 11.3 13.3 13.0
Policy rate, end-year (% y-o-y) 9.25 6.50 6.50 6.00 5.75 6.50
IDR /USD, end-year 10,950 9,400 8,991 9,068 8,850 8,450
IDR /USD, average 9,691 10,409 9,086 8,775 9,038 8,650
External sector
Merchandise exports (USDbn) 139.6 119.6 158.1 201.5 224.2 256.2
Merchandise imports (USDbn) 116.7 88.7 127.4 166.1 190.6 221.1
Trade balance (USDbn) 22.9 30.9 30.6 35.3 33.6 35.0
Current account balance (USDbn) 0.1 10.6 5.1 2.1 -3.4 -5.0
Current account balance (% GDP) 0.0 2.0 0.7 0.2 -0.4 -0.5
Net FDI (USDbn) 3.4 2.6 11.1 10.4 9.0 10.0
Net FDI (% GDP) 0.7 0.5 1.6 1.2 1.0 0.9
Current account balance plus FDI (% GDP) 0.7 2.5 2.3 1.5 0.6 0.5
Exports (% y-o-y) 18.3 -14.3 32.1 27.5 11.3 14.3
Imports (% y-o-y) 36.9 -24.0 43.7 30.3 14.7 16.0
International FX reserves (USDbn) 51.6 66.1 96.2 110.1 116.7 125.8
Import cover (months) 5.3 8.9 9.1 8.0 7.3 6.8
Short-term external debt (USDbn) 29.6 30.6 33.0 38.1 42.0 44.0
Short-term external debt (% nominal GDP) 5.8 5.7 4.7 4.5 4.6 4.1
Short-term external debt (% exports) 21.2 25.6 20.9 18.9 18.7 17.2
Public and external solvency indicators
Gross external debt (USDbn) 149.1 172.9 202.4 224.8 243.4 279.4
Short term external debt (% of int'l reserves) 57.3 46.3 34.4 34.6 36.0 35.0
Central government balance (% GDP) -0.1 -1.6 -0.7 -2.1 -2.2 -1.8
Source: HSBC

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April 2012

Republic of Korea
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term A1 A A+
Outlook Positive Stable Positive
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-1 F1
Local Currency Rating Long term A1 A+ AA
Local Currency Rating Short term NR A-1 NR
Korea Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 2.3 0.3 6.2 3.6 3.1 3.7
Nominal GDP (USDbn) 947.7 841.6 1,014.5 1,125.3 1,193.6 1,345.2
GDP per capita (USD) 19,498 17,264 20,756 22,954 24,275 27,276
Gross domestic saving (% GDP) 30.0 29.9 32.2 33.1 33.7 34.3
Unemployment rate, end-year (%) 3.3 3.5 3.5 3.0 3.3 3.2
Prices & wages
CPI, average (% y-o-y) 4.7 2.8 2.9 4.0 3.4 3.5
PPI, end-year (% y-o-y) 5.6 1.8 5.3 4.3 3.6 4.2
Manufacturing wages, nominal (% y-o-y) N/A 5.0 6.4 1.7 2.5 4.0
Money, FX & interest rates
Central bank money M0, average (% y-o-y) 7.5 17.6 11.4 7.4 11.2 9.0
Broad money supply M3, average (% y-o-y) 10.0 8.6 6.8 6.1 8.2 8.0
Policy rate, end-year (%) 3.00 2.00 2.50 3.25 3.50 3.75
KRW /USD, end-year 1,258 1,168 1,139 1,153 1,080 1,040
KRW /USD, average 1,100 1,277 1,156 1,108 1,114 1,060
External sector
Merchandise exports (USDbn) 435.2 357.6 461.0 552.4 601.5 649.5
Merchandise imports (USDbn) 430.2 320.5 421.5 522.6 570.4 610.7
Trade balance (USDbn) 4.5 37.9 39.9 30.4 31.1 38.9
Current account balance (USDbn) 3.1 32.6 29.1 26.3 28.1 36.7
Current account balance (% GDP) 0.3 3.9 2.9 2.3 2.4 2.7
Net FDI (USDbn) -16.9 -14.9 -22.2 -15.7 -8.0 -8.0
Net FDI (% GDP) -1.8 -1.8 -2.2 -1.4 -0.7 -0.6
Current account balance plus FDI (% GDP) -1.5 2.1 0.7 0.9 1.7 2.1
Exports (% y-o-y) 11.7 -17.8 28.9 19.8 8.9 8.0
Imports (% y-o-y) 22.0 -25.5 31.5 24.0 9.1 7.1
International FX reserves (USDbn) 204.7 268.4 291.7 308.7 351.5 386.3
Import cover (months) 5.7 10.0 8.3 7.1 7.4 7.6
Short-term external debt (USDbn) 149.9 149.2 139.8 136.1 147.0 162.8
Short-term external debt (% nominal GDP) 15.8 17.7 13.8 12.1 12.3 12.1
Short-term external debt (% exports) 34.4 41.7 30.3 24.6 24.4 25.1
Public and external solvency indicators
Gross external debt (USDbn) 317.4 345.7 359.4 398.4 420.0 440.0
Short term external debt (% of int'l reserves) 73.2 55.6 47.9 44.1 41.8 42.1
Central government balance (% GDP) 1.3 -2.1 1.6 2.2 1.8 2.5
Source: HSBC

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April 2012

Federation of Malaysia
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term A3 A- A-
Outlook Stable Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-2 F2
Local Currency Rating Long term A3 A+ A
Local Currency Rating Short term NR A-1 NR
Malaysia Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 4.8 -1.6 7.2 5.1 3.7 5.3
Nominal GDP (USDbn) 222.4 193.4 238.4 278.9 298.9 346.9
GDP per capita (USD) 8,109 6,934 8,440 9,767 10,334 11,839
Gross domestic saving (% GDP) 42.5 36.0 39.2 38.7 36.8 36.6
Unemployment rate, end-year (%) 3.1 3.5 3.2 3.1 3.3 3.2
Prices & wages
CPI, average (% y-o-y) 5.4 0.6 1.7 3.2 2.6 3.1
PPI, end-year (% y-o-y) -2.6 3.6 5.5 6.2 8.4 4.4
Manufacturing wages, nominal (% y-o-y) 12.3 0.3 5.9 6.6 4.8 6.2
Money, FX & interest rates
Central bank money M0, end-year (% y-o-y) 7.2 -20.0 11.8 57.3 8.0 13.0
Broad money supply M3, average (% y-o-y) 12.5 7.4 8.1 10.9 9.5 10.5
Policy rate, end-year (%) 3.25 2.00 2.75 3.00 3.00 3.50
3M interbank rate, end-year (%) 3.37 2.17 2.98 3.22 3.30 3.70
MYR /USD, end-year 3.55 3.41 3.13 3.16 2.93 2.74
MYR /USD, average 3.33 3.52 3.22 3.06 3.03 2.83
External sector
Merchandise exports (USDbn) 199.3 157.3 198.8 227.7 238.8 278.6
Merchandise imports (USDbn) 147.7 117.1 157.0 178.8 187.0 214.3
Trade balance (USDbn) 51.6 40.2 41.9 48.9 51.7 64.3
Current account balance (USDbn) 39.5 31.8 27.4 32.0 31.1 38.3
Current account balance (% GDP) 17.7 16.5 11.5 11.5 10.4 11.0
Net FDI (USDbn) -7.8 -6.5 -4.2 -4.0 -3.8 -3.9
Net FDI (% GDP) -3.5 -3.4 -1.8 -1.5 -1.3 -1.1
Current account balance plus FDI (% GDP) 14.2 13.1 9.7 10.0 9.1 9.9
Exports (% y-o-y) 9.7 -16.5 15.5 8.8 4.0 9.1
Imports (% y-o-y) 3.4 -16.2 22.6 8.2 3.7 7.1
International FX reserves (USDbn) 91.5 96.7 106.5 133.6 148.3 163.5
Import cover (months) 7.4 9.9 8.1 9.0 9.5 9.2
Short-term external debt (USDbn) 23.9 22.0 24.7 34.0 37.6 42.4
Short-term external debt (% nominal GDP) 10.8 11.4 10.4 12.2 12.6 12.2
Short-term external debt (% exports) 12.0 14.0 12.4 14.9 15.8 15.2
Public and external solvency indicators
Gross external debt (USDbn) 56.8 66.1 70.6 84.1 94.1 106.1
Short term external debt (% of int'l reserves) 26.1 22.7 23.2 25.4 25.4 26.0
Consolidated government balance (% GDP) N/A N/A N/A N/A N/A N/A
Central government balance (% GDP) -4.8 -7.0 -5.6 -5.3 -4.9 -4.3
Source: HSBC

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April 2012

Republic of the Philippines

Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Ba2 BB BB+
Outlook Stable Positive Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR B B
Local Currency Rating Long term Ba2 BB+ BBB-
Local Currency Rating Short term NR B NR
Philippines Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 4.2 1.1 7.6 3.7 3.6 5.2
Nominal GDP (USDbn) 173.6 168.5 199.6 224.8 245.7 281.4
GDP per capita (USD) 1,983.1 1,890.6 2,200.1 2,428.8 2,602.9 2,923.2
Gross domestic saving (% GDP) 17.5 20.5 20.1 18.7 18.6 18.4
Unemployment rate, end-year (%) 7.7 7.3 7.4 7.1 7.1 7.1
Prices & wages
CPI, average (% y-o-y) 8.2 4.2 3.8 4.8 3.3 4.7
PPI, end-year (% y-o-y) 7.3 -2.2 -5.8 1.5 4.8 3.9
Manufacturing wages, nominal* (% y-o-y) 5.3 2.2 3.4 5.5 6.5 6.5
Money, FX & interest rates
Central bank money M0, average (% y-o-y) 10.6 8.8 10.9 11.3 10.3 8.0
Broad money supply M3, average (% y-o-y) 14.2 11.7 9.5 8.4 5.1 4.5
Policy rate, end-year (%) 5.50 4.00 4.00 4.50 4.00 4.50
PHP /USD, end-year 48.09 46.42 43.95 43.65 41.30 40.40
PHP /USD, average 44.47 47.64 45.11 43.31 42.47 40.45
External sector
Merchandise exports (USDbn) 48.3 37.6 50.7 47.3 45.5 49.8
Merchandise imports (USDbn) 61.1 46.5 61.1 63.4 65.3 70.3
Trade balance (USDbn) -12.9 -8.8 -10.4 -16.1 -19.9 -20.5
Current account balance (USDbn) 3.6 9.4 8.9 6.5 8.1 9.8
Current account balance (% GDP) 2.1 5.6 4.5 2.9 3.3 3.5
Net FDI (USDbn) 1.3 1.6 1.2 1.0 1.2 1.2
Net FDI (% GDP) 0.7 1.0 0.6 0.4 0.5 0.4
Current account balance plus FDI (% GDP) 2.8 6.5 5.1 3.3 3.8 3.9
Exports (% y-o-y) -2.5 -22.1 34.9 -6.8 -3.9 9.5
Imports (% y-o-y) 5.6 -24.0 32.9 2.8 3.0 7.6
International FX reserves (USDbn) 37.4 44.1 62.1 76.7 85.4 96.9
Import cover (months) 7.3 11.4 12.2 14.5 15.7 16.5
Short-term external debt (USDbn) 7.0 4.0 7.2 6.7 7.0 7.1
Short-term external debt (% nominal GDP) 4.0 2.4 3.6 3.0 2.8 2.5
Short-term external debt (% exports) 14.5 10.6 14.2 14.2 15.3 14.2
Public and external solvency indicators
Commercial banks’ FX assets (USDbn) 17.7 18.2 20.2 22.3 24.3 27.3
Gross external debt (USDbn) 54.3 54.9 60.0 56.0 58.0 59.0
Short term external debt (% of int'l reserves) 18.7 9.1 11.6 8.8 8.1 7.3
Consolidated government balance (% GDP) 0.4 -3.0 NA NA NA NA
Central government balance (% GDP) -0.9 -3.7 -3.5 -2.0 -2.6 -2.4
Note: *refers to minimum wage index
Source: HSBC

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Republic of Singapore
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Aaa AAA AAA
Outlook Stable Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-1+ F1+
Local Currency Rating Long term Aaa AAA AAA
Local Currency Rating Short term NR A-1+ NR
Singapore Economic Indicators
2008 2009 2010 2,011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 1.7 -1.0 14.8 5.0 2.6 5.8
Nominal GDP (USDbn) 190.6 185.9 227.9 260.3 280.8 301.0
GDP per capita (USD) 41,537 38,418 45,308 47,289 49,962 53,346
Gross domestic saving (% GDP) 49.5 49.2 51.4 51.8 50.9 52.9
Unemployment rate end-year (%) 2.7 2.3 2.2 2.0 2.0 2.0
Prices & wages
CPI, average (% y-o-y) 6.6 0.6 2.8 5.2 4.1 2.1
PPI, end-year (% y-o-y) -11.2 0.0 -0.9 7.3 6.0 5.3
Manufacturing wages, nominal (% y-o-y) 4.1 5.0 0.3 5.7 4.0 4.5
Money, FX & interest rates
Central bank money M0, average (% y-o-y) 7.0 12.2 10.0 14.0 10.5 12.0
Broad money supply M3, average (% y-o-y) 10.9 10.6 8.4 10.2 8.5 10.1
3M interbank rate, end-year (%) 0.96 0.68 0.44 0.39 0.40 0.40
SGD /USD, end-year 1.44 1.40 1.29 1.30 1.20 1.16
SGD /USD, average 1.41 1.45 1.36 1.26 1.24 1.18
External sector
Merchandise exports (USDbn) 357.0 290.0 372.5 430.3 475.9 568.0
Merchandise imports (USDbn) 315.0 242.3 309.1 362.7 408.7 484.4
Trade balance (USDbn) 42.0 47.6 63.4 67.5 67.2 83.6
Current account balance (USDbn) 26.4 30.2 55.6 57.1 51.4 70.5
Current account balance (% GDP) 13.9 16.2 24.4 21.9 18.3 22.1
Net FDI (USDbn) 5.1 6.8 27.8 38.9 28.9 33.1
Net FDI (% GDP) 2.7 3.7 12.2 14.9 10.3 11.0
Current account balance plus FDI (% GDP) 16.5 19.9 36.6 36.9 28.6 33.1
Exports (% y-o-y) 13.7 -18.8 28.5 15.5 10.6 19.4
Imports (% y-o-y) 22.6 -23.1 27.5 17.4 12.7 18.5
International FX reserves (USDbn) 173.9 188.1 224.4 237.1 262.3 325.9
Import cover (months) 6.6 9.3 8.7 7.8 7.7 8.1
Public and external solvency indicators
Consolidated government balance (% GDP) 1.5 -0.9 -1.7 0.7 0.4 0.7
Gross external debt (USDbn) 416.7 406.0 477.0 620.3 659.8 692.3
Source: HSBC

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Democratic Socialist Republic of Sri Lanka

Rating
Moody's S&P Fitch
Foreign Currency Rating Long term B1 B+ BB-
Outlook Positive Positive Stable
Review/Credit Watch NR None None
Foreign Currency Rating Short term NR B B
Local Currency Rating Long term NR BB- BB-
Local Currency Rating Short term NR B NR
Sri Lanka Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 6.0 3.5 8.0 8.3 6.5 7.4
Nominal GDP (USDbn) 40.7 42.0 49.6 59.1 63.6 68.0
GDP per capita (USD) 2014.0 2057.0 2400.0 2832.7 3013.9 3185.6
Gross domestic saving (% GDP) 17.3 23.6 25.1 22.1 22.6 24.5
Unemployment rate end-year (%) 5.3 5.7 5.0 4.4 4.4 4.4
Prices & wages
CPI, average (% y-o-y) 22.6 3.5 6.2 6.7 5.9 7.6
CPI, end-year (% y-o-y) 13.9 5.0 6.8 4.9 7.3 7.6
WPI, end-year (% y-o-y) 0.7 13.3 17.6 -6.1 8.2 6.3
Money, FX & interest rates
Central bank money M0, end (% y-o-y) 4.0 21.4 20.9 7.7 14.8 20.5
Broad money supply M2, end (% y-o-y) 11.7 19.9 18.0 20.9 16.5 18.5
Policy rate, end-year (%) 12.00 9.75 9.00 8.50 9.75 10.25
LKR /USD, end-year 113.3 114.4 111.1 114.0 125.0 127.0
External sector
Merchandise exports (USDbn) 8.1 7.1 8.4 10.5 11.8 13.6
Merchandise imports (USDbn) 14.1 10.2 13.4 20.3 22.7 24.4
Trade balance (USDbn) -6.0 -3.1 -5.0 -9.8 -10.9 -10.9
Current account balance (USDbn) -3.8 -0.2 -1.3 -4.6 -4.9 -3.8
Current account balance (% GDP) -9.3 -0.5 -2.7 -7.8 -7.7 -5.7
Net FDI (USDbn) 0.7 0.6 0.5 1.0 1.0 1.5
Net FDI (% GDP) 1.7 1.4 1.0 1.7 1.6 2.2
Current account balance plus FDI (% GDP) -7.6 0.9 -1.7 -6.2 -6.2 -3.5
Exports (% y-o-y) 6.0 -12.7 19.2 24.3 12.7 15.0
Imports (% y-o-y) 26.0 -27.6 31.8 51.2 11.7 7.6
Import cover (months) 1.5 6.0 5.9 3.9 3.3 3.2
Short-term external debt (USDbn) 34.0 13.2 20.4 29.2 42.4 46.2
Short-term external debt (% FX reserves) 83.6 31.4 41.2 49.3 66.7 68.0
Public and external solvency indicators
Consolidated government balance (% GDP) -7.0 -9.8 -7.9 -7.1 -6.6 -5.5
Gross public domestic debt (USD bn) 19.8 20.9 22.8 24.5 26.2 27.5
Gross public external debt (USDbn) 13.4 15.3 18.8 18.2 21.1 23.5
Source: HSBC

