Fortnight ended Nov 15, 2013

Global Risk Syndicate

Asia High Yield Market Overview

View of the Asian High Yield markets this fortnight…
Macro Overview
Market Statistics
Markets were once again dominated by QE tapering thoughts. October’s strong
NFP print (204k vs consensus of 120k), together with positive US Q3 GDP and Benchmark Rates Nov 1 Nov 15 Change
ISM data, triggered a sharp sell-off in rates as the market increased expectations
for tapering being brought forward. However, Janet Yellen’s dovish comments at 5-year UST 1.37% 1.34% -3bp
the Fed Chair confirmation hearing returned markets once again to a risk-on 10-year UST 2.62% 2.70% +8bp
mode, helping the S&P500 index to yet another record close and nudging Market Indices
equities markets elsewhere higher. Yellen’s speech was also positive for the Hang Seng Index 23,250 23,032 -0.94%
Asian credit space, allowing spreads to retrace their initial widening to close the
Shanghai Composite Index 2,150 2,136 -0.65%
week generally unchanged to marginally tighter. The release of key reform
measures from the China Communist Party’s 3rd Plenum saw Chinese equities BSE Sensex 30 21,197 20,399 -3.76%
close on a strong note, as investors received favorably the decision to speed up Jarkata Comp 4,433 4,335 -2.21%
market reform. PSEi 6,585 6,346 -3.63%
Asian High Yield Market Overview

Primary High Yield Asia IG Index 133 134 +1bp

Euro Xover 344 336 -8bp
US$0.5bn priced in the past two weeks from one tap transaction. 2013 YTD
Asian High Yield volume now stands at US$34.5bn (+120% YoY) ViX (Volatility Index) 13.28 12.19 -1.09

– Evergrande, a B2/BB-/- Chinese real estate developer priced a US$500m tap

of its existing US$1bn 5NC3 Senior Notes on 6 November at par. DB acted as
a Joint Bookrunner
Secondary High Yield EM Fund Flows (US$m)
– China property bonds are lower by around a quarter point. Long dated bonds Week ended Total HC LC
were the underperformers but did see a rebound towards the end of last
13-Nov $(1,876) $(741) $(938)
week on fast-money short covering
4 week average $(1,085) $(560) $(449)
– Indonesian corporates underperformed and were down by around 1.25pts on
4 week total $(4,338) $(2,241) $(1,795)
average. The rate volatility, especially over the week ended Nov 8, brought
about a sharp sell-off in the Indonesian sovereign spaced that saw weakness YTD Flow $(7,943) $(11,340) +$3,158
spill over into corporates.
Asian HY Primary Volumes (US$m)
– Overall, flow remains balanced 2-way as both retail and real money trim
positions on tight/short end paper while switching into higher yielding bonds 2012YTD 2013YTD Run rate % Vol
Total $15,715 $34,525 +120% 100.0%
China Property $6,015 $15,000 +149% 43.4%
China Industrials $3,925 $6,125 +56% 17.7%
Philippines $1,100 $3,650 +232% 10.6%
Indonesia $1,575 $2,955 +88% 8.6%
India $0 $1,900 n/a 5.5%
Other $3,100 $4,895 +58% 14.2%

Benchmark Secondary Levels(b)

China property China industrials
Reoffer Current Reoffer Current
Issuer Description Issue rating yield Price Yield Change Issuer Description Issue rating yield Price Yield Change

Franshion $300m/2018 Ba1/BB/BBB- 5.375% 99.8 5.42% +1bp Zoomlion $600m/2022 -/BB+/BBB- 6.250% 91.0 7.51% +33bp

Agile $700m/2017 Ba2/BB/- 9.900% 105.0 7.21% -3bp Citic Pacific $1bn/2023 Ba1/BB/- 6.800% 90.5 8.30% +54bp

Longfor $500m/2023 Ba2/BB/- 6.750% 92.5 7.91% +32bp Parkson $500m/2018 Ba1/-/BB+ 4.500% 94.5 5.92% +14bp

