EM ASIA CREDIT: Meituan: Regulators ramp up pressure
(MEITUA, Baa1/A-/BBB+)
Regulators ramp up scrutiny, positive for industry
Food delivery firms are in focus as China’s State Administration for Market Regulation seeks to further regulate competition. Reports today indicate a renewed emphasis on food safety standards for delivery companies, which could add operational burdens and costs to the sector. We view these developments, rational competition and enhanced consumer protections, positively for the industry.
Meituan, which reported very weak Q2 numbers (EBITDA down 81% YoY), is due to report Q3 results on November 29th. During the last earnings call, management noted that competition had become irrational, contributing to underperformance in both equity and credit. It is worth noting, however, that the company remains well-capitalized, ending Q2 with about USD24bn in cash and equivalents.
The USD Meituan 29s traded wide to the JD 30s. The spread differential moved from around z+25bp before the results, to as wide as 44bp and now back to 38bp apart. JD.com is rated 2 notches higher than Meituan.
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JGBS AUCTION: PREVIEW - 20-Year JGB Auction Due
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 19 August 2025, the auction drew cover of 3.0853x at an average yield of 2.581%, an average price of 98.93, a high yield of 2.591%, a low price of 98.80, with 65.3666% of bids allotted at the high yield.
- Last month’s 20-year JGB auction showed mixed results across key metrics. The low price underperformed dealer forecasts, which were set at 98.85 according to a Bloomberg poll. Moreover, the cover ratio declined to 3.0853 from 3.1462x in the previous auction. The auction tail did, however, shorten to 0.13 from 0.18.
- Today’s auction also comes on the heels of lacklustre demand metrics observed in this month’s 30-year JGB auctions. The cover ratio dipped to 3.31x from 3.4297x and the auction tail lengthened to 0.18 from 0.15, indicating a weakening in bidding strength.
- Results are due at 0435 BST / 1235 JT.
JGBS AUCTION: Poll: 20-Year JGB Auction
*JAPAN 20Y GOVT BOND AUCTION MAY HAVE 97.80 LOWEST PRICE:POLL
USD: BBDXY - Breaks Below 1195 Going Into FOMC, 1180 Is Pivotal
The BBDXY range overnight was 1187.71 - 1193.47, Asia is currently trading around 1189, +0.02%. The USD’s move lower gained pace overnight breaking below its recent support around 1195/97, first target is the year's lows back towards 1180. A sustained break below 1180 would be extremely bearish, should the USD start another leg lower it would have big implications for FX and potentially see a lot of the recent ranges in G10 broken. The market is clearly going into the FOMC short the USD so there is some obvious danger of disappointment, but if the market gets the dovish cut it's looking for the USD could be poised for its next big leg lower.
- Lance Roberts(RIA) - “With the Fed set to cut rates this week while other central banks remain on hold, the cost of hedging dollar assets will only get cheaper. That suggests continued demand for U.S. markets, but without the currency boost that has historically accompanied foreign inflows.”
- Robin Brooks on X: “The sharp fall in the Dollar today takes it below the previous low it made in early July. This kind of thing is significant, all the more so because it comes ahead of tomorrow's FOMC decision. Markets are positioning for a Fed under political pressure and a very dovish meeting...”
- Daily Chartbook on X: “"Non-commercial traders in the derivatives markets — a group of speculative market players that includes hedge funds, asset managers and others — boosted their short dollar bets to some $7.2 billion in the week through Sept. 9" - @vkaramanis_fx
- Andreas Steno Larsen on X: “It looks like we are approaching the next leg of the weaker USD trade here.”
- Data/Events : MBA Mortgage Applications, Housing Starts, FOMC Rate Decision
Fig 1: BBDXY Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