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Kingdom of Thailand
Rating
Moody's S&P Fitch
Foreign Currency Rating Long term Baa1 BBB+ BBB
Outlook Stable Stable Stable
Review/Credit Watch None None None
Foreign Currency Rating Short term NR A-2 F3
Local Currency Rating Long term Baa1 A- A-
Local Currency Rating Short term NR A-2 NR
Thailand Economic Indicators
2008 2009 2010 2,011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 2.5 -2.3 7.8 0.1 5.5 4.5
Nominal GDP (USDbn) 278.5 264.0 318.7 343.0 380.6 439.2
GDP per capita (USD) 4,189 3,936 4,727 5,051 5,229 5,620
Gross domestic saving (% GDP) 32.6 31.3 35.8 35.8 34.5 34.3
Unemployment rate, end-year (%) 1.4 0.9 0.7 0.4 1.1 1.1
Prices & wages
CPI, average (% y-o-y) 5.5 -0.8 3.3 3.8 3.4 3.8
PPI, end-year (% y-o-y) -1.7 9.9 6.7 4.5 3.0 3.0
Manufacturing wages, nominal (% y-o-y) 10.2 -2.5 6.5 2.2 3.3 3.5
Money, FX & interest rates
Central bank money M0, average (% y-o-y) N/A N/A N/A N/A N/A N/A
Broad money supply M2, average (% y-o-y) 5.4 8.2 8.0 15.2 6.0 6.0
Policy rate, end-year (%) 2.75 1.25 2.00 3.25 3.25 4.00
THB /USD, end-year 34.72 33.33 30.16 31.51 29.20 27.60
THB /USD, average 32.68 34.25 31.71 30.73 30.21 28.40
External sector
Merchandise exports (USDbn) 175.2 150.8 193.7 225.4 243.8 258.8
Merchandise imports (USDbn) 157.9 118.2 161.9 201.9 217.8 228.7
Trade balance (USDbn) 17.3 32.6 31.8 23.5 26.0 30.1
Current account balance (USDbn) 2.2 21.9 13.2 11.9 16.5 20.7
Current account balance (% GDP) 0.8 8.3 4.1 3.5 4.3 4.7
Net FDI (USDbn) 4.4 2.3 0.1 1.9 6.5 6.0
Net FDI (% GDP) 1.6 0.9 0.0 0.5 1.7 1.4
Current account balance plus FDI (% GDP) 2.4 9.2 4.2 4.0 6.0 6.1
Exports (% y-o-y) 15.9 -13.9 28.4 16.4 8.2 6.2
Imports (% y-o-y) 26.7 -25.1 37.0 24.7 7.9 5.0
International FX reserves (USDbn) 111.0 138.4 172.1 175.1 198.2 226.7
Import cover (months) 8.4 14.1 12.8 10.4 10.9 11.9
Short-term external debt (USDbn) 33.6 33.1 46.7 29.0 30.0 30.5
Short-term external debt (% nominal GDP) 12.1 12.5 14.7 8.5 7.9 6.9
Short-term external debt (% exports) 19.2 22.0 24.1 12.9 12.3 11.8
Public and external solvency indicators
Gross external debt (USDbn) 76.1 75.3 96.9 55.3 63.9 64.6
Short term external debt (% of int'l reserves) 30.3 23.9 27.2 16.6 15.1 13.5
Consolidated government balance (% GDP) -1.1 -4.4 -1.3 -1.2 -3.4 -2.8
Source: HSBC

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Socialist Republic of Vietnam

Rating
Moody's S&P Fitch
Foreign Currency Rating Long term B1 BB- B+
Outlook Negative Negative Stable
Review/Credit Watch None None Negative
Foreign Currency Rating Short term NR B B
Local Currency Rating Long term B1 BB B+
Local Currency Rating Short term NR B NR
Vietnam Economic Indicators
2008 2009 2010 2011 2012f 2013f
Production, demand and employment
GDP growth (% y-o-y) 6.3 5.3 6.8 5.9 5.7 6.1
Nominal GDP (USDbn) 90.3 93.2 102.0 124.4 144.3 165.3
GDP per capita (USD) 1,052 1,064 1,156 1,382 1,586 1,796
Gross domestic saving (% GDP) 32.6 31.9 32.0 31.7 32.0 IMF, HSBC
Unemployment rate, end-year (%) 4.7 4.6 4.3 4.5 4.6 4.4
Prices
CPI, average (% y-o-y) 23.1 7.0 9.2 18.6 11.0 9.8
PPI end, (% y-o-y) 21.8 7.3 12.6 20.1 8.0 8.5
Money, FX & interest rates
Broad money supply M2, average (% y-o-y) 20.7 26.2 29.7 9.3 13.0 17.0
Policy rate (Prime rate), end-year (%) 9.0 8.0 10.0 14.0 10.0 10.0
VND /USD, end-year 17,483 18,200 19,498 21,034 21,500 21,500
VND /USD, average 16,759 18,317 19,260 20,836 21,350 21,500
External sector
Merchandise exports (USDbn) 62.7 57.1 72.2 96.9 119.1 146.6
Merchandise imports (USDbn) 80.7 69.9 84.8 106.7 128.7 156.7
Trade balance (USDbn) -18.0 -12.9 -12.6 -9.8 -9.6 -10.1
Current account balance (USDbn) -10.8 -6.1 -3.9 -5.7 -5.3 -4.9
Current account balance (% GDP) -11.9 -6.5 -3.9 -4.6 -3.6 -3.0
Net FDI (USDbn) 11.5 10.0 11.0 11.0 11.0 11.0
Net FDI (% GDP) 12.7 10.7 10.8 8.8 7.6 6.7
Current account balance plus FDI (% GDP) 0.8 4.2 6.9 4.2 4.0 3.7
Exports (% y-o-y) 29.1 -8.9 26.4 34.2 22.9 23.0
Imports (% y-o-y) 28.6 -13.3 21.2 25.9 20.6 21.8
International FX reserves (USDbn) 24.2 16.8 12.9 12.0 14.0 13.0
Import cover (months) 3.6 2.9 1.8 1.3 1.3 1.0
Short-term external debt (USDbn) 4.4 5.0 5.5 6.0 6.5 6.8
Short-term external debt (% nominal GDP) 4.9 5.4 5.4 4.8 4.5 4.1
Short-term external debt (% exports) 7.0 8.8 7.6 6.2 5.5 4.6
Public and external solvency indicators
Gross external debt (USDbn) 30.2 37.9 41.6 51.6 60.6 70.2
Short term external debt (% of int'l reserves) 18.3 29.8 42.5 50.0 46.4 52.3
Consolidated government balance (% GDP) -1.2 -9.0 -5.7 -3.9 -3.8 -3.7
Primary balance (% GDP) -0.1 -7.6 -4.4 -2.9 -2.8 -2.7
Source: HSBC

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Long term foreign currency ratings

Moody's Outlook S&P Outlook Fitch Outlook
China Aa3 Positive AA- Stable A+ Stable
HK SAR Aa1 Positive AAA Stable AA+ Stable
India Baa3 Stable BBB- Stable BBB- Stable
Indonesia Baa3 Stable BB+ Positive BBB- Stable
Korea A1 Positive A Stable A+ Positive
Malaysia A3 Stable A- Stable A- Stable
Philippines Ba2 Stable BB Positive BB+ Stable
Singapore Aaa Stable AAA Stable AAA Stable
Sri Lanka B1 Positive B+ Positive BB- Stable
Thailand Baa1 Stable BBB+ Stable BBB Stable
Vietnam B1 Negative BB- Negative B+ Stable
Source: HSBC

Total foreign debt (USD bn)

2008 2009 2010e 2011e 2012e 2013e
China 390.2 428.6 548.9 653.9 708.9 743.9
HK SAR 663.4 668.5 822.7 850.0 750.0 700.0
India 224.5 261.0 305.0 340.0 355.0 410.0
Indonesia 149.1 172.9 202.4 224.8 243.4 279.4
Korea 317.4 345.7 359.4 398.4 420.0 440.0
Malaysia 56.8 66.1 70.6 84.1 94.1 106.1
Philippines 54.3 54.9 60.0 56.0 58.0 59.0
Singapore 416.7 406.0 477.0 620.3 659.8 692.3
Sri Lanka 18.7 18.9 23.0 27.5 30.2 32.6
Thailand 76.1 75.3 96.9 55.3 63.9 64.6
Vietnam 30.2 37.9 41.6 51.6 60.6 70.2
Source: HSBC

Debt/GDP (%)
2008 2009 2010e 2011e 2012e 2013e
China 8.6 8.6 9.2 9.0 8.4 7.6
HK SAR 307.8 319.4 367.0 349.3 303.2 267.3
India 17.9 19.4 18.1 17.9 17.5 17.2
Indonesia 29.2 32.1 28.6 26.6 26.5 25.8
Korea 33.5 41.1 35.4 35.4 35.2 32.7
Malaysia 25.5 34.2 29.6 30.2 31.5 30.6
Philippines 31.3 32.6 30.1 24.9 23.6 21.0
Singapore 218.6 218.4 209.3 238.3 235.0 230.0
Sri Lanka 46.0 45.0 46.5 46.5 47.5 48.0
Thailand 27.3 28.5 30.4 16.1 16.8 14.7
Vietnam 33.5 40.7 40.8 41.5 42.0 42.5
Source: HSBC

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Debt/Exports (%)
2008 2009 2010e 2011e 2012e 2013e
China 24.7 33.0 32.7 32.9 33.3 31.8
HK SAR 0.1 0.2 0.2 0.2 0.1 0.1
India 113.0 155.2 135.0 112.8 92.3 81.4
Indonesia 1,401.8 -1,540.7 29,209.7 1,177.2 1,243.4 1,285.2
Korea 72.9 96.7 78.0 72.1 69.8 67.7
Malaysia 24.7 35.5 30.5 32.0 34.3 33.4
Philippines 93.7 112.8 93.9 91.2 96.5 90.2
Singapore 93.8 110.0 101.0 114.1 109.8 96.4
Sri Lanka 133.0 185.6 171.5 135.3 133.1 133.5
Thailand 36.5 41.6 42.5 20.8 22.2 21.0
Vietnam 48.2 66.4 57.6 53.3 50.9 47.9
Source: HSBC

S/T Debt/FX (%)

2008 2009 2010e 2011e 2012e 2013e
China 11.6 10.8 13.2 15.0 15.2 15.4
HK SAR NA NA NA NA NA NA
India 17.6 20.2 24.3 27.4 25.6 25.4
Indonesia 57.3 46.3 34.4 34.6 36.0 35.0
Korea 73.2 55.6 47.9 44.1 41.8 42.1
Malaysia 26.1 22.7 23.2 25.4 25.4 26.0
Philippines 18.7 9.1 11.6 8.8 8.1 7.3
Singapore NA NA NA NA NA NA
Sri Lanka 1,941.4 258.7 309.1 441.7 684.5 711.1
Thailand 30.3 23.9 27.2 16.6 15.1 13.5
Vietnam 18.3 29.8 42.5 50.0 46.4 52.3
Source: HSBC

S/T Debt/GDP (%)

2008 2009 2010e 2011e 2012e 2013e
China 5.0 5.2 6.3 6.5 6.2 5.7
HK SAR NA NA NA NA NA NA
India 3.5 3.9 3.9 3.8 3.5 3.4
Indonesia 5.8 5.7 4.7 4.5 4.6 4.1
Korea 15.8 17.7 13.8 12.1 12.3 12.1
Malaysia 10.8 11.4 10.4 12.2 12.6 12.2
Philippines 4.0 2.4 3.6 3.0 2.8 2.5
Singapore NA NA NA NA NA NA
Sri Lanka 83.6 31.4 41.2 49.3 66.7 68.0
Thailand 12.1 12.5 14.7 8.5 7.9 6.9
Vietnam 4.9 5.4 5.4 4.8 4.5 4.1
Source: HSBC

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S/T Debt/Exports (%)

2008 2009 2010e 2011e 2012e 2013e
China 14.3 20.0 22.4 23.9 24.7 23.8
HK SAR NA NA NA NA NA NA
India 21.8 31.1 28.8 23.9 18.5 16.3
Indonesia 278.2 -272.7 4,769.0 199.4 214.5 202.4
Korea 34.4 41.7 30.3 24.6 24.4 25.1
Malaysia 10.4 11.8 10.7 12.9 13.7 13.3
Philippines 12.1 8.2 11.3 10.9 11.6 10.8
Singapore NA NA NA NA NA NA
Sri Lanka 419.7 186.3 242.2 278.1 359.3 340.3
Thailand 16.1 18.3 20.5 10.9 10.4 9.9
Vietnam 7.0 8.8 7.6 6.2 5.5 4.6
Source: HSBC

FX reserves (USD bn)

2008 2009 2010e 2011e 2012e 2013e
China 1,946.0 2,399.2 2,850.0 3,181.0 3,450.0 3,600.0
HK SAR 182.5 255.8 268.7 285.4 332.2 340.2
India 246.6 258.6 267.8 262.9 277.1 322.8
Indonesia 51.6 66.1 96.2 110.1 116.7 125.8
Korea 204.7 268.4 291.7 308.7 351.5 386.3
Malaysia 91.5 96.7 106.5 133.6 148.3 163.5
Philippines 37.4 44.1 62.1 76.7 85.4 96.9
Singapore 173.9 188.1 224.4 237.1 262.3 325.9
Sri Lanka 1.8 5.1 6.6 6.6 6.2 6.5
Thailand 111.0 138.4 172.1 175.1 198.2 226.7
Vietnam 24.2 16.8 12.9 12.0 14.0 13.0
Source: HSBC

Import coverage (months)

2008 2009 2010e 2011e 2012e 2013e
China 20.6 28.6 24.5 21.9 21.2 19.4
HK SAR 5.6 8.8 7.4 6.9 7.5 7.0
India 9.1 11.3 9.0 6.8 5.7 5.2
Indonesia 5.3 8.9 9.1 8.0 7.3 6.8
Korea 5.7 10.0 8.3 7.1 7.4 7.6
Malaysia 7.4 9.9 8.1 9.0 9.5 9.2
Philippines 7.3 11.4 12.2 14.5 15.7 16.5
Singapore 6.6 9.3 8.7 7.8 7.7 8.1
Sri Lanka 1.5 6.0 5.9 3.9 3.3 3.2
Thailand 8.4 14.1 12.8 10.4 10.9 11.9
Vietnam 3.6 2.9 1.8 1.3 1.3 1.0
Source: HSBC

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Nominal GDP (USD bn)

2008 2009 2010e 2011e 2012e 2013e
China 4,535 4,990 5,938 7,299 8,485 9,772
HK SAR 215.5 209.3 224 243 247 262
India 1,252 1,343 1,688 1,903 2,029 2,377
Indonesia 511 539 708 846 918 1,082
Korea 948 842 1,014 1,125 1,194 1,345
Malaysia 222 193 238 279 299 347
Philippines 174 168 200 225 246 281
Singapore 191 186 228 260 281 301
Sri Lanka 41 42 50 59 64 68
Thailand 279 264 319 343 381 439
Vietnam 90 93 102 124 144 165
Source: HSBC

Real GDP growth (%)

2008 2009 2010e 2011e 2012e 2013e
China 9.6 9.2 10.4 9.2 8.6 8.8
HK SAR 2.3 -2.6 7.0 5.0 3.3 5.2
India 6.7 8.4 8.4 6.7 7.5 8.2
Indonesia 6.0 4.6 6.2 6.5 6.1 6.5
Korea 2.3 0.3 6.2 3.6 3.1 3.7
Malaysia 4.8 -1.6 7.2 5.1 3.7 5.3
Philippines 4.2 1.1 7.6 3.7 3.6 5.2
Singapore 1.7 -1.0 14.8 5.0 2.6 5.8
Sri Lanka 6.0 3.5 8.0 8.3 6.5 7.4
Thailand 2.5 -2.3 7.8 0.1 5.5 4.5
Vietnam 6.3 5.3 6.8 5.9 5.7 6.1
Source: HSBC

Inflation, CPI (%)

2008 2009 2010e 2011e 2012e 2013e
China 5.9 -0.7 3.3 5.4 2.9 2.6
HK SAR 4.3 0.6 2.3 5.3 5.3 4.8
India 9.1 12.4 10.4 8.1 7.2 6.7
Indonesia 9.8 4.8 5.1 5.4 5.6 6.3
Korea 4.7 2.8 2.9 4.0 3.4 3.5
Malaysia 5.4 0.6 1.7 3.2 2.6 3.1
Philippines 8.2 4.2 3.8 4.8 3.3 4.7
Singapore 6.6 0.6 2.8 5.2 4.1 2.1
Sri Lanka 22.6 3.5 6.2 6.7 5.9 7.6
Thailand 5.5 -0.8 3.3 3.8 3.4 3.8
Vietnam 23.1 7.0 9.2 18.6 11.0 9.8
Source: HSBC

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Export growth (%)

2008 2009 2010e 2011e 2012e 2013e
China 17.2 -15.9 31.4 20.3 9.0 12.0
HK SAR 5.6 -11.9 22.4 11.2 6.8 10.5
India 29.1 -15.3 34.3 33.4 27.6 31.0
Indonesia 18.3 -14.3 32.1 27.5 11.3 14.3
Korea 11.7 -17.8 28.9 19.8 8.9 8.0
Malaysia 9.7 -16.5 15.5 8.8 4.0 9.1
Philippines -2.5 -22.1 34.9 -6.8 -3.9 9.5
Singapore 13.7 -18.8 28.5 15.5 10.6 19.4
Sri Lanka 6.0 -12.7 19.2 24.3 12.7 15.0
Thailand 15.9 -13.9 28.4 16.4 8.2 6.2
Vietnam 29.1 -8.9 26.4 34.2 22.9 23.0
Source: HSBC

Import growth (%)

