EM ASIA CREDIT: Perusahaan Listrik Negara (PLNIJ, Baa2/BBB) - Possible deal FV's
PT Perusahaan Listrik Negara (PLNIJ, Baa2/BBB/BBB) - Possible deal FV's
Where would a $ deal come?
5y - z+128bp (T+98bp)
10y - z+170bp (T+130bp)
20y - z+213bp (T+151bp)
30y - z+238bp (T+157bp)
- Indonesia’s State owned electricity company, PT Perusahaan Listrik Negara (PLNIJ), is reported to be in the market for $1.5bn of funding, either in the bonds or via loans. We take a look at where fair value might be if a $ issue was to come today, consider it a guide, which we will firm up if and when there is a deal.
- PLNIJ is Indonesia's state owned electricity provider - generating, transmitting and distributing electricity. The energy mix remains heavily weighted to coal (67% of mix, end '23) and a core strategy of the company is to transition to net zero by 2060. PLNIJ has estimated near-term investments (2024-2033) could reach $110bn, of which $45bn would be PLNIJ-led. Indeed PLNIJ may become a more frequent issuer.
- In terms of fair value, we will assume a multi-tranche deal, in which maturities could fall into 5y, 10y, 20, or 30y buckets.
- The PLNIJ curve is relatively large, but we note there hasn’t been $ issuance since 2020. In terms of peers, the Indian State oil & gas company, PT Pertamina Persero (PERTIJ, Baa2/NR/BBB), is relevant…the same parent, sector, rating and similar shaped curve.
- As noted in the charts, PLNIJ trades wide of the PERTIJ curve, despite the same rating. This is likely explained by the fact that PLNIJ has a weaker underlying credit profile. In addition, PERTIJ would have a higher probability of State support given it critical role as a major Indonesian exporter. Moody's agrees, with a baseline credit rating assessment of Baa3 for PERTIJ and Ba2 for PLNIJ.
- In terms of FV, we would expect any new and hence more liquid deal to come wide (c. 5bp) of the existing PLNIJ curve. Investors are still likely to be cautious about PLNIJ's coal usage, despite efforts to reduce this over time.
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JPY: Yen Up With January Hike Odds As Ueda Speaks In Tokyo
USD/JPY is moving lower, the pair last near 157.50/55, close to session lows. We are up around 0.30% in yen terms, comfortably the best G10 performer in what has been a muted session ahead of the US CPI print later.
- USD/JPY's down move has been aided by remarks by BoJ Governor Ueda in Tokyo (per BBG/Rtrs). Ueda stating that a rate hike decision will be made next week at the policy meeting. The Governor noting US economic developments and wage trends will be key watch points. He added that the recent branch managers meeting expressed positive trends around wage trends. See this BBG link.
- The comments largely echoed those made by Deputy Governor Himino yesterday, but no push back from Ueda on rate hike has likely encouraged markets to believe next week's meeting is a live one. Current OIS pricing indicates: a 69% probability of a 25bp hike in January; a cumulative 86% chance by May; and a full 25bp increase not fully priced in until May 2025. The Jan meeting odds have risen since Himino spoke yesterday.
- For USD/JPY levels, lows earlier this week were at 156.92, while the 20-day EMA is around 156.71.
JGBS: Cash Bonds Cheaper, BoJ Ueda Adds To Weight To Hike Discussions
After a choppy Tokyo session, JGB futures are little changed, +1 compared to settlement levels.
- Japan likely to miss primary budget surplus target for FY2025, sources say "Japan is likely to miss achieving its goal of running a primary budget surplus by the next fiscal year, according to three sources with knowledge of fresh fiscal estimates, as the minority government faces increasing pressure for more spending.” RTRS
- Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 0.4bp higher at 1.250% after making a fresh cycle high of 1.253% today.
- The swaps curve has bear-steepened, with rates flat to 4bps higher.
- “BOJ Governor Ueda: Will raise rates and adjust the degree of monetary support if improvement in economy and price conditions continues” - RTRS
- BOJ-dated OIS pricing has shifted notably since BOJ Deputy Governor Himino's speech yesterday. The speech was interpreted as another indication that the policy board is leaning toward a 25bp rate hike at its upcoming meeting on January 23–24.
- Current OIS pricing indicates: a 69% probability of a 25bp hike in January; a cumulative 86% chance by May; and a full 25bp increase not fully priced in until May 2025.
- Tomorrow, the local calendar will see PPI data alongside 20-year supply.
ASIA STOCKS: Asian Equities Mixed, Ahead Of US CPI Tonight
Asian markets traded mixed as investors awaited key US inflation data for clues on Federal Reserve policy. The MSCI Asia Pacific Index was little changed, with modest gains in Japan, South Korea, and Hong Kong, while Chinese equities were mixed. The PBOC injected significant short-term liquidity to ease a cash squeeze ahead of the Lunar New Year, highlighting its easing stance. Indian stocks extended gains, driven by energy and utility sectors, while foreign outflows from Indian equities continued in January. South Korea's unemployment rose to its highest level since mid-2021 amid political uncertainty. Meanwhile, oil prices steadied after recent declines, and the dollar consolidated after the previous session's losses. Overall, sentiment remained cautious ahead of the U.S. CPI report, which could shape global monetary policy expectations.