2008 2009 2010e 2011e 2012e 2013e
China 18.5 -11.3 38.6 24.9 12.0 14.0
HK SAR 6.3 -10.3 25.3 13.1 6.9 10.0
India 39.8 -15.0 30.0 28.9 26.8 28.2
Indonesia 36.9 -24.0 43.7 30.3 14.7 16.0
Korea 22.0 -25.5 31.5 24.0 9.1 7.1
Malaysia 3.4 -16.2 22.6 8.2 3.7 7.1
Philippines 5.6 -24.0 32.9 2.8 3.0 7.6
Singapore 22.6 -23.1 27.5 17.4 12.7 18.5
Sri Lanka 26.0 -27.6 31.8 51.2 11.7 7.6
Thailand 26.7 -25.1 37.0 24.7 7.9 5.0
Vietnam 28.6 -13.3 21.2 25.9 20.6 21.8
Source: HSBC

Current account balance (USD bn)

2008 2009 2010e 2011e 2012e 2013e
China 426.1 284.1 305.4 201.1 170.0 160.0
HK SAR 22.1 15.6 12.2 9.0 11.0 7.9
India -31.0 -25.9 -52.2 -59.1 -72.8 -78.2
Indonesia 0.1 10.6 5.1 2.1 -3.4 -5.0
Korea 3.1 32.6 29.1 26.3 28.1 36.7
Malaysia 39.5 31.8 27.4 32.0 31.1 38.3
Philippines 3.6 9.4 8.9 6.5 8.1 9.8
Singapore 26.4 30.2 55.6 57.1 51.4 70.5
Sri Lanka -3.8 -0.2 -1.3 -4.6 -4.9 -3.8
Thailand 2.2 21.9 13.2 11.9 16.5 20.7
Vietnam -10.8 -6.1 -3.9 -5.7 -5.3 -4.9
Source: HSBC

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Foreign exchange rate (end of period)

2008 2009 2010e 2011e 2012e 2013e
China 6.82 6.83 6.62 6.30 6.12 5.92
HK SAR 7.75 7.76 7.77 7.77 7.80 7.80
India 48.46 46.69 44.81 53.26 49.00 49.00
Indonesia 10,950 9,400 8,991 9,068 8,850 8,450
Korea 1,258 1,168 1,139 1,153 1,080 1,040
Malaysia 3.55 3.41 3.13 3.16 2.93 2.74
Philippines 48.09 46.42 43.95 43.65 41.30 40.40
Singapore 1.44 1.40 1.29 1.30 1.20 1.16
Sri Lanka 113.33 114.38 111.11 113.95 125.00 127.00
Thailand 34.72 33.33 30.16 31.51 29.20 27.60
Vietnam 17,483 18,200 19,498 21,034 21,500 21,500
Source: HSBC

Policy rates (%)

2008 2009 2010e 2011e 2012e 2013e
China 5.31 5.31 5.81 6.56 6.31 6.31
HK SAR 0.50 0.50 0.50 0.50 0.50 0.50
India 6.50 4.75 6.25 8.50 7.75 7.75
Indonesia 9.25 6.50 6.50 6.00 5.75 6.50
Korea 3.00 2.00 2.50 3.25 3.50 3.75
Malaysia 3.25 2.00 2.75 3.00 3.00 3.50
Philippines 5.50 4.00 4.00 4.50 4.00 4.50
Singapore 0.96 0.68 0.44 0.39 0.40 0.40
Sri Lanka 12.00 9.75 9.00 8.50 9.75 10.25
Thailand 2.75 1.25 2.00 3.25 3.25 4.00
Vietnam 9.00 8.00 10.00 14.00 10.00 10.00
Source: HSBC

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April 2012

Asian Yankee/Eurobond Secondary Trading Levels as of 3/4/2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
CHINA
PEOPLE'S REP OF CHINA CHINA 4.75 29-Oct-13 AA- Aa3 123 133 -10 CT2 govt 1,000,000,000
EXPORT IMPORT BANK CHINA EXIMCH 5.25 29-Jul-14 AA- Aa3 173 193 -20 CT2 govt 1,000,000,000
EXPORT IMPORT BANK CHINA EXIMCH 4.875 21-Jul-15 AA- Aa3 199 229 -30 CT5 govt 1,000,000,000
CHINA DEVELOPMENT BANK SDBC 4.75 08-Oct-14 AA- Aa3 169 208 -40 CT2 govt 600,000,000
CHINA DEVELOPMENT BANK SDBC 5 15-Oct-15 AA- Aa3 179 240 -60 CT5 govt 1,000,000,000
BANK OF CHINA HONG KONG BCHINA 3.75 08-Nov-16 A+ Aa3 176 186 -10 CT5 govt 750,000,000
BANK OF CHINA HONG KONG BCHINA 5.55 11-Feb-20 A A1 253 271 -18 CT10 govt 2,500,000,000
AGILE PROPERTY HLDGS LTD AGILE 10 14-Nov-16 BB Ba2 932 866 66 CT5 govt 300,000,000
AGILE PROPERTY HLDGS LTD AGILE 9.875 20-Mar-17 BB Ba2 992 n/a n/a CT5 govt 700,000,000
AGILE PROPERTY HLDGS LTD AGILE 8.875 28-Apr-17 BB Ba2 989 931 58 CT5 govt 650,000,000
BEIJING ENTERPRISE BEIENT 5 12-May-21 A- Baa1 236 231 5 CT10 govt 600,000,000
BEIJING ENTERPRISE BEIENT 6.375 12-May-41 A- Baa1 271 277 -6 CT30 govt 400,000,000
CMHI FINANCE CAYMAN INC CHINAM 5.375 09-Mar-15 BBB Baa2 319 364 -45 CT5 govt 500,000,000
CHINA AUTOMATION GROUP CNAUTO 7.75 20-Apr-16 BB- Ba3 1,546 1,352 193 CT5 govt 200,000,000
CHINA LIANSU GROUP HOLD LIANSU 7.875 13-May-16 N/A Ba2 866 897 -31 CT5 govt 268,700,000
CHINA LUMENA NEW MATERIA LUMENA 12 27-Oct-14 B+ B2 1,718 1,709 9 CT2 govt 250,000,000
CHINA ORIENTAL GROUP CO CHOGRP 8 18-Aug-15 N/A Ba1 /*- 972 910 61 CT5 govt 550,000,000
CHINA ORIENTAL GROUP CO CHOGRP 7 17-Nov-17 N/A Ba1 /*- 986 897 90 CT5 govt 300,000,000
CHINA OVERSEAS FIN CAYMA CHIOLI 4.875 15-Feb-17 BBB Baa2 348 346 2 CT5 govt 750,000,000
CHINA OVRSEA FIN KY II CHIOLI 5.5 10-Nov-20 BBB Baa2 348 351 -3 CT10 govt 1,000,000,000
CHINA PROPERTIES GROUP CHINPR 9.125 04-May-14 NR WR 1,984 1,952 32 CT2 govt 102,600,000
CHINA RESOURCES POWER HL RESOPW 3.75 03-Aug-15 BBB- Baa3 306 330 -24 CT5 govt 500,000,000
CHINA RESOURCES LAND LTD CRHZCH 4.625 19-May-16 BBB Baa2 359 356 2 CT5 govt 1,000,000,000
CHINA FORESTRY HOLDINGS CHTREE 10.25 17-Nov-15 CCC- /*- Caa2 2,843 2,816 27 CT5 govt 180,000,000
CHINA SHANSHUI CEMENT GR SHASHU 8.5 25-May-16 BB- N/A 822 766 56 CT5 govt 400,000,000
CHINA SOUTH CITY HOLDING CSCHCN 13.5 14-Jan-16 B B2 1,866 1,876 -10 CT5 govt 250,000,000
CENTRAL CHINA REAL ESTAT CENCHI 12.25 20-Oct-15 B+ B1 1,300 1,161 139 CT5 govt 300,000,000
CITIC BK INTL LTD CINDBK 6.875 24-Jun-20 N/A Baa3 393 406 -13 CT10 govt 500,000,000
CITIC PACIFIC LIMITED CITPAC 6.625 15-Apr-21 BB+ Ba1 528 550 -22 CT10 govt 500,000,000
CITIC PACIFIC LIMITED CITPAC 7.875 15-Apr-2016* N/A N/A 901 901 1 CT5 govt 750,000,000
CITIC PACIFIC LIMITED CITPAC 6.875 21-Jan-18 BB+ Ba1 580 n/a n/a CT5 govt 750,000,000
CITIC RESOURCES FIN 2007 CITIC 6.75 15-May-14 BB Ba3 526 486 39 CT2 govt 1,000,000,000
CNOOC FINANCE 2011 LTD CNOOC 4.25 26-Jan-21 AA- Aa3 148 166 -18 CT10 govt 1,500,000,000
CNOOC FINANCE 2011 LTD CNOOC 5.75 26-Jan-41 AA- Aa3 156 162 -6 CT30 govt 500,000,000
CNPC HK OVERSEAS CAPITAL CNPCCH 4.5 28-Apr-21 A+ A1 151 166 -15 CT10 govt 650,000,000
CNPC HK OVERSEAS CAPITAL CNPCCH 5.95 28-Apr-41 A+ A1 176 207 -31 CT30 govt 500,000,000
COUNTRY GARDEN HLGD CO COGARD 11.75 10-Sep-14 BB- Ba3 928 939 -12 CT2 govt 375,000,000
COUNTRY GARDEN HLGD CO COGARD 10.5 11-Aug-15 BB- Ba3 1,033 1,021 12 CT5 govt 400,000,000
COUNTRY GARDEN HLGD CO COGARD 11.25 22-Apr-17 BB- Ba3 1,049 1,010 39 CT5 govt 550,000,000
COUNTRY GARDEN HLGD CO COGARD 11.125 23-Feb-18 BB- Ba3 1,070 1,088 -19 CT5 govt 900,000,000
EVERGRANDE REAL ESTATE G EVERRE 13 27-Jan-15 BB- B2 1,375 1,302 73 CT5 govt 1,350,000,000
FRANSHION DEVELOPMENT LT FRANSH 6.75 15-Apr-21 BB Ba1 650 602 48 CT10 govt 500,000,000
FOSUN INTERNATIONAL LTD FOSUNI 7.5 12-May-16 BB+ Ba2 827 828 -1 CT5 govt 300,000,000
FUFENG GROUP LTD FUFENG 7.625 13-Apr-16 BB N/A 1,147 1,158 -11 CT5 govt 300,000,000
GLORIOUS PROPERTY HOLDIN GLOPRO 13 25-Oct-15 B Caa1 1,778 1,570 208 CT5 govt 300,000,000
GREENTOWN CHINA HOLDS GRNCH 9 08-Nov-13 CCC+ Caa1 2,023 1,977 46 CT2 govt 38,666,000
GUANGZHOU R&F PROPERTIES GZRFPR 10.875 29-Apr-16 N/A N/A 1,580 1,513 67 CT5 govt 150,000,000
HIDILI INDUSTRY INTL DEV HIDILI 8.625 04-Nov-15 B+ B1 1,278 1,237 41 CT5 govt 400,000,000
HOPSON DEVELOPMENT HLDGS HPDLF 8.125 09-Nov-12 B- /*- Caa1 1,911 1,439 472 CT2 govt 350,000,000
HOPSON DEVELOPMENT HLDGS HPDLF 11.75 21-Jan-16 B- /*- Caa1 1,586 1,538 48 CT5 govt 300,000,000
INDU & COML BNK CHINA SG ICBCAS 2.75 12-Sep-17 A A1e 201 n/a n/a CT5 govt 300,000,000
ICBC ASIA LTD ICBCAS 5.125 30-Nov-20 N/A A3 258 261 -3 CT10 govt 500,000,000
ICBC ASIA LTD ICBCAS 4.875 07-Dec-21 A A1 238 236 2 CT10 govt 750,000,000
KAISA GROUP HOLDINGS LTD KAISAG 13.5 28-Apr-15 B+ B2 1,441 1,422 19 CT5 govt 650,000,000
KWG PROPERTY HOLDINGS LT KWGPRO 12.75 30-Mar-16 B+ B1 1,307 1,240 67 CT5 govt 350,000,000
KWG PROPERTY HOLDINGS LT KWGPRO 12.5 18-Aug-17 B+ B1 1,310 1,300 10 CT5 govt 250,000,000
LAI FUNG HOLDINGS LTD LAIFNG 9.125 04-Apr-14 B+ B1 1,051 938 112 CT2 govt 185,747,000
LONGFOR PROPERTIES LNGFOR 9.5 07-Apr-16 BB Ba3 840 912 -72 CT5 govt 750,000,000
LONKING HOLDINGS LTD LONKIN 8.5 03-Jun-16 BB Ba3 992 1,007 -15 CT5 govt 350,000,000
MCC HOLDING HK CORP LTD CHMETL 4.875 29-Jul-16 BBB- Baa2 399 411 -13 CT5 govt 500,000,000
MIE HOLDINGS CORP MIEHOL 9.75 12-May-16 B+ N/A 903 951 -48 CT5 govt 400,000,000

167
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Asia’s Bond Markets abc
April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
CHINA (cont’d)
NOBLE GROUP LTD NOBLSP 8.5 30-May-13 BBB- Baa3 363 415 -52 CT2 govt 500,000,000
NOBLE GROUP LTD NOBLSP 6.75 29-Jan-20 BBB- Baa3 483 508 -25 CT10 govt 1,250,000,000
POWERLONG REAL ESTATE HL PWRLNG 13.75 16-Sep-15 B- /*- Caa1 2,255 2,100 155 CT5 govt 200,000,000
RENHE COMMERCIAL HLDS CO RNHEF 11.75 18-May-15 B /*- B3 2,872 1,980 892 CT5 govt 300,000,000
RENHE COMMERCIAL HLDS CO RNHEF 13 10-Mar-16 B /*- B3 2,672 1,975 697 CT5 govt 600,000,000
ROAD KING INFRASTRUCTURE ROADKG 7.625 14-May-14 BB- Ba3 1,282 1,269 13 CT2 govt 200,000,000
ROAD KING INFRASTRUCTURE ROADKG 9.5 21-Sep-15 BB- Ba3 1,286 1,324 -38 CT5 govt 333,580,000
SHANGHAI ZENDAI PROP LTD ZENDA 10 06-Jun-12 CCC+ Caa2 3,513 2,265 1248 CT2 govt 139,040,000
SHIMAO PPTY HLDNG LTD SHIMAO 8 01-Dec-16 BB- /*- B1 1,106 1,076 29 CT5 govt 350,000,000
SHIMAO PPTY HLDNG LTD SHIMAO 9.65 03-Aug-17 BB- /*- B1 1,152 1,112 39 CT5 govt 500,000,000
SHUI ON DEVELOPMENT HOLD SHUION 9.75 16-Feb-15 N/A N/A 925 877 48 CT5 govt 475,000,000
SINOCHEM OVERSEAS CAPITA SINOCH 4.5 12-Nov-20 BBB Baa1 281 291 -10 CT10 govt 1,500,000,000
SINOCHEM OVERSEAS CAPITA SINOCH 6.3 12-Nov-40 BBB Baa1 336 342 -6 CT30 govt 500,000,000
SINO-OCEAN LAND PER FIN SINOCE 10.25 13-May-2016* N/A N/A 1,319 1,262 57 CT5 govt 400,000,000
SPG LAND HOLDINGS LTD SPGL 13.5 08-Apr-16 B- B2 2,395 2,396 -1 CT5 govt 200,000,000
SRE GROUP LTD SHANG 8.625 24-Apr-13 CCC+ Caa1 2,693 2,571 122 CT2 govt 71,461,000
TENCENT HOLDINGS LTD TENCNT 4.625 12-Dec-16 BBB+ Baa1 349 361 -13 CT5 govt 600,000,000
TEXHONG TEXTILE GROUP LT TEXTEX 7.625 19-Jan-16 BB- Ba3 1,249 1,220 29 CT5 govt 200,000,000
WEST CHINA CEMENT LTD WESCHI 7.5 25-Jan-16 BB- Ba3 1,091 1,006 86 CT5 govt 400,000,000
WINSWAY COKING COAL HOLD WINSWY 8.5 08-Apr-16 B+ B1 /*- 1,436 1,185 251 CT5 govt 500,000,000
ENN ENERGY HOLDINGS LTD XINAOG 6 13-May-21 BBB- /*- Baa3 /*- 458 461 -3 CT10 govt 750,000,000
YANLORD LAND GROUP LTD YLLG 9.5 04-May-17 B+ B1 1,132 1,221 -88 CT5 govt 300,000,000
YANLORD LAND GROUP LTD YLLG 10.625 29-Mar-18 B+ B1 1,233 1,303 -70 CT5 govt 400,000,000
YUZHOU PROPERTIES CO YUZHOU 13.5 15-Dec-15 B B2 1,880 1,898 -18 CT5 govt 199,500,000
ZIJIN INTL FINANCE CO LT ZIJMIN 4.25 30-Jun-16 N/A A1 283 281 2 CT5 govt 480,000,000
HONG KONG
HKSAR GOVERNMENT HK 5.125 01-Aug-14 AAA Aa1 135 149 -14 CT2 govt 1,250,000,000
BANK OF EAST ASIA LTD BNKEA 6.125 16-Jul-20 A- A3 303 331 -28 CT10 govt 600,000,000
HONG KONG AIRPORT AUTH HKAA 5 16-Sep-13 AAA NR 147 148 -1 CT2 govt 350,000,000
CLP POWER HK FINANCING CHINLP 6.25 08-May-12 A A1 67 107 -40 CT2 govt 300,000,000
CLP POWER HK FINANCING CHINLP 4.75 19-Mar-20 A A1 178 181 -3 CT10 govt 500,000,000
CLP POWER HK FINANCING CHINLP 4.75 12-Jul-21 A A1 183 186 -3 CT10 govt 300,000,000
HENDERSON LAND MTN LTD HENLND 4.75 14-Feb-17 NR NR 348 351 -3 CT5 govt 700,000,000
HENDERSON LAND MTN LTD HENLND 5.5 17-Sep-19 NR NR 343 341 2 CT10 govt 500,000,000
FUBON BANK HONG KONG LTD FUBON 6.125 30-Nov-20 BBB NR 338 341 -3 CT10 govt 200,000,000
HONGKONG ELECTRIC FINANC HKE 4.25 14-Dec-20 A+ NR 181 181 0 CT10 govt 750,000,000
HONGKONG LAND FINANCE HKLAND 5.5 28-Apr-14 A- A2 195 204 -9 CT2 govt 500,000,000
HONGKONG LAND FINANCE HKLAND 4.5 07-Oct-25 A- A2 283 281 2 CT10 govt 600,000,000
HONG KONG MTG CO HKMTGC 3.5 04-Aug-14 AAA Aa1 130 154 -25 CT2 govt 500,000,000
HUTCHISON WHAMPOA HUWHY 6.5 13-Feb-13 A- A3 135 158 -22 CT2 govt 3,146,000,000
HUTCHISON WHAMPOA HUWHY 6.25 24-Jan-14 A- A3 178 187 -8 CT2 govt 1,309,000,000
HUTCHISON WHAMPOA HUWHY 4.625 11-Sep-15 A- A3 235 243 -8 CT5 govt 2,189,330,000
HUTCHISON WHAMPOA HUWHY 3.5 13-Jan-17 A- A3 205 226 -21 CT5 govt 1,000,000,000
HUTCHISON WHAMPOA HUWHY 7.45 01-Aug-17 A- A3 234 255 -21 CT5 govt 500,000,000
HUTCHISON WHAMPOA HUWHY 7.625 09-Apr-19 A- A3 185 203 -18 CT10 govt 1,500,000,000
HUTCHISON WHAMPOA HUWHY 5.75 11-Sep-19 A- A3 185 204 -19 CT10 govt 1,000,000,000
HUTCHISON WHAMPOA HUWHY 4.625 13-Jan-22 A- A3 225 247 -22 CT10 govt 1,500,000,000
HUTCHISON WHAMPOA HUWHY 7.5 01-Aug-27 A- A3 280 295 -15 CT10 govt 329,000,000
HUTCHISON WHAMPOA HUWHY 7.45 24-Nov-33 A- A3 170 185 -15 CT30 govt 1,144,000,000
HUTCHISON WHAMPOA CKINF 6.625 29-Sep-15* NR NR 619 639 -21 CT5 govt 1,000,000,000
KERRY PROPERTIES KERPRO 5 15-Feb-17 BBB- NR 353 351 2 CT5 govt 600,000,000
KERRY PROPERTIES KERPRO 6.375 25-Aug-16 BBB- NR 338 361 -23 CT5 govt 420,000,000
KCRC KCRC 5.125 20-May-19 AAA Aa1 128 126 2 CT10 govt 750,000,000
KCRC KERPRO 5.875 06-Apr-21 BBB- NR 356 361 -5 CT10 govt 300,000,000
LI & FUNG LTD LIFUNG 5.5 16-May-17 A- A3 278 296 -18 CT5 govt 500,000,000
LI & FUNG LTD LIFUNG 5.25 13-May-20 A- A3 228 271 -43 CT10 govt 750,000,000
LIFESTYLE INTERNATIONAL LIHHK 5.25 26-Jan-17 NR Baa3 358 376 -18 CT5 govt 500,000,000
MTR MTRC 4.75 21-Jan-14 AAA Aa1 129 169 -39 CT2 govt 600,000,000
NAN FUNG TREASURY I NANFUN 5.25 20-Jan-17 BBB- Baa3 358 371 -13 CT5 govt 600,000,000
NEW WORLD DEVELOPMENT NWDEVL 6.5 09-Feb-17 NR NR 458 463 -5 CT5 govt 500,000,000
NEW WORLD DEVELOPMENT NWDEVL 7 10-Feb-20 NR NR 458 461 -3 CT10 govt 750,000,000
PACNET LTD PACNET 9.25 09-Nov-15 NR B1 1,135 1,172 -37 CT5 govt 300,000,000

168
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Asia’s Bond Markets abc
April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
HONG KONG (cont’d)
PCCW-HKT CAPITAL NO2 LTD PCCW 6 15-Jul-13 BBB Baa2 203 243 -40 CT2 govt 500,000,000
PCCW-HKT CAPITAL NO3 LTD PCCW 5.25 20-Jul-15 BBB Baa2 296 310 -14 CT5 govt 500,000,000
PCCW-HKT CAPITAL NO4 LTD PCCW 4.25 24-Feb-16 BBB Baa2 273 296 -23 CT5 govt 500,000,000
SUN HUNG KAI PROPERTY SUNHUN 5.375 08-Mar-17 A+ /*- A1 288 226 62 CT5 govt 264,300,000
SUN HUNG KAI PROPERTY SUNHUN 4.5 14-Feb-22 A+ /*- A1 298 244 54 CT10 govt 500,000,000
SWIRE PACIFIC SWIRE 5.625 30-Mar-16 A- A3 203 219 -16 CT5 govt 600,000,000
SWIRE PACIFIC MTN FIN SWIRE 6.25 18-Apr-18 A- A3 276 274 2 CT5 govt 500,000,000
SWIRE PACIFIC MTN FIN SWIRE 5.5 19-Aug-19 A- A3 188 194 -6 CT10 govt 500,000,000
SWIRE PACIFIC MTN FIN SWIRE 4.5 28-Feb-22 A- A3 234 231 3 CT10 govt 500,000,000
BANK OF EAST ASIA LTD BNKEA 6.375 04-May-22 NR A3 403 421 -18 CT10 govt 500,000,000
CHONG HING BANK LTD CHOHIN 6 04-Nov-20 NR Baa3 358 401 -43 CT10 govt 225,000,000
DAH SING BANK LTD DAHSIN 6.625 11-Feb-20 NR Baa1 368 381 -13 CT10 govt 225,000,000
SUN HUNG KAI PROPERTY SUNHUN 3.5 02-Nov-16 A+ /*- A1 274 221 52 CT5 govt 775,000,000
SUN HUNG KAI PROPERTY SUNHUN 4 02-Nov-20 A+ /*- A1 273 226 47 CT10 govt 300,000,000
WHARF FINANCE LTD WHARF 6.125 06-Nov-17 NR NR 303 321 -18 CT5 govt 400,000,000
WHEELOCK FINANCE LIMITED WHEELK 4.75 23-Feb-17 NR NR 356 361 -6 CT5 govt 535,000,000
INDIA
AXIS BANK LTD AXSBIN 5.125 05-Sep-17 BBB- Baa2 422 442 -20 CT5 govt 500,000,000
AXIS BANK LTD AXSBIN 7.25 12-Aug-21 NR Ba1 706 723 -18 CT10 govt 150,000,000
BANK OF INDIA BOIIN 4.75 30-Sep-15 BBB- Baa3 381 381 0 CT5 govt 750,000,000
BANK OF INDIA BOIIN 6.625 22-Sep-21 BB Ba1 614 632 -18 CT10 govt 240,000,000
BANK OF BARODA BOBIN 4.75 07-Oct-15 NR Baa2 381 391 -10 CT5 govt 350,000,000
BANK OF BARODA BOBIN 5 24-Aug-16 NR Baa2 347 383 n/a CT5 govt 500,000,000
BANK OF BARODA BOBIN 6.625 25-May-22 NR Baa3 656 673 -18 CT10 govt 300,000,000
CANARA BANK CANARA 5.125 09-Sep-16 NR (P)Baa2 362 398 -35 CT5 govt 350,000,000
ICICI ICICI 5.5 25-Mar-15 BBB- Baa2 385 415 -29 CT5 govt 750,000,000
ICICI ICICI 5 15-Jan-16 BBB- Baa2 342 361 -19 CT5 govt 500,000,000
ICICI ICICI 4.75 25-Nov-16 BBB- Baa2 397 415 -18 CT5 govt 1,000,000,000
ICICI ICICI 7.25 31-Oct-16* BB Ba2 850 887 -37 CT5 govt 340,000,000
ICICI ICICI 6.375 12-Dec-16* NR Ba1 934 947 -13 CT5 govt 85,000,000
ICICI ICICI 6.375 30-Apr-22 BB Ba1 694 711 -17 CT10 govt 750,000,000
ICICI ICICI 5.75 16-Nov-20 BBB- Baa2 380 390 -10 CT10 govt 1,000,000,000
ICICI ICICI 7 23-Nov-20 NR Baa3 504 488 16 CT10 govt 150,000,000
IDBI BANK IDBI 4.75 05-Feb-16 BBB- Baa3 372 408 -36 CT5 govt 350,000,000
IDBI BANK IOBIN 5 19-Oct-16 BBB- (P)Baa3 382 403 -20 CT5 govt 500,000,000
EXPORT-IMPORT BK INDIA EXIMBK 4.375 02-Feb-15 BBB- Baa3 330 331 0 CT5 govt 300,000,000
STATE BANK INDIA LONDON SBIIN 4.5 27-Jul-15 BBB- Baa2 305 321 -16 CT5 govt 1,000,000,000
STATE BANK INDIA LONDON SBIIN 4.5 23-Oct-14 BBB- Baa2 290 316 -26 CT2 govt 850,000,000
STATE BANK OF INDIA SBIIN 6.439 15-May-17* BB Ba3 744 767 -23 CT5 govt 400,000,000
STATE BANK OF INDIA SBIIN 7.14 27-Jun-17* BB Ba3 677 737 -60 CT5 govt 225,000,000
NTPC NTPCIN 5.875 02-Mar-16 BBB- NR 312 327 -15 CT5 govt 300,000,000
NTPC NTPCIN 5.625 14-Jul-21 BBB- NR 330 317 13 CT10 govt 500,000,000
UNION BANK OF INDIA UNBKIN 4.625 11-Feb-16 BBB- Baa3 353 393 -40 CT5 govt 400,000,000
INDIAN OIL CORP LTD IOCLIN 4.75 22-Jan-15 NR Baa3 315 331 -16 CT5 govt 500,000,000
INDIAN OIL CORP LTD IOCLIN 5.625 02-Aug-21 NR Baa3 379 355 25 CT10 govt 500,000,000
INDIAN RAILWAY FINANCE C INRCIN 4.406 30-Mar-16 BBB- (P)Baa3 332 383 -51 CT5 govt 200,000,000
BALLARPUR INTL GRAPIC PA BILTIN 9.75 8/11/2016* NR NR 1,421 1,433 -12 CT5 govt 200,000,000
RELIANCE HOLDINGS RILIN 4.5 19-Oct-20 BBB Baa2 305 315 -10 CT10 govt 1,000,000,000
RELIANCE HOLDINGS RILIN 5.4 14-Feb-22 BBB Baa2 339 348 -8 CT10 govt 1,000,000,000
RELIANCE HOLDINGS RILIN 6.25 19-Oct-40 BBB Baa2 362 360 3 CT30 govt 500,000,000
RURAL ELECTRIFICATION RELECL 4.25 25-Jan-16 NR (P)Baa3 318 323 -5 CT5 govt 500,000,000
VEDANTA RESOURCES VEDLN 8.75 15-Jan-14 BB Ba3 657 655 2 CT2 govt 500,000,000
VEDANTA RESOURCES PLC VEDLN 9.5 18-Jul-18 BB Ba3 858 888 -30 CT5 govt 750,000,000
AXIS BANK/DUBAI AXSBIN 5.25 30-Sep-15 BBB- Baa2 441 450 -9 CT5 govt 350,000,000
AXIS BANK/DUBAI AXSBIN 4.75 02-May-16 BBB- Baa2 392 405 -13 CT5 govt 500,000,000
BANK OF INDIA BOIIN 6.25 16-Feb-21 BBB- Baa3 404 391 13 CT10 govt 500,000,000
VEDANTA RESOURCES PLC VEDLN 8.25 07-Jun-21 BB Ba3 730 735 -5 CT10 govt 900,000,000

169
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Asia’s Bond Markets abc
April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
INDONESIA
REPUBLIC OF INDONESIA INDON 6.75 10-Mar-14 BB+ Baa3 206 202 4 CT2 govt 1,300,000,000
REPUBLIC OF INDONESIA INDOIS 8.8 23-Apr-14 BB+ Baa3 226 228 -3 CT2 govt 650,000,000
REPUBLIC OF INDONESIA INDON 10.375 04-May-14 BB+ Baa3 184 204 -20 CT2 govt 1,000,000,000
REPUBLIC OF INDONESIA INDON 7.25 20-Apr-15 BB+ Baa3 229 217 12 CT5 govt 1,000,000,000
REPUBLIC OF INDONESIA INDON 7.5 15-Jan-16 BB+ Baa3 173 181 -8 CT5 govt 900,000,000
REPUBLIC OF INDONESIA INDON 6.875 09-Mar-17 BB+ Baa3 200 192 8 CT5 govt 1,000,000,000
REPUBLIC OF INDONESIA INDON 6.875 17-Jan-18 BB+ Baa3 224 213 11 CT5 govt 1,900,000,000
REPUBLIC OF INDONESIA INDON 11.625 04-Mar-19 BB+ Baa3 146 143 3 CT10 govt 2,000,000,000
REPUBLIC OF INDONESIA INDON 5.875 13-Mar-20 BB+ Baa3 155 163 -8 CT10 govt 2,000,000,000
REPUBLIC OF INDONESIA INDON 8.5 12-Oct-35 BB+ Baa3 165 188 -22 CT30 govt 1,600,000,000
REPUBLIC OF INDONESIA INDON 6.625 17-Feb-37 BB+ Baa3 168 188 -20 CT30 govt 1,500,000,000
REPUBLIC OF INDONESIA INDON 7.75 17-Jan-38 BB+ Baa3 175 188 -13 CT30 govt 2,000,000,000
REPUBLIC OF INDONESIA INDON 5.25 17-Jan-42 BB+ Baa3 160 179 -19 CT30 govt 1,750,000,000
BERAU CAPITAL RESOURCES BRAUIJ 12.5 08-Jul-15 BB- B1 679 601 79 CT5 govt 450,000,000
BERAU COAL ENERGY PT BRAUIJ 7.25 13-Mar-17 BB- B1 617 n/a n/a CT5 govt 500,000,000
BUMI CAPITAL BUMIIJ 12 10-Nov-16 BB Ba3 774 774 0 CT5 govt 300,000,000
BUMI CAPITAL BUMIIJ 10.75 06-Oct-17 BB Ba3 748 744 4 CT5 govt 700,000,000
CIKARANG LISTRINDO CIKLIS 9.25 29-Jan-15 BB- Ba2 556 367 189 CT5 govt 20,010,000
CIKARANG LISTRINDO CIKLIS 6.95 21-Feb-19 BB- Ba2 429 445 -16 CT10 govt 500,000,000
INDOSAT ISATIJ 7.375 29-Jul-20 BB /*+ Ba1 406 392 15 CT10 govt 650,000,000
INDIKA ENERGY INDYIJ 9 01-Jun-12 NR B1 500 624 -124 CT2 govt 65,000,000
INDIKA ENERGY INDYIJ 9.75 05-Nov-16 NR B1 604 529 75 CT5 govt 230,000,000
LIPPO LPKRIJ 9 30-Apr-15 BB- B1 708 673 35 CT5 govt 395,608,000
MNC SKYVISION BMTRIJ 12.75 16-Nov-15 B B2 1,073 1,083 -10 CT5 govt 165,000,000
MNC SKYVISION PERTIJ 5.25 23-May-21 BB+ Baa3 248 245 3 CT10 govt 1,000,000,000
MNC SKYVISION PERTIJ 6.5 27-May-41 BB+ Baa3 258 266 -8 CT30 govt 500,000,000
PERUSAHAAN LISTRIK NEGARA (PLN) PLNIJ 8 07-Aug-19 BB Baa3 251 237 14 CT10 govt 750,000,000
MAJAPAHIT HOLDING BV PLNIJ 7.75 20-Jan-20 BB Baa3 260 251 9 CT10 govt 1,250,000,000
REPUBLIC OF INDONESIA INDOIS 4 21-Nov-18 BB+ Baa3 264 291 -28 CT5 govt 1,000,000,000
REPUBLIC OF INDONESIA INDON 11.625 04-Mar-19 BB+ Baa3 146 143 3 CT10 govt 2,000,000,000
REPUBLIC OF INDONESIA INDON 4.875 05-May-21 BB+ Baa3 158 167 -8 CT10 govt 2,500,000,000
PT ADARO INDONESIA ADROIJ 7.625 22-Oct-19 NR Ba1 322 302 21 CT10 govt 800,000,000
ALTUS CAPITAL PTE LTD TPIAIJ 12.875 10-Feb-15 B+ B2 1,167 1,093 73 CT5 govt 193,030,000
GAJAH TUNGGAL GJTLIJ 6 21-Jul-14 NR B3 1,024 955 69 CT2 govt 424,017,000
PERUSAHAAN LISTRIK NEGAR PLNIJ 5.5 22-Nov-21 BB Baa3 271 274 -3 CT10 govt 1,000,000,000
STAR ENERGY GEOTHERMAL STAREN 11.5 12-Feb-15 NR B2 612 574 38 CT5 govt 350,000,000
INDO ENERGY FINANCE BV INDYIJ 7 07-May-18 NR B1 537 547 -10 CT5 govt 300,000,000
KOREA
REPUBLIC OF KOREA KOREA 4.25 01-Jun-13 A A1 150 170 -20 CT2 govt 1,000,000,000
REPUBLIC OF KOREA KOREA 5.75 16-Apr-14 A A1 140 160 -20 CT2 govt 1,500,000,000
REPUBLIC OF KOREA KOREA 4.875 22-Sep-14 A A1 156 160 -4 CT2 govt 1,000,000,000
REPUBLIC OF KOREA KOREA 5.125 07-Dec-16 A A1 165 165 1 CT5 govt 500,000,000
REPUBLIC OF KOREA KOREA 7.125 16-Apr-19 A A1 117 130 -13 CT10 govt 1,500,000,000
REPUBLIC OF KOREA KOREA 5.625 03-Nov-25 A A1 200 204 -4 CT10 govt 400,000,000
EXPORT-IMPORT BK KOREA EIBKOR 8.125 21-Jan-14 A A1 189 220 -31 CT2 govt 2,000,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5.25 10-Feb-14 A A1 201 230 -29 CT2 govt 700,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5.875 14-Jan-15 A A1 211 255 -44 CT5 govt 1,500,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5.125 16-Mar-15 A A1 216 265 -49 CT5 govt 600,000,000
EXPORT-IMPORT BK KOREA EIBKOR 4.125 09-Sep-15 A A1 227 260 -33 CT5 govt 1,000,000,000
EXPORT-IMPORT BK KOREA EIBKOR 3.75 20-Oct-16 A A1 201 247 -46 CT5 govt 700,000,000
EXPORT-IMPORT BK KOREA EIBKOR 3.75 20-Oct-16 A A1 211 230 -19 CT5 govt 700,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5.125 29-Jun-20 A A1 185 220 -35 CT10 govt 1,250,000,000
EXPORT-IMPORT BK KOREA EIBKOR 4 29-Jan-21 A A1 210 209 1 CT10 govt 1,000,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5 11-Apr-22 A A1 215 240 -25 CT10 govt 1,000,000,000
KOOKMIN BANK CITNAT 7.25 14-May-14 AA Aa1 195 215 -20 CT2 govt 1,000,000,000
KOOKMIN BANK CITNAT 3.625 14-Jan-17 A A1 294 325 -31 CT5 govt 300,000,000
KOREA DEVELOPMENT BANK KDB 5.5 13-Nov-12 A A1 186 200 -13 CT2 govt 600,000,000
KOREA DEVELOPMENT BANK KDB 8 23-Jan-14 A A1 189 215 -26 CT2 govt 2,000,000,000
KOREA DEVELOPMENT BANK KDB 4.375 10-Aug-15 A A1 244 265 -21 CT5 govt 750,000,000
KOREA DEVELOPMENT BANK KDB 3.25 09-Mar-16 A A1 193 235 -42 CT5 govt 900,000,000
KOREA DEVELOPMENT BANK KDB 4 09-Sep-16 A A1 201 232 -31 CT5 govt 750,000,000
KOREA DEVELOPMENT BANK KDB 3.5 22-Aug-17 A A1 221 230 -9 CT5 govt 750,000,000
KOREA EXCHANGE BANK KEB 4.875 14-Jan-16 A- A2 230 255 -24 CT5 govt 500,000,000

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April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
KOREA (cont’d)
BUSAN BANK PUSAN 4.125 09-Feb-17 NR A2 261 260 1 CT5 govt 300,000,000
HANA BANK HANABK 6.5 09-Apr-12 A A1 169 179 -11 CT2 govt 1,000,000,000
HANA BANK HANABK 5.375 12-Apr-17 A- A2 2,130 695 1435 CT5 govt 500,000,000
HANA BANK HANABK 4.5 30-Oct-15 A A1 252 280 -28 CT5 govt 500,000,000
HYUNDAI STEEL CO INCIRO 4.625 21-Apr-16 BBB- Baa3 291 320 -29 CT5 govt 500,000,000
INDUSTRIAL BANK OF KOREA INDKOR 7.125 23-Apr-14 A A1 200 240 -40 CT2 govt 1,000,000,000
INDUSTRIAL BANK OF KOREA INDKOR 4.375 04-Aug-15 A A1 237 275 -38 CT5 govt 350,000,000
INDUSTRIAL BANK OF KOREA INDKOR 3.75 29-Sep-16 A A1 216 250 -34 CT5 govt 500,000,000
NATIONAL AGRICULTURAL CO NACF 5.375 26-Apr-17 A- A2 185 547 -362 CT5 govt 500,000,000
NATIONAL AGRICULTURAL CO NACF 5 30-Sep-14 A A1 221 255 -34 CT2 govt 500,000,000
NATIONAL AGRICULTURAL CO NACF 4.25 28-Jan-16 A A1 216 250 -34 CT5 govt 500,000,000
NATIONAL AGRICULTURAL CO NACF 3.5 08-Feb-17 A A1 246 265 -19 CT5 govt 500,000,000
SHINHAN BANK SHNHAN 5.663 02-Mar-35 BBB- Ba1 493 539 -46 CT30 govt 300,000,000
SHINHAN BANK SHNHAN 4.375 15-Sep-15 A A1 247 275 -28 CT5 govt 700,000,000
SHINHAN BANK SHNHAN 4.125 04-Oct-16 A A1 226 240 -14 CT5 govt 500,000,000
SHINHAN BANK SHNHAN 4.375 27-Jul-17 A A1 251 255 -4 CT5 govt 700,000,000
SHINHAN BANK SHNHAN 6.819 20-Sep-16 BBB- Ba1 540 586 -45 CT5 govt 350,000,000
WOORI BANK WOORIB 7 02-Feb-15 A- A1 241 270 -29 CT5 govt 800,000,000
WOORI BANK WOORIB 7.63 14-Apr-15 BBB+ A2 311 370 -59 CT5 govt 389,171,000
WOORI BANK WOORIB 4.5 07-Oct-15 A- A1 254 266 -12 CT5 govt 500,000,000
WOORI BANK WOORIB 4.75 20-Jan-16 A- A1 205 230 -24 CT5 govt 600,000,000
WOORI BANK WOORIB 5.875 13-Apr-21 BBB+ A2 270 314 -44 CT10 govt 500,000,000
KOREA FINANCE CORP KOFCOR 3.25 20-Sep-16 A A1 221 260 -39 CT5 govt 750,000,000
KOREA RAILROAD CORP KORAIL 5.375 15-May-13 A A1 189 215 -26 CT2 govt 500,000,000
KOREA RESOURCES CORP KORESC 4.125 19-May-15 A A1 252 290 -38 CT5 govt 300,000,000
GS-CALTEX CORP GSCCOR 5.5 25-Aug-14 BBB Baa2 238 245 -7 CT2 govt 300,000,000
GS-CALTEX CORP GSCCOR 5.5 15-Oct-15 BBB Baa2 287 300 -13 CT5 govt 300,000,000
HYNIX SEMICONDUCTOR HYUELE 7.875 27-Jun-17 BB- Ba3 393 273 120 CT5 govt 500,000,000
HYUNDAI CAPITAL HYNMTR 3.75 06-Apr-16 BBB+ Baa2 211 245 -34 CT5 govt 500,000,000
HYUNDAI CAPITAL HYUCAP 6 05-May-15 BBB+ Baa2 246 280 -34 CT5 govt 500,000,000
HYUNDAI CAPITAL HYUCAP 4.375 27-Jul-16 BBB+ Baa2 216 255 -39 CT5 govt 700,000,000
HYUNDAI CAPITAL HYUCAP 3.5 13-Sep-17 BBB+ Baa2 261 n/a n/a CT5 govt 500,000,000
KIA MOTORS CORPORATION KIAMTR 3.625 14-Jun-16 BBB+ Baa2 216 250 -34 CT5 govt 500,000,000
KOREA ELECTRIC POWER KORELE 7.75 01-Apr-13 A A1 196 210 -13 CT2 govt 350,000,000
KOREA ELECTRIC POWER KORELE 5.5 21-Jul-14 A A1 211 240 -29 CT2 govt 500,000,000
KOREA ELECTRIC POWER KORELE 3 05-Oct-15 A A1 222 250 -28 CT5 govt 700,000,000
KOREA SOUTH-EAST POWER KORELE 3.625 29-Jan-17 A A1 226 240 -14 CT5 govt 300,000,000
KOREA HYDRO & NUCLEAR POWER KORELE 4.75 13-Jul-21 A A1 197 224 -27 CT10 govt 500,000,000
KOREA GAS CORP KORGAS 6 15-Jul-14 A A1 221 235 -14 CT2 govt 500,000,000
KOREA GAS CORP KORGAS 4.25 02-Nov-20 A A1 200 219 -19 CT10 govt 500,000,000
KOREA GAS CORP KORGAS 6.25 20-Jan-42 A A1 224 230 -6 CT30 govt 750,000,000
KOREA EXPRESSWAY CORP HIGHWY 4.9 01-Jul-13 A A1 210 245 -35 CT2 govt 500,000,000
KOREA EXPRESSWAY CORP HIGHWY 4.9 01-Jul-13 A A1 210 245 -35 CT2 govt 500,000,000
KOREA EXPRESSWAY CORP HIGHWY 4.5 23-Mar-15 A A1 237 270 -33 CT5 govt 700,000,000
KOREA EXPRESSWAY CORP HIGHWY 5.125 20-May-15 A A1 237 280 -43 CT5 govt 500,000,000
KHFC KHFC 4.125 15-Dec-15 NR Aa3 242 260 -18 CT5 govt 500,000,000
KOREA LAND CORPORATION KOLAHO 5.75 30-May-14 A A1 241 275 -34 CT2 govt 500,000,000
KOREA NATIONAL OIL CORP KOROIL 2.875 09-Nov-15 A A1 237 265 -28 CT5 govt 700,000,000
KT CORP KOREAT 5.875 24-Jun-14 A A3 221 260 -39 CT2 govt 600,000,000
KT CORP KOREAT 4.875 15-Jul-15 A A3 242 265 -23 CT5 govt 400,000,000
KT CORP KOREAT 3.875 20-Jan-17 A NR 221 240 -19 CT5 govt 350,000,000
KOREA HYDRO & NUCLEAR PO KORELE 6.25 17-Jun-14 A A1 206 235 -29 CT2 govt 1,000,000,000
KOREA HYDRO & NUCLEAR PO KORELE 3.125 16-Sep-15 A A1 227 255 -28 CT5 govt 500,000,000
KOREA NATIONAL OIL CORP KOROIL 5.375 30-Jul-14 A A1 211 235 -24 CT2 govt 1,000,000,000
KOREA LAND & HOUSING CO KOLAHO 4.875 10-Sep-14 A A1 241 270 -29 CT2 govt 750,000,000
LOTTE SHOPPING CO LTD LOTTES 3.875 07-Apr-16 NR A3 246 250 -4 CT5 govt 400,000,000
NATIONAL FEDERATION FISH NFFSHC 6.375 21-Jul-14 A- A2 241 265 -24 CT2 govt 300,000,000
POSCO POHANG 8.75 26-Mar-14 A- A3 199 255 -56 CT2 govt 700,000,000
POSCO POHANG 5.875 10-Aug-16 A- A3 250 280 -29 CT5 govt 300,000,000
POSCO POHANG 4.25 28-Oct-20 A- A3 240 259 -19 CT10 govt 700,000,000
POSCO POHANG 5.25 14-Apr-21 A- A3 240 259 -19 CT10 govt 700,000,000
KOREA DEVELOPMENT BANK KDB 3.875 04-May-17 A A1 221 259 -39 CT5 govt 1,000,000,000
EXPORT-IMPORT BK KOREA EIBKOR 5.375 04-Oct-16 A A1 190 240 -49 CT5 govt 300,000,000
EXPORT-IMPORT BK KOREA EIBKOR 4.375 15-Sep-21 A A1 210 230 -19 CT10 govt 1,000,000,000

171
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April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ___ Benchmark ____ Amount
3-Apr-12 7-Mar-12
KOREA (cont’d)
HANA BANK HANABK 4.25 14-Jun-17 A A1 256 245 11 CT5 govt 500,000,000
KOREA HOUSING FINANCE CO KHFC 3.5 15-Dec-16 NR Aa3 211 240 -29 CT5 govt 500,000,000
KOREA FINANCE CORP KOFCOR 4.625 16-Nov-21 A A1 225 226 -1 CT10 govt 750,000,000
DOOSAN INFRACORE CO LTD DAEHIM 4.5 23-Nov-16 A NR 246 285 -39 CT5 govt 350,000,000
HYUNDAI MOTOR MANUFACTUR HYNMTR 4.5 15-Apr-15 BBB+ Baa2 242 275 -33 CT5 govt 500,000,000
HYUNDAI CAPITAL AMERICA HYNMTR 4 08-Jun-17 BBB+ Baa2 246 255 -9 CT5 govt 500,000,000
MALAYSIA
MALAYSIA MALAYS 2.991 06-Jul-16 A- A3 139 160 -21 CT5 govt 1,200,000,000
MALAYSIA MALAYS 4.646 06-Jul-21 A- A3 144 158 -14 CT10 govt 800,000,000
MALAYSIA MALAYS 3.928 04-Jun-15 A- A3 166 167 -2 CT5 govt 1,250,000,000
MALAYAN BANKING BHD MAYMK 3 10-Feb-17 A- NR 198 202 -5 CT5 govt 400,000,000
GENTING GENTMK 5.375 22-Sep-14 BBB+ Baa1 220 235 -15 CT2 govt 300,000,000
IOI VENTURES IOIMK 5.25 16-Mar-15 BBB+ Baa1 275 285 -10 CT5 govt 500,000,000
MISC CAPITAL LTD MISCMK 6.125 01-Jul-14 BBB Baa2 250 235 16 CT2 govt 700,000,000
PETRONAS PETMK 4.25 12-Aug-14 A- A1 166 165 1 CT2 govt 1,500,000,000
PETRONAS PETMK 7.75 15-Aug-15 A- A1 154 169 -14 CT5 govt 625,000,000
PETRONAS PETMK 7 22-May-12 A- A1 72 80 -8 CT2 govt 2,000,000,000
PETRONAS PETMK 5.25 12-Aug-19 A- A1 127 122 5 CT10 govt 3,000,000,000
PETRONAS PETMK 7.875 22-May-22 A- A1 163 152 11 CT10 govt 1,000,000,000
PETRONAS PETMK 7.625 15-Oct-26 A- A1 183 189 -6 CT10 govt 500,000,000
SARAWAK SARAWK 5.5 03-Aug-15 A- A3 263 277 -14 CT5 govt 800,000,000
TELEKOM MALAYSIA TELMAL 5.25 22-Sep-14 A- A3 210 202 8 CT2 govt 465,055,000
TELEKOM MALAYSIA TELMAL 7.875 01-Aug-25 A- A3 215 214 1 CT10 govt 300,000,000
TENAGA TNBMK 7.5 01-Nov-25 BBB+ Baa1 265 272 -7 CT10 govt 335,500,000
TENAGA TNBMK 5.25 05-May-15 BBB+ Baa1 235 240 -5 CT5 govt 350,000,000
TENAGA AXIATA 5.375 28-Apr-20 BBB- Baa2 223 224 -1 CT10 govt 300,000,000
PHILIPPINES
REPUBLIC OF PHILIPPINES PHILIP 9.875 15-Jan-19 BB Ba2 110 107 3 CT10 govt 792,405,000
REPUBLIC OF PHILIPPINES PHILIP 8.25 15-Jan-14 BB Ba2 189 178 11 CT2 govt 1,151,146,000
REPUBLIC OF PHILIPPINES PHILIP 8.25 15-Jan-14 BB Ba2 189 178 11 CT2 govt 1,151,146,000
REPUBLIC OF PHILIPPINES PHILIP 8 15-Jan-16 BB Ba2 152 158 -6 CT5 govt 648,035,000
REPUBLIC OF PHILIPPINES PHILIP 8.75 07-Oct-16 BB Ba2 167 166 1 CT5 govt 526,087,000
REPUBLIC OF PHILIPPINES PHILIP 9.875 15-Jan-19 BB Ba2 110 107 3 CT10 govt 792,405,000
REPUBLIC OF PHILIPPINES PHILIP 8.375 17-Jun-19 BB Ba2 112 108 4 CT10 govt 1,182,339,000
REPUBLIC OF PHILIPPINES PHILIP 6.5 20-Jan-20 BB Ba2 128 132 -4 CT10 govt 1,342,902,000
REPUBLIC OF PHILIPPINES PHILIP 4.95 15-Jan-21 BB Ba2 132 131 1 CT10 govt 44,109,000,000
REPUBLIC OF PHILIPPINES PHILIP 10.625 16-Mar-25 BB Ba2 221 234 -13 CT10 govt 1,552,888,000
REPUBLIC OF PHILIPPINES PHILIP 10.625 16-Mar-25 BB Ba2 221 234 -13 CT10 govt 1,552,888,000
REPUBLIC OF PHILIPPINES PHILIP 5.5 30-Mar-26 BB Ba2 203 214 -11 CT10 govt 1,500,000,000
REPUBLIC OF PHILIPPINES PHILIP 7.75 14-Jan-31 BB Ba2 138 149 -11 CT30 govt 2,343,570,000
REPUBLIC OF PHILIPPINES PHILIP 6.375 15-Jan-32 BB Ba2 139 149 -10 CT30 govt 1,419,781,000
REPUBLIC OF PHILIPPINES PHILIP 6.375 23-Oct-34 BB Ba2 139 153 -15 CT30 govt 2,796,807,000
REPUBLIC OF PHILIPPINES PHILIP 5 13-Jan-37 BB Ba2 140 154 -15 CT30 govt 1,500,000,000
ALLIANCE GLOBLE GROUP AGIPM 6.5 18-Aug-17 NR NR 428 418 11 CT5 govt 500,000,000
FIRST PACIFIC FIRPAC 7.375 24-Jul-17 NR NR 386 418 -32 CT5 govt 300,000,000
FIRST PACIFIC FIRPAC 6.375 28-Sep-20 NR NR 347 349 -2 CT10 govt 400,000,000
INTERNATION CONTAINER TERMINAL ICTPM 7.375 17-Mar-20 NR NR 341 347 -6 CT10 govt 450,000,000
POWER SECTOR ASSETS & LI PSALM 7.25 27-May-19 BB Ba2 154 150 4 CT10 govt 1,020,986,000
POWER SECTOR ASSETS & LI PSALM 7.39 02-Dec-24 BB Ba2 245 254 -8 CT10 govt 1,179,014,000
SM INVESTMENTS CORP SMPM 5.5 13-Oct-17 NR NR 416 424 -8 CT5 govt 400,000,000
SMC GLOBAL POWER HLDGS SMCPM 7 28-Jan-16 NR NR 450 471 -21 CT5 govt 300,000,000
PHILIPPINE LONG DIST TEL TELPM 8.35 06-Mar-17 BB+ Baa3 297 316 -19 CT5 govt 234,259,000

172
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Asia’s Bond Markets abc
April 2012

Ticker Coupon Maturity Rating Rating Offer spd to Chg Benchmark Issue
S&P Moody ____ Benchmark ____ Amount
3-Apr-12 7-Mar-12
SINGAPORE
DBS BANK DBSSP 5.125 16-May-17 A+ Aa2 /*- 145 194 -49 CT5 govt 500,000,000
DBS BANK DBSSP 5 15-Nov-14 BBB+ A1 /*- 264 267 -2 CT2 govt 750,000,000
DBS BANK DBSSP 2.375 14-Sep-15 AA- Aa1 /*- 120 164 -44 CT5 govt 1,000,000,000
DBS BANK DBSSP 2.35 28-Feb-17 AA- Aa1 /*- 150 147 3 CT5 govt 1,000,000,000
DBS BANK DBSSP 3.625 21-Sep-22 A+ Aa2 /*- 302 n/a n/a CT10 govt 750,000,000
OCBC OCBCSP 4.25 18-Nov-19 A+ Aa2 265 255 10 CT10 govt 500,000,000
OCBC OCBCSP 3.75 15-Nov-22 A+ Aa2 285 278 7 CT10 govt 500,000,000
OCBC OCBCSP 1.625 13-Mar-15 AA- Aa1 120 n/a n/a CT5 govt 1,000,000,000
UOB UOBSP 4.5 02-Jul-13 BBB A1 148 168 -19 CT2 govt 1,000,000,000
UOB UOBSP 5.375 03-Sep-19 BBB A1 269 265 5 CT10 govt 1,000,000,000
UOB UOBSP 5.796 15-Mar-16* BBB A3 393 413 -20 CT5 govt 500,000,000
UOB UOBSP 2.25 07-Mar-17 AA- Aa1 154 146 8 CT5 govt 750,000,000
BW GROUP LTD BWGRP 6.625 28-Jun-17 BB Ba1 607 616 -10 CT5 govt 500,000,000
CAPITA CAPITA 4.321 08-Apr-15 NR A3 237 265 -28 CT5 govt 500,000,000
CMT MTN PTE LTD CAPITA 3.731 21-Mar-18 NR A3 255 n/a n/a CT5 govt 400,000,000
MMI INTERNATIONAL LTD MMIINT 8 01-Mar-17 B+ (P)Ba3 597 628 -31 CT5 govt 300,000,000
OLAM INTERNATIONAL LTD OLAMSP 7.5 12-Aug-20 NR NR 514 521 -7 CT10 govt 250,000,000
PSA INTERNATIONAL PTE LT PSASP 5.9 29-Jun-16 AA Aa1 109 120 -11 CT5 govt 500,000,000
PSA INTERNATIONAL PTE LT PSASP 4.625 11-Sep-19 AA Aa1 105 130 -25 CT10 govt 500,000,000
PSA INTERNATIONAL PTE LT PSASP 3.875 11-Feb-21 AA Aa1 140 150 -10 CT10 govt 500,000,000
SP POWERASSETS LTD SPSP 5 22-Oct-13 AA- Aa3 118 105 14 CT2 govt 1,000,000,000
SINGAPORE TELECOM STSP 4.625 15-Oct-19 A+ NR 144 145 0 CT10 govt 500,000,000
SINGAPORE TELECOM STSP 4.5 08-Sep-21 A+ Aa2 143 150 -7 CT10 govt 600,000,000
SINGAPORE TELECOM STSP 7.375 01-Dec-31 A+ Aa2 90 90 0 CT30 govt 500,000,000
STATS CHIPPAC LTD STATSP 7.5 12-Aug-15 BB+ Ba1 445 445 -1 CT5 govt 600,000,000
STATS CHIPPAC LTD STATSP 5.375 31-Mar-16 BB+ Ba1 404 447 -43 CT5 govt 200,000,000
ST ENGINEERING STESP 4.8 16-Jul-19 AAA Aaa 104 125 -21 CT10 govt 500,000,000
TEMASEK TEMASE 4.5 21-Sep-15 AAA Aaa 112 127 -14 CT5 govt 1,750,000,000
TEMASEK TEMASE 4.3 25-Oct-19 AAA Aaa 80 102 -22 CT10 govt 1,500,000,000
TEMASEK TEMASE 5.375 23-Nov-39 AAA Aaa 90 91 -1 CT30 govt 500,000,000
SRI LANKA
REPUBLIC OF SRI LANKA SRILAN 8.25 24-Oct-12 B+ NR 367 565 -198 CT2 govt 500,000,000
REPUBLIC OF SRI LANKA SRILAN 7.4 22-Jan-15 B+ NR 482 539 -57 CT5 govt 500,000,000
REPUBLIC OF SRI LANKA SRILAN 6.25 04-Oct-20 B+ B1 406 467 -62 CT10 govt 1,000,000,000
REPUBLIC OF SRI LANKA SRILAN 6.25 27-Jul-21 B+ B1 407 461 -54 CT10 govt 1,000,000,000
THAILAND
BANGKOK BANK PUB CO (HK) BBLTB 9.025 15-Mar-29 BBB Baa1 404 405 -2 CT30 govt 449,825,000
BANGKOK BANK PUB CO (HK) BBLTB 3.25 18-Oct-15 BBB+ A3 257 258 0 CT5 govt 400,000,000
BANGKOK BANK PUB CO (HK) BBLTB 4.8 18-Oct-20 BBB+ A3 249 260 -11 CT10 govt 800,000,000
IRPC PCL IRPCTB 6.375 25-May-17 BBB- Baa3 381 350 31 CT5 govt 238,000,000
PTTEP AUST INTL FIN PTY PTTEPT 4.152 19-Jul-15 BBB+ Baa1 252 275 -23 CT5 govt 500,000,000
PTTEP CANADA INTL FIN LT PTTEPT 5.692 05-Apr-21 BBB+ Baa1 255 280 -25 CT10 govt 700,000,000
PTT PCL PTTTB 5.75 01-Aug-14 BBB+ Baa1 236 240 -4 CT2 govt 400,000,000
PTT PCL PTTTB 5.875 03-Aug-35 BBB+ Baa1 244 255 -12 CT30 govt 350,000,000
PTT GLOBAL CHEMICAL PCL PTTGC 5.5 20-Jul-12 BBB Baa2 210 224 -14 CT2 govt 234,850,000
PTT GLOBAL CHEMICAL PCL PTTGC 5.5 24-Jun-15 BBB Baa2 272 275 -3 CT5 govt 300,000,000
THAI OIL PCL TOPTB 5.1 09-Jun-15 BBB Baa1 267 265 2 CT5 govt 350,000,000
SIAM COMMERCIAL BANK(HK) SCBTB 3.375 19-Sep-17 BBB+ A3e 263 n/a n/a CT5 govt 600,000,000
VIETNAM
SOCIALIST REP OF VIETNAM VIETNM 6.875 15-Jan-16 BB- B1 345 395 -50 CT5 govt 750,000,000
SOCIALIST REP OF VIETNAM VIETNM 6.75 29-Jan-20 BB- B1 321 352 -31 CT10 govt 1,000,000,000
* First callable date
Source: HSBC

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April 2012

Asian Rating Timeline

Sovereigns
Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
China S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
Moodys Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve)
Fitch A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Hong Kong S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve)
Fitch AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab)
India S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Indonesia S&P BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve)
Korea S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (+ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Malaysia S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Pakistan S&P B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab) B-/ (stab)
Moodys B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab) B3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Philippines S&P BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Singapore S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab)
Fitch AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Sri Lanka S&P B+/ (stab) B+/ (stab) B+/ (+ve) B+/ (+ve) B+/ (+ve) B+/ (+ve) B+/ (+ve) B+/ (+ve) B+/ (stab)
Moodys B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab)
Fitch BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) B+/ (+ve)
Thailand S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve)
Vietnam S&P BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve) BB-/ (-ve)
Moody's B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve)
Fitch B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab)
Source: HSBC

174
 The View
Asia’s Bond Markets abc
April 2012

ADBI Financial Institutions

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
Axis Bank S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Banco de Oro S&P NR NR NR BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab)
Unibank Inc Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Bangkok Bank S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
(senior) Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Bangkok Bank S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
(sub-debt) Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Bangko Sentral ng S&P BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Pilipinas Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Bank of Baroda S&P NR NR NR BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Bank of China (HK) S&P BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve)
(senior) Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Bank of China (HK) S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (+ve)
(sub-debt) Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Bank of East Asia S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Bank of India S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Busan Bank S&P NR NR NR NR NR NR NR NR NR
Moodys A2/ (stab) A2/ (stab) A2/ (stab) NR NR NR NR NR NR
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Canara Bank S&P NR NR NR BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
China Development S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
Bank Moodys Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve)
Fitch A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Citic Bank S&P NR NR NR NR NR NR NR NR NR
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
DBS (senior) S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
Moodys Aa1/ (-ve) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Development Bank S&P BB-/ (stab) NR NR NR NR NR NR NR NR
of Mongolia Moodys B1/ (stab) NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Development Bank S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
of Philippines Moodys NR NR NR NR NR NR NR NR NR
Fitch BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Export-Import Bank S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
of China Moodys Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve) Aa3/ (+ve)
Fitch A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Export-Import Bank S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
of India Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Export-Import Bank S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
of Korea Moodys A1/ (+ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Hana Bank S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)

175
 The View
Asia’s Bond Markets abc
April 2012

ADBI Financial Institutions (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
Hong Leong Bank S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Hyundai Capital S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Services Moodys Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
ICBC Asia S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
(senior) Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
ICBC Asia S&P NR NR NR NR NR NR NR NR NR
(sub-debt) Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
ICICI S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
IDBI S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Indian Overseas S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Bank Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Industrial Bank of S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Korea Moodys A1/ (+ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Development S&P A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve)
Bank Moodys A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Exchange S&P A-/ (stab) A-/ (stab) BBB+/ (+ve) BBB+/ (+ve) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Bank Moodys A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve) A2/ (+ve)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Korea Finance Corp S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (+ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Kookmin Bank S&P AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab)
(Covered bond) Moodys Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Malayan Bank S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
NACF S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
National Federation S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
of Fisheries Co Moodys A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (-ve)
Fitch NR NR NR NR NR NR NR NR NR
OCBC S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Moodys Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Rizal Commerical S&P NR NR NR NR NR NR NR NR NR
Banking Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab)
Shinhan Bank S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (-ve) A/ (-ve) A/ (-ve)
Siam Commercial S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Bank Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
State Bank of India S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Syndicate Bank S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
of India Moodys Baa2/ (-ve) Baa2/ (-ve) Baa2/ (-ve) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR

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April 2012

ADBI Financial Institutions (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
UOB S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Union Bank of India S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Woori Bank S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Source: HSBC

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April 2012

ADBI Corporate Entities

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
Agile Property S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Axiata Group S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB/ (stab)
Moodys Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve)
Fitch NR NR NR NR NR NR NR NR NR
Alliance Group S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Beijing Enterprise S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
BW Group S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Moodys Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
CapitaMall Trust S&P NR NR NR NR NR NR NR NR NR
(CMT MTN) Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
China Merchants S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
(Holdings) Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
China Oriental Group S&P NR NR NR NR NR NR NR NR NR
Moodys Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve)
Fitch BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
China Overseas S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Land and Inv Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
China Resources S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Land Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
China Resources S&P BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve)
Power Holdings Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Citic Pacific S&P BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BB+/ (-ve) BBB-/ (-ve)
Moodys Ba1/ (-ve) Ba1/ (-ve) Ba1/ (-ve) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Citic Resources S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Moodys Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
COSCO Pacific S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
CLP Holdings S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Limited Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A+/ (-ve)
CNPC S&P A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Moodys A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve) A1/ (+ve)
Fitch A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
CNOOC Ltd S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
Moodys Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Country Garden S&P BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (-ve) BB-/ (-ve)
Moodys Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Doosan Infracore Co S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) NR NR NR NR NR
Ltd Moodys NR NR NR NR A/ (stab) NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Energy Development S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
ENN Energy S&P BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (-ve) Baa3/ (-ve) Baa3/ (-ve) Baa3/ (-ve) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (-ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)

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ADBI Corporate Entities (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
Evergrande S&P BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab)
Real Estate Moodys B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve) B2/ (-ve)
Fitch BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
First Pacific S&P NR NR NR NR NR NR NR NR NR
Co Ltd. Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Franshion Properties S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB+/ (-ve) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Moodys Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
GS Caltex S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Genting S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Henderson Land S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
HK and China Gas S&P A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
HK Land Company S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
HKAA S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys NR NR NR NR NR NR NR NR NR
Fitch AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab)
Hongkong Electric S&P A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Co Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Hong Kong Mortgage S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
CO Moodys Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve) Aa1/ (+ve)
Fitch NR NR NR NR NR NR NR NR NR
Hutchison Whampoa S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Hyundai Capital S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Services Moodys Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
Hyundai Motor S&P BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
Moodys Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
Hyundai Steel S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Indian Oil Corp S&P NR NR NR NR NR NR NR NR NR
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Internation Container S&P NR NR NR NR NR NR NR NR NR
Terminal Services Moodys NR NR NR NR NR NR NR NR NR
Inc Fitch NR NR NR NR NR NR NR NR NR
IOI Corp S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Kia Motors Corp S&P BBB+/ (stab) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
Moodys Baa2/ (+ve) Baa2/ (+ve) Baa2/ (+ve) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve) BBB/ (+ve)
KCRC S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab)
KEPCO S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)

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ADBI Corporate Entities (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
Kerry Properties S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Korea Gas S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (-ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Expressway S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Housing S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Finance Corp Moodys Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) NR NR NR
Korea Hydro & S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Nuclear Power Co. Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Land Corp S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) NR NR NR NR NR
Korea National S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Housing Corp Moodys A1/ (+ve) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea National Oil S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Corp Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Korea Railroad S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Korea Resources S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Korea South-East S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Power Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Korea Southern S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Power Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (+ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
KT Corp S&P A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A3/ (-ve) A3/ (-ve) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
KWG Property S&P B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab) B+/ (stab)
Moodys B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab) B1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Li & Fung S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Lifestyle International S&P NR NR NR NR NR NR NR NR NR
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) NR NR NR NR NR NR
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) NR NR NR NR NR NR
MCC Holdings S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) Baa2/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) BBB-/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
MISC S&P BBB/ (-ve) BBB+/ (-ve) BBB+/ (-ve) BBB+/ (-ve) BBB+/ (-ve) BBB+/ (-ve) BBB+/ (-ve) A-/ (-ve) A-/ (-ve)
Moodys Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) Baa1/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve)
Fitch NR NR NR NR NR NR NR NR NR
MTRC S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab) AA+/ (stab)
National Power S&P BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Corporation Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab) BB+/ (stab)
Nan Fung Holdings S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) NR NR NR NR NR NR
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) NR NR NR NR NR NR
Fitch BBB/ (stab) BBB/ (stab) BBB/ (stab) NR NR NR NR NR NR

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ADBI Corporate Entities (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
New World S&P NR NR NR NR NR NR NR NR NR
Development Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Noble Group S&P BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (-ve) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (+ve) BBB-/ (+ve) BBB-/ (+ve) BBB-/ (+ve) BBB-/ (+ve)
NTPC Ltd. S&P BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
OLAM S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Perusahaan Listrik S&P BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Negara Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Petronas S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Pertamina PT S&P BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve)
Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab) Ba1/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve) BB+/ (+ve)
POSCO S&P A-/ (-ve) A-/ (-ve) A-/ (-ve) A-/ (-ve) A-/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve) A/ (-ve)
Moodys A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (-ve) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A-/ (-ve) A-/ (-ve) A-/ (-ve) A-/ (-ve) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
PSA S&P AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab) AA/ (stab)
Moodys Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab) Aa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
PSALM S&P BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (+ve) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Moodys Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab) Ba2/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
PTT Public S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
PTT Chemical S&P NR NR NR NR NR BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Moodys NR NR NR NR NR Baa3/ (+ve) Baa3/ (+ve) Baa3/ (+ve) Baa3/ (+ve)
Fitch NR NR NR NR NR NR NR NR NR
Reliance Holding S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Moodys Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab) Baa2/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Rural Electrification S&P NR NR NR NR NR NR NR NR NR
Corp Moodys Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab) Baa3/ (stab)
Fitch BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab) BBB-/ (stab)
Renhe Commercial S&P B/ (-ve) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab) BB-/ (stab)
Holdings Moodys B3/ (-ve) Ba3/ (-ve) Ba3/ (-ve) Ba3/ (-ve) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab) Ba3/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Sarawak S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve) Baa1/ (+ve)
Fitch NR NR NR NR NR NR NR NR NR
Shangri-La Asia Ltd S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Shui On Land S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Singapore Telecom S&P A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Moodys Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Sino-Forest S&P NR NR NR NR NR NR NR B+/ (-ve) B+/ (-ve)
Moodys NR NR NR NR Caa1/ (-ve) Caa1/ (-ve) Caa1/ (-ve) B1/ (-ve) Ba2/ (-ve)
Fitch NR NR NR NR NR NR NR NR BB-/ (-ve)
Sinochem Overseas S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)

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ADBI Corporate Entities (cont’d)

Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11
SK Telecom S&P A-/ (stab) A-/ (stab) A/ (-ve) A/ (-ve) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Moodys A3/ (-ve) A3/ (-ve) A2/ (-ve) A2/ (-ve) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab) A2/ (stab)
Fitch A-/ (stab) A-/ (stab) A/ (-ve) A/ (-ve) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
SM Investment S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
SMC Global Power S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Spower S&P AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab) AA-/ (stab)
Moodys Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab) Aa3/ (stab)
Fitch A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
ST Engineering S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Sun Hung Kai S&P A+/ (-ve) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab) A+/ (stab)
Properties Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Swire S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab) A/ (stab)
Telekom Malaysia S&P A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Moodys A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab) A3/ (stab)
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Temasek S&P AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab) AAA/ (stab)
Moodys Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab) Aaa/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Tenaga S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab)
Tencent Holdings S&P BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) BBB+/ (stab) NR NR NR NR NR
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Thai Oil S&P BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab) BBB/ (stab)
Moodys Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab) Baa1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Travel International S&P NR NR NR NR NR NR NR NR NR
Hotel Group Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Vedanta Resources S&P BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve) BB/ (-ve)
Moodys Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve) Ba2/ (-ve)
Fitch BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab) BB/ (stab)
Wharf S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab) A-/ (stab)
Wheelock & Co S&P NR NR NR NR NR NR NR NR NR
Moodys NR NR NR NR NR NR NR NR NR
Fitch NR NR NR NR NR NR NR NR NR
Zijing Mining Group S&P NR NR NR NR NR NR NR NR NR
Moodys A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab) A1/ (stab)
Fitch NR NR NR NR NR NR NR NR NR
Zoomlion Heavy S&P NR NR NR NR NR NR NR NR NR
Industry Moodys NR NR NR NR NR NR NR NR NR
Fitch BBB-/ (stab) NR NR NR NR NR NR NR NR
Source: HSBC

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Rating Migrations
ADBI average rating migration

Av erage rating
BBB+/ (+ve) S&P
Moody 's

BBB+/ (stab)

BBB+/ (-ve)
1/04
4/04
7/04
10/04
1/05
4/05
7/05
10/05
1/06
4/06
7/06
10/06
1/07
4/07
7/07
10/07
1/08
4/08
7/08
10/08
1/09
4/09
7/09
10/09
1/10
4/10
7/10
10/10
1/11
4/11
7/11
10/11
1/12
4/12
Source: HSBC, S&P and Moody’s

Credit’s rating change in previous month

Company Agency Country Action type Direction Current rating Previous rating
Fosun International Corp CN Rating Down Ba3 *- Ba2/ sta
Hopson Development Corp CN Rating Down B *- B+/ sta
DBS Bank Bank SG Outlook Down Aa1 *- Aa1 /sta
Export-Import Bank of Korea Bank KR Outlook Up A1/ +ve A1/ sta
Industrial Bank of Korea Bank KR Outlook Up A1/ +ve A1/ sta
Republic of Korea Sov KR Outlook Up A1/ +ve A1/ sta
Korea Housing Finance Corp Quasi KR Outlook Up A1/ +ve A1/ sta
Korea Finance Corp Quasi KR Outlook Up A1/ +ve A1/ sta
Korea Land Corporation Quasi KR Outlook Up A1/ +ve A1/ sta
Fufeng Group Ltd Corp CN Outlook Down BB/ -ve BB/ sta
Powerlong Real Estate Holdings Ltd Corp CN Rating Down B3/ -ve B1/ sta
Shimao Property Corp CN Outlook Down BB *- BB/ sta
Sun Hun Kai Properties Corp HK Outlook Down A+ *- A+/ sta
Renhe Commercial Holdings Co Ltd Corp CN Rating Down B *- B+/ -ve
Renhe Commercial Holdings Co Ltd Corp CN Rating Down B3/ -ve B1/ -ve
Powerlong Real Estate Holdings Ltd Corp CN Rating Down B *- B+ / sta
Fufeng Group Ltd Corp CN Outlook Down BB/ -ve BB/ sta
GS Caltex Corp Corp KR Outlook Down BBB/ -ve BBB/ sta
MISC Bhd Corp MK Rating Down BBB/ -ve BBB+/ sta
Texhong Textile Group Ltd Corp CN Rating Down Ba3/ -ve Ba2/ sta
West China Cement Ltd Corp CN Rating Down BB- /sta BB/ sta
Franshion Properties China Ltd Corp CN Outlook Down Baa3/ -ve Baa3/ sta
Texhong Textile Group Ltd Corp CN Rating Down BB-/ -ve BB/ -ve
West China Cement Ltd Corp CN Outlook Down Ba3/ -ve Ba3/ sta
Kaisa Group Holdings Ltd Corp CN Outlook Down B+/ -ve B+/ sta
Kia Motors Corp Corp KR Rating Up BBB+/ sta BBB/ sta
Union Bank of India Bank IN Rating Down Baa3/ sta Baa2/ sta
Renhe Commercial Holdings Co Ltd Corp CN Rating Down B+/ -ve BB- *-
State of Sarawak Malaysia Quasi MK Rating Up A3/ sta Baa1 *-
Bank of India Bank IN Rating Down Baa3/ sta Baa2/ sta
Yanlord Land Group Ltd Corp CN Rating Down BB-/ -ve BB/ -ve
Dah Sing Bank Ltd Bank HK Rating Down BBB+ / sta A-/ *-
China Metallurgical Group Corp Corp CN Outlook Down Baa2/ -ve Baa2/ sta
Lonking Holdings Ltd Corp CN Outlook Down Ba3/ -ve Ba3/ sta
Yanlord Land Group Ltd Corp CN Rating Down Ba3/ -ve Ba2/ -ve
Source: HSBC, S&P, Moody’s and Fitch

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Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Louisa Lam, Philip Wickham, Dilip Shahani, Devendran
Mahendran, Zhi Ming Zhang, Keith Chan, Becky Liu, Yi Hu, Alex Zhang, Linus Fung, Hongbin Qu, Frederic Neumann, Pin-
ru Tan, Leif Eskesen, Xiaoping Ma, Jun Wei Sun, Paul Mackel, Dominic Bunning, Perry Kojodjojo, Daniel Hui and Trinh
Nguyen

Basis for financial analysis

This report is designed for, and should only be utilised by, institutional investors. Furthermore, HSBC believes an investor's
decision to make an investment should depend on individual circumstances such as the investor's existing holdings and other
considerations.

HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its credit research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a six-month time
horizon; and 2) from time to time to identify trade ideas on a time horizon of up to three months, relating to specific
instruments, which are predominantly derived from relative value considerations or driven by events and which may differ
from our long-term credit opinion on an issuer. HSBC has assigned a fundamental recommendation structure only for its long-
term investment opportunities, as described below.

HSBC believes an investor's decision to buy or sell a bond should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of terms as well as different systems to
describe their recommendations. Investors should carefully read the definitions of the recommendations used in each research
report. In addition, because research reports contain more complete information concerning the analysts' views, investors
should carefully read the entire research report and should not infer its contents from the recommendation. In any case,
recommendations should not be used or relied on in isolation as investment advice.

HSBC Global Research is not and does not hold itself out to be a Credit Rating Agency as defined under the Hong Kong
Securities and Futures Ordinance.

Definitions for fundamental credit recommendations

Overweight: The credits of the issuer are expected to outperform those of other issuers in the sector over the next six months

Neutral: The credits of the issuer are expected to perform in line with those of other issuers in the sector over the next six
months

Underweight: The credits of the issuer are expected to underperform those of other issuers in the sector over the next six
months

Prior to 1 July 2007, HSBC applied a recommendation structure in Europe that ranked euro- and sterling-denominated bonds
and CDS relative to the relevant iBoxx/iTraxx indices over a 3-month horizon.

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Rating changes for long-term investment opportunities

Recommendation History of HUTCHISON WHAMPOA
From To Date
Overweight Neutral 2010-12-20
Not Rated Overweight 2007-08-09
Neutral Not Rated 2007-07-31
Overweight Neutral 2006-09-07
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of ICICI BANK

From To Date
Overweight Neutral 2008-06-02
Neutral Overweight 2008-03-31
Underweight Neutral 2008-03-04
Overweight Underweight 2007-03-05
Not Rated Overweight 2006-12-18
Source: HSBC

Recommendation History of CENTRAL CHINA REAL ESTATE LIMI

From To Date
Not Rated Neutral 2010-12-20
Source: HSBC

Recommendation History of INTERNATIONAL CONTAINER TER SE

From To Date
Not Rated Neutral 2010-07-30
Source: HSBC

Recommendation History of CITIC BANK INTERNATIONAL LIMIT

From To Date
Not Rated Neutral 2010-12-20
Source: HSBC

Recommendation History of GLORIOUS PROPERTY HOLDINGS LIM

From To Date
Not Rated Neutral 2010-11-01
Source: HSBC

Recommendation History of KAISA GROUP

From To Date
Not Rated Neutral 2010-07-05
Source: HSBC

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Recommendation History of STAR ENERGY GEOTHERMAL

From To Date
Not Rated Neutral 2010-06-04
Source: HSBC

Recommendation History of LUMENA RESOURCES CORP

From To Date
Not Rated Underweight 2009-11-26
Source: HSBC

Recommendation History of SHINHAN

From To Date
Underweight Neutral 2009-11-04
Neutral Underweight 2008-10-22
Overweight Neutral 2008-10-20
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of FRANSHION PROPERTIES

From To Date
Not Rated Overweight 2011-05-23
Source: HSBC

Recommendation History of PCCW HKT TELEPHONE LTD

From To Date
Overweight Neutral 2008-05-29
Not Rated Overweight 2007-12-18
Source: HSBC

Recommendation History of BERAU COAL PT

From To Date
Underweight Neutral 2009-11-06
Neutral Underweight 2008-12-17
Overweight Neutral 2007-05-07
Not Rated Overweight 2007-02-05
Source: HSBC

Recommendation History of SHUI ON LAND LIMITED

From To Date
Overweight Underweight 2012-03-23
Not Rated Overweight 2010-12-20
Source: HSBC

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Recommendation History of SHIMAO PROPERTY

From To Date
Underweight Neutral 2009-09-08
Neutral Underweight 2008-02-05
Not Rated Neutral 2007-08-09
Source: HSBC

Recommendation History of HOPSON DEVELOPMENT

From To Date
Underweight Neutral 2009-09-08
Neutral Underweight 2008-02-06
Not Rated Neutral 2007-08-09
Source: HSBC

Recommendation History of KOREA NATIONAL HOUSING CO

From To Date
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of NOBLE GROUP

From To Date
Not Rated Overweight 2012-03-05
Underweight Not Rated 2012-03-02
Neutral Underweight 2011-11-10
Overweight Neutral 2010-12-17
Neutral Overweight 2009-09-22
Underweight Neutral 2008-05-09
Neutral Underweight 2007-08-09
Overweight Neutral 2007-05-07
Not Rated Overweight 2007-03-05
Source: HSBC

Recommendation History of WOORI FHC

From To Date
Underweight Neutral 2009-10-30
Neutral Underweight 2008-10-22
Overweight Neutral 2007-04-03
Not Rated Overweight 2006-12-18
Source: HSBC

Recommendation History of SUN HUNG KAI PROPERTIES

From To Date
Not Rated Overweight 2007-05-07
Source: HSBC

Recommendation History of YANLORD LAND GROUP

From To Date
Not Rated Overweight 2010-07-22
Source: HSBC

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Recommendation History of INDIKA GROUP

From To Date
Neutral Overweight 2012-02-07
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of VEDANTA RESOURCES PLC

From To Date
Not Rated Neutral 2008-06-27
Source: HSBC

Recommendation History of CHINA RESOURCES POWER

From To Date
Not Rated Overweight 2010-07-29
Source: HSBC

Recommendation History of KERRY PROPERTIES LIMITED

From To Date
Not Rated Neutral 2008-03-20
Source: HSBC

Recommendation History of CHINA SCE PROPERTY

From To Date
Not Rated Overweight 2011-02-18
Source: HSBC

Recommendation History of YUZHOU PROPERTIES COMPANY LIMI

From To Date
Not Rated Neutral 2010-12-20
Source: HSBC

Recommendation History of POWERLONG REAL ESTATE HOLDINGS

From To Date
Overweight Neutral 2011-08-29
Not Rated Overweight 2010-10-21
Source: HSBC

Recommendation History of EXPORT-IMPORT BANK OF CHI

From To Date
Not Rated Neutral 2004-07-09
Source: HSBC

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Recommendation History of AXIS BANK LTD

From To Date
Not Rated Neutral 2008-07-15
Not Rated Not Rated 2008-04-22
Source: HSBC

Recommendation History of AXIATA GROUP

From To Date
Not Rated Neutral 2011-12-19
Source: HSBC

Recommendation History of CHINA ORIENTAL GROUP COMPANY L

From To Date
Not Rated Overweight 2011-02-08
Source: HSBC

Recommendation History of CITIC PACIFIC

From To Date
Underweight Neutral 2006-07-05
Not Rated Underweight 2005-12-16
Source: HSBC

Recommendation History of BW GROUP LIMITED

From To Date
Not Rated Neutral 2007-12-18
Source: HSBC

Recommendation History of EVERGRANDE REAL ESTATE GROUP

From To Date
Not Rated Underweight 2010-02-23
Source: HSBC

Recommendation History of ADARO ENERGY

From To Date
Neutral Overweight 2010-06-04
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of SINGTEL OPTUS PTY LTD

From To Date
Not Rated Neutral 2009-11-11
Source: HSBC

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Recommendation History of KOREA DEVELOPMENT BANK

From To Date
Underweight Neutral 2009-03-09
Neutral Underweight 2008-12-17
Not Rated Neutral 2008-05-28
Source: HSBC

Recommendation History of HANA FGL

From To Date
Underweight Neutral 2009-12-17
Neutral Underweight 2008-10-22
Not Rated Neutral 2008-06-06
Source: HSBC

Recommendation History of CHINA OVERSEAS LAND & INV

From To Date
Neutral Overweight 2007-08-09
Overweight Neutral 2007-02-05
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of CHINA SHANSHUI CEMENT

From To Date
Not Rated Neutral 2011-12-19
Source: HSBC

Recommendation History of RENHE COMMERCIAL HOLDINGS

From To Date
Not Rated Underweight 2010-12-20
Source: HSBC

Recommendation History of BOC HONG KONG HOLDINGS

From To Date
Not Rated Neutral 2010-03-24
Source: HSBC

Recommendation History of WHEELOCK

From To Date
Not Rated Neutral 2012-03-27
Source: HSBC

Recommendation History of THE WHARF (HOLDINGS) LTD

From To Date
Not Rated Neutral 2008-03-27
Source: HSBC

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Recommendation History of UOB

From To Date
Overweight Neutral 2008-11-07
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of HENDERSON LAND DEVELOPMENT

From To Date
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of INDOSAT

From To Date
Not Rated Neutral 2008-06-05
Source: HSBC

Recommendation History of PTT EXPLORATION & PRODUCT

From To Date
Not Rated Overweight 2010-10-07
Source: HSBC

Recommendation History of LONGFOR PROPERTIES CO LTD

From To Date
Not Rated Overweight 2011-07-07
Source: HSBC

Recommendation History of LI & FUNG

From To Date
Underweight Neutral 2009-08-14
Neutral Underweight 2009-02-06
Not Rated Neutral 2007-10-04
Source: HSBC

Recommendation History of UNION BANK OF INDIA

From To Date
Not Rated Neutral 2011-05-09
Source: HSBC

Recommendation History of SHANGHAI INDUSTRIAL URBAN DEVE

From To Date
Neutral Overweight 2010-06-25
Underweight Neutral 2010-01-20
Not Rated Underweight 2008-02-05
Source: HSBC

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Recommendation History of PETRONAS

From To Date
Not Rated Overweight 2009-10-06
Source: HSBC

Recommendation History of COUNTRY GARDEN

From To Date
Neutral Overweight 2009-11-06
Not Rated Neutral 2009-09-08
Source: HSBC

Recommendation History of PERUSAHAAN LISTRIK NEGARA

From To Date
Neutral Overweight 2009-08-17
Not Rated Neutral 2007-12-18
Source: HSBC

Recommendation History of BANK OF INDIA

From To Date
Overweight Neutral 2007-03-05
Not Rated Overweight 2006-11-06
Source: HSBC

Recommendation History of AGILE PROPERTY

From To Date
Neutral Overweight 2008-04-18
Overweight Neutral 2007-10-04
Not Rated Overweight 2006-11-06
Source: HSBC

Recommendation History of BUMI RESOURCES TBK PT

From To Date
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of CHINA DEVELOPMENT BANK

From To Date
Not Rated Neutral 2005-12-02
Source: HSBC

Recommendation History of DAH SING BANKING GROUP

From To Date
Underweight Neutral 2010-03-25
Not Rated Underweight 2009-08-13
Source: HSBC

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Recommendation History of INDUSTRIAL BANK OF KOREA

From To Date
Not Rated Neutral 2009-12-17
Source: HSBC

Recommendation History of XINAO GAS

From To Date
Neutral Underweight 2011-12-07
Overweight Neutral 2009-04-06
Neutral Overweight 2007-12-18
Overweight Neutral 2007-06-05
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of LIU CHONG HING BANK

From To Date
Not Rated Neutral 2011-08-11
Source: HSBC

Recommendation History of BANK OF EAST ASIA

From To Date
Not Rated Underweight 2009-12-17
Source: HSBC

Recommendation History of SINGAPORE TELECOM

From To Date
Not Rated Neutral 2008-05-14
Source: HSBC

Recommendation History of PUBLIC BANK

From To Date
Overweight Neutral 2008-06-02
Not Rated Overweight 2005-12-16
Source: HSBC

Recommendation History of CHINA RESOURCES LAND

From To Date
Not Rated Overweight 2011-12-19
Source: HSBC

Recommendation History of OCBC

From To Date
Not Rated Neutral 2009-12-17
Source: HSBC

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Distribution of fundamental credit opinions

As of 04 April 2012, the distribution of all credit opinions published is as follows:

___All Covered Companies___ Companies where HSBC has provided Investment Banking in the past 12 months
Count Percentage Count Percentage
Overweight 132 21 57 43
Neutral 372 58 133 36
Underweight 133 21 41 31
Source: HSBC

HSBC & Analyst disclosures

Disclosure checklist
Company Ticker Recent price Price Date Disclosure
AGILE PROPERTY 3383.HK 9.67 04-Apr-2012 1,4,5,11
AXIATA GROUP AXIA.KL 5.27 04-Apr-2012 2,6,7,11
AXIS BANK LTD AXBK.BO 1166.65 04-Apr-2012 1,2,4,5,7,11
BANK OF EAST ASIA 0023.HK 29.40 04-Apr-2012 1,2,5,6,7,11
BANK OF INDIA BOI.NS 372.40 04-Apr-2012 1,5,6,7,11
BERAU COAL PT - - - 11
BOC HONG KONG HOLDINGS 2388.HK 21.70 04-Apr-2012 1,2,4,5,6,7,11
BUMI RESOURCES TBK PT BUMI.JK 2325.00 04-Apr-2012 11
BW GROUP LIMITED - - - 2,6,7,11
CHINA DEVELOPMENT BANK - - - 1,2,5,6,7,11
CHINA ORIENTAL GROUP COMPANY L 0581.HK 2.12 04-Apr-2012 11
CHINA OVERSEAS LAND & INV 0688.HK 15.84 04-Apr-2012 1,4,5,11
CHINA RESOURCES LAND 1109.HK 14.00 04-Apr-2012 1,4,5
CHINA SHANSHUI CEMENT 0691.HK 6.29 04-Apr-2012 4
CITIC BANK INTERNATIONAL LIMIT - - - 1,5,6,7
CITIC PACIFIC 0267.HK 13.06 04-Apr-2012 1,2,5,6,7,11
COUNTRY GARDEN 2007.HK 2.62 04-Apr-2012 11
DAH SING BANKING GROUP 2356.HK 7.74 04-Apr-2012 1,4,5,6,7,11
DBS GROUP DBSM.SI 13.48 04-Apr-2012 1,2,5,6,7,11
EVERGRANDE REAL ESTATE GROUP 3333.HK 4.58 04-Apr-2012 11
EXPORT-IMPORT BANK OF CHI - - - 2,5,7,11
FRANSHION PROPERTIES 0817.HK 2.03 04-Apr-2012 1,5
HANA FGL 086790.KS 44200.00 04-Apr-2012 1,2,5,6,7,11
HENDERSON LAND DEVELOPMENT 0012.HK 43.80 04-Apr-2012 1,2,5,6,7
HOPSON DEVELOPMENT 0754.HK 4.88 04-Apr-2012 11
HUTCHISON WHAMPOA 0013q.L 77.70 04-Apr-2012 1,2,4,5,6,7,11
ICICI BANK ICBK.NS 890.25 04-Apr-2012 1,2,4,5,6,7,11
INDOSAT ISAT.JK 5150.00 04-Apr-2012 2,5,11
INDUSTRIAL BANK OF KOREA 024110.KS 13700.00 04-Apr-2012 1,2,5,6,7,11
INTERNATIONAL CONTAINER TER SE ICT.PS 67.80 04-Apr-2012 1,5
KAISA GROUP 1638.HK 1.66 04-Apr-2012 11
KERRY PROPERTIES LIMITED 0683.HK 34.75 04-Apr-2012 1,2,5,6,7
KOREA DEVELOPMENT BANK - - - 1,2,5,7,11
KOREA NATIONAL HOUSING CO - - - 11
LI & FUNG 0494.HK 17.94 04-Apr-2012 1,2,4,5,6,7,11
LIU CHONG HING BANK 1111.HK 13.54 04-Apr-2012 1,5,6,7,11
LONGFOR PROPERTIES CO LTD 0960.HK 11.58 04-Apr-2012 4
LUMENA RESOURCES CORP - - - 11
NOBLE GROUP NOBG.SI 1.36 04-Apr-2012 1,2,5,6,7,11
OCBC - - - 1,5,6,7
PCCW HKT TELEPHONE LTD - - - 11
PETRONAS - - - 2,11
POWERLONG REAL ESTATE HOLDINGS - - - 1,5,6,7
PSA CORP LTD - - - 6,7,11
PTT EXPLORATION & PRODUCT PTTE.BK 179.00 04-Apr-2012 2,5
PUBLIC BANK PUBM.KL 13.78 04-Apr-2012 6,7,11
RENHE COMMERCIAL HOLDINGS 1387.HK 0.50 04-Apr-2012 11
SHANGHAI INDUSTRIAL URBAN DEVE 0563.HK 1.46 04-Apr-2012 11
SHIMAO PROPERTY 0813.HK 8.82 04-Apr-2012 4,11

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Disclosure checklist
Company Ticker Recent price Price Date Disclosure
SHINHAN - - - 11
SHUI ON LAND LIMITED 0272.HK 3.22 04-Apr-2012 4,6,7
SINGAPORE TELECOM STEL.SI 3.11 04-Apr-2012 1,2,5,6,7,11
SINGTEL OPTUS PTY LTD SO_NQ.AX 3.71 13-Sep-2001 11
STAR ENERGY GEOTHERMAL - - - 11
SUN HUNG KAI PROPERTIES 0016.HK 96.25 04-Apr-2012 1,2,4,5,6,7,11
THE WHARF (HOLDINGS) LTD 0004.HK 43.50 04-Apr-2012 1,2,4,5,11
UNION BANK OF INDIA UNBK.BO 238.30 04-Apr-2012 6,7,11
UOB UOBH.SI 18.39 04-Apr-2012 1,5,6,7,11
VEDANTA RESOURCES PLC - - - 6,7,11
WHEELOCK 0020.HK 24.20 04-Apr-2012 1,2,5,6,7
WOORI FHC 053000.KS 13500.00 04-Apr-2012 1,2,5,6,7,11
YANLORD LAND GROUP YNLG.SI 1.26 04-Apr-2012 1,2,5,6,7
YUZHOU PROPERTIES COMPANY LIMI - - - 6
Source: HSBC

1 HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
4 As of 29 February 2012 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5 As of 29 February 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of investment banking services.
6 As of 29 February 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-investment banking-securities related services.
7 As of 29 February 2012, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-securities services.
8 A covering analyst/s has received compensation from this company in the past 12 months.
9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

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Additional disclosures
1 This report is dated as at 05 April 2012.
2 All market data included in this report are dated as at close 02 April 2012, unless otherwise indicated in the report.
3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
price sensitive information is handled in an appropriate manner.
4 As of 29 February 2012, HSBC beneficially owned 5% or more of a class of common equity securities of the following
company(ies) :POWERLONG REAL ESTATE HOLDINGS
5 As of 29 February 2012, HSBC and/or its affiliates (including the funds, portfolios and investment clubs in securities
managed by such entities) either, directly or indirectly, own or are involved in the acquisition, sale or intermediation of,
1% or more of the total capital of the subject companies securities in the market for the following Company(ies) :AGILE
PROPERTY,AXIS BANK LTD,BOC HONG KONG HOLDINGS,CHINA OVERSEAS LAND & INV,CHINA
RESOURCES LAND,CHINA SHANSHUI CEMENT,DAH SING BANKING GROUP,HUTCHISON
WHAMPOA,ICICI BANK,LI & FUNG,LONGFOR PROPERTIES CO LTD,SHIMAO PROPERTY,SHUI ON LAND
LIMITED,SUN HUNG KAI PROPERTIES,THE WHARF (HOLDINGS) LTD
6 As of 23 March 2012, HSBC owned a significant interest in the debt securities of the following company(ies) :CHINA
DEVELOPMENT BANK,DBS GROUP,EXPORT-IMPORT BANK OF CHI,HENDERSON LAND
DEVELOPMENT,HUTCHISON WHAMPOA,INDUSTRIAL BANK OF KOREA,UOB,WOORI FHC
7 HSBC* has managed or co-managed a USD bond offering for the Government of Sri Lanka within the past 12 months.
8 As of 29 February 2012, the Government of Sri Lanka was a client of HSBC or had during the preceding 12 month period
been a client of and/or paid compensation to HSBC in respect of investment banking services.
9 HSBC has also been appointed as credit rating advisor to the Sri Lankan sovereign.

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Disclaimer
* Legal entities as at 04 March 2011 Issuer of report
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation
Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; ‘CA’ HSBC Securities (Canada) The Hongkong and Shanghai
Inc, Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; Banking Corporation Limited
000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; Level 19, 1 Queen's Road Central
‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC
Hong Kong SAR
Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking
Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Telephone: +852 2843 9111
Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Telex: 75100 CAPEL HX
Securities (South Africa) (Pty) Ltd, Johannesburg; ‘GR’ HSBC Securities SA, Athens; HSBC Bank plc,
Fax: +852 2801 4138
London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim
Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; Website: www.research.hsbc.com
HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC
Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch
The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) has issued this research material. The Hongkong and Shanghai Banking
Corporation Limited is regulated by the Hong Kong Monetary Authority. This material is distributed in the United Kingdom by HSBC Bank plc. In
Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for
the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is
distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services
mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with
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This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch.
This material is distributed in Japan by HSBC Securities (Japan) Limited. HSBC Securities (USA) Inc. accepts responsibility for the content of this
research report prepared by its non-US foreign affiliate. All US persons receiving and/or accessing this report and intending to effect transactions in
any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer
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Crédito Público and Comisión Nacional Bancaria y de Valores (CNBV). HSBC Bank (Panama) S.A. is regulated by Superintendencia de Bancos de
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by Superintendencia del Sistema Financiero (SSF). HSBC Colombia S.A. is regulated by Superintendencia Financiera de Colombia. Banco HSBC
Costa Rica S.A. is supervised by Superintendencia General de Entidades Financieras (SUGEF). Banistmo Nicaragua, S.A. is authorized and regulated
by Superintendencia de Bancos y de Otras Instituciones Financieras (SIBOIF).
Any recommendations contained in it are intended for the professional investors to whom it is distributed. This material is not and should not be
construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information
obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and
accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of HSBC only and are subject to change
without notice. The decision and responsibility on whether or not to invest must be taken by the reader. HSBC and its affiliates and/or their officers,
directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time
add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting
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© Copyright. The Hongkong and Shanghai Banking Corporation Limited 2012, ALL RIGHTS RESERVED. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 208/04/2011, MICA (P) 040/04/2011
and MICA (P) 206/01/2012

197
 abc
Global Fixed Income Research Team
Steven Major, CFA
Global Head of Fixed Income Research
+44 20 7991 5980 steven.j.major@hsbcib.com

Rates Credit
Europe Europe
Bert Lourenco Ben Ashby
Head of Rates Research, Europe Head of Credit Research, Europe
+44 20 7991 1352 bert.lourenco@hsbcib.com +44 20 7991 5475 ben.ashby@hsbcib.com
Subhrajit Banerjee Lior Jassur
+44 20 7991 6851 subhrajit.banerjee@hsbcib.com +44 20 7991 5632 lior.jassur@hsbcib.com
Theologis Chapsalis Dominic Kini
+44 20 7992 3706 theologis.chapsalis@hsbcib.com +44 20 7991 5599 dominic.kini@hsbcib.com
Wilson Chin, CFA Laura Maedler
+44 20 7991 5983 wilson.chin@hsbcib.com +44 20 7991 1402 laura.maedler@hsbcib.com
Di Luo Remus Negoita, CFA
+44 20 7991 6753 di.luo@hsbcib.com +44 20 7991 5975 remus.negoita@hsbcib.com
Johannes Rudolph Anna Schena
+49 211 910 2157 johannes.rudolph@hsbc.de +44 20 7991 5919 anna.schena@hsbcib.com
Sebastian von Koss Peng Sun, CFA
+49 211 910 3391 sebastian.von.koss@hsbc.de +44 20 7991 5427 peng.sun@hsbcib.com
Asia Olga Fedotova
André de Silva, CFA +44 20 7992 3707 olga.fedotova@hsbcib.com
Head of Rates Research, Asia-Pacific Keerthi Angammana, CFA
+852 2822 2217 andre.de.silva@hsbcib.com +44 20 7991 6701 keerthisri.angammana@hsbcib.com
Pin-ru Tan Pavel Simacek, CFA
+852 2822 4665 pinrutan@hsbc.com.hk +44 20 7992 3714 pavel.simacek@hsbcib.com
Grace Qiu Alexander Rozhetskin
+852 2822 6569 gracetqiu@hsbc.com.hk +44 20 7992 3703 alexander.rozhetskin@hsbcib.com
Americas Farangiz Rahimova
Larry Dyer +44 20 7992 5829 farangiz.rahimova@hsbcib.com
+1 212 525 0924 lawrence.j.dyer@us.hsbc.com
Chris Attfield
Pablo Goldberg +44 20 7991 2133 christopher.attfield@hsbcib.com
Head of Global Emerging Markets Research
+1 212 525 8729 pablo.a.goldberg@us.hsbc.com Raffaele Semonella
+44 20 7991 3153 raffaele.semonella@hsbcib.com
Bertrand Delgado
EM Strategist Asia
+1 212 525 0745 bertrand.j.delgado@us.hsbc.com Dilip Shahani
Head of Global Research, Asia-Pacific
Gordian Kemen +852 2822 4520 dilipshahani@hsbc.com.hk
+1 212 525 2593 gordian.x.kemen@us.hsbc.com
Zhiming Zhang
Victor Fu +852 2822 4523 zhimingzhang@hsbc.com.hk
+1 212 525 4219 victor.w.fu@us.hsbc.com
Devendran Mahendran
Alejandro Mártinez-Cruz +852 2822 4521 devendran@hsbc.com.hk
+52 55 5721 2380 alejandro.martinezcr@hsbc.com.mx
Philip Wickham
Jae Yang + 65 6239 0630 philipwickham@hsbc.com.sg
+1 212 525 0861 jae.yang@us.hsbc.com
Keith Chan
+852 2822 4522 keithkfchan@hsbc.com.hk
Becky Liu
+852 2822 4392 beckyjliu@hsbc.com.hk
Louisa Lam
+852 2822 4527 louisamclam@hsbc.com.hk
Yi Hu
+852 2996 6539 yi.hu@hsbc.com.hk
Crystal Zhao
+852 2996 6514 crystalmzhao@hsbc.com.hk
Linus Fung
+852 2822 4687 linusckfung@hsbc.com.hk
Alex Zhang
+852 2822 3232 alexdzhang@hsbc.com.hk
Americas
Van Hesser
Head of Credit Research, US Financial Institutions
+1 212 525 3114 van.hesser@us.hsbc.com
Robert J Schmieder
Head of Latam Corporate Credit
+1 212 525 4829 robert.j.schmieder@us.hsbc.com
John Kollar
+1 212 525 3118 john.kollar@us.hsbc.com
Mary Ellen Olson
+1 212 525 0191 mary.ellen.olson@us.hsbc.com
Sarah R Leshner
+1 212 525 3231 sarah.r.leshner@us.hsbc.com
Monica A Parekh
+1 212 525 4117 monica.a.parekh@us.hsbc.com
Arjun Bowry
+1 212 525 3119 arjun.bowry@us.hsbc.com
Dilip Shahani
Head of Global Research, Asia-Pacific
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4520
dilipshahani@hsbc.com.hk

Dilip Shahani is Head of Global Research, Asia-Pacific and has been with the HSBC Group for more than 20 years. His responsibilities include
management of the equities, fixed income (credit and local rates), foreign exchange, and economics research groups under the Global Research
umbrella. In addition to his managerial role, Dilip is a writing analyst focusing on overall Asian credit strategy plus sovereign analysis.

Zhi Ming Zhang

Head of China Research
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4523
zhimingzhang@hsbc.com.hk

Zhi Ming Zhang, Head of China Research, has 14 years' experience in Markets and Research. At HSBC, he started on the Asian fixed income
trading desk and in Asian products before moving to Research covering credit, local rates and developments in China's capital markets.
Zhi Ming was a professor of finance at David Eccles School of Business at University of Utah and has a PhD in Economics from Indiana
University. He worked for a year for the Shanghai Government after completing his BS in Engineering at Shanghai Jiao Tong University.

Devendran Mahendran
Senior Analyst, Sovereigns and Financial Institutions
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4521
devendran@hsbc.com.hk

Devendran joined HSBC in 2000 and has worked as a credit analyst since 1994. He started his career in 1991 at the Malaysian central bank
where he spent three years. He covers financial institutions and sovereigns in Asia. Devendran is a CFA charterholder.

Philip Wickham
Director, Corporate Credit Research
The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch
+65 6239 0630
philipwickham@hsbc.com.sg

Philip Wickham joined HSBC in January 2012 as a corporate credit research analyst and is based in Singapore. Prior to this, he spent five years
as a credit analyst on the buy side. Philip covers various corporate issuers but with a general focus on commodities and energy.

Keith Chan
Director, Corporate Credit Research
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4522
keithkfchan@hsbc.com.hk

Keith is a corporate credit research analyst. He has been with HSBC since June 2005 and is responsible for sector coverage of China/Hong Kong
properties and Asia utilities. He graduated from the University of Hong Kong with a First Class Honours Degree in Actuarial Science.

Becky Liu
Strategist, Credit Research
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4392
beckyjliu@hsbc.com.hk

Becky started working with HSBC in December 2005 focusing on Asian credit strategy research and management of HSBC Asian Bond Indices.
With the rapid evolution of the RMB offshore market, Becky started to cover this new asset class in late 2010, and has been instrumental
in constructing the new HSBC Offshore RMB Bond Index.

Yi Hu
Analyst, Credit Research
The Hongkong and Shanghai Banking Corporation Limited
+852 2996 6539
yi.hu@hsbc.com.hk

Yi joined the Asia credit research team in February 2009, focusing on financial institutions. Yi came to HSBC in September 2007 after
completing a Masters degree at the London School of Economics. At HSBC, she has worked in both equity research in Asia and with the credit
research team in Europe.

Louisa Lam
Associate, Credit Research
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4527
louisamclam@hsbc.com.hk

Louisa joined HSBC in February 2008 as a credit research associate focusing on quantitative analysis and credit strategy. Prior to this,
she had worked on portfolio performance and risk analysis on the buy-side. Louisa has a bachelor’s degree in business administration
(Information Systems) from the University of Hong Kong.