Cogard $750m/2023 Ba3/BB-/- 7.500% 96.6 8.03% +34bp Yingde Gas $425m/2018 Ba3/BB-/BB 8.250% 102.5 7.45% -1bp
Shanshui
Evergrande $1.5bn/2018 B2/BB-/- 8.75% 100.1 8.72% +38bp $400m/2017 -/B+/BB 10.500% 108.3 7.68% +1bp
Cement
Central Melco
$400m/2018 B1/BB-/- 6.500% 96.5 7.42% +14bp $1bn/2021 B1/BB-/- 5.000% 96.8 5.55% +38bp
China Crown
Kaisa $550m/2018 B1/B+/- 8.875% 101.2 8.52% +20bp Fosun $400m/2020 B1/BB+/- 6.875% 95.0 7.91% +11bp

KWG $300m/2020 B1/B+/- 8.625% 98.8 8.89% +22bp MIE $200m/2018 -/B+/B 6.875% 95.7 8.10% +21bp

Greentown $700m/2018 B2/B+/- 8.500% 104.5 7.24% -1bp Studio City $825m/2020 B3/B-/- 8.500% 109.9 6.70% +8bp

(b) As of 15 November 2013 and change compared to 1 November 2013

 Benchmark Secondary Levels (continued)(c)

Indonesian corporates Other Asian HY corporates

Reoffer Current Reoffer Current
Issuer Description Issue rating yield Price Yield Change Issuer Description Issue rating yield Price Yield Change

Indosat $650m/2020 Ba1/BB+/BBB 7.450% 107.0 6.08% +8bp STATS $611m/2018 Ba1/BB+/- 4.500% 99.5 4.63% +15bp
Adaro $800m/2019 Ba1/-/BB+ 7.950% 104.8 6.18% +17bp Olam $750m/2018 -/-/- 6.750% 94.2 8.42% +11bp
C.Listrindo $500m/2019 Ba2/BB-/- 6.950% 102.7 6.32% +10bp
MMI $300m/2017 Ba3/B+/BB- 8.000% 100.3 7.86% -4bp
Tower
$300m/2018 Ba3/-/BB 4.625% 94.0 6.21% +68bp
Bersama SMC $800m/2023 -/-/- 4.950% 84.0 7.25% +49bp
Lippo
$403m/2020 Ba3/BB-/BB- 6.125% 93.8 7.28% +52bp ICTSI $400m/2023 -/-/-
Karawaci 4.750% 93.4 5.56% +6bp
Berau
$500m/2017 B1/BB-/- 7.250% 96.5 8.48% -16bp JG Summit $750m/2023 -/-/- 4.500% 92.3 5.46% -3bp
Coal
Indika $500m/2023 B1/-/B+ 6.375% 83.8 9.01% +67bp SMIC $500m/2019 -/-/- 4.250% 95.5 5.15% +21bp
Star
$359m/2020 B2/-/B+ 6.125% 93.0 7.53% +62bp EDC $300m/2021 -/-/- 6.500% 104.7 5.68% +11bp
Energy
Gajah
$500m/2018 B2/B+/- 7.950% 96.4 8.79% +90bp Vedanta $750m/2018 Ba3/BB/BB 9.500% 110.0 6.95% +28bp
Tunggal
(c) As of 15 November 2013 and change compared to 1 November 2013

Deutsche Bank Asian High Yield Research Highlights

China HY Industrials: Quick thoughts (d)

There seems to be a growing consensus that China has bottomed out on the macro front. This combined with Indonesia’s worsening outlook has meant
that China industrial bonds have outperformed and now trade inside their counterparts on average, having started the year trading wider. But risks
prevail. This is partly reflected in the wide gap between the most bullish and bearish forecast for China’s 2014 GDP growth at 8.6% and 6.7%
respectively (per Bloomberg). Even our recent conversations with companies under our coverage suggest that end demand is still at the lows – while
they have not worsened, they have also not improved. It’s hard to argue that the China industrial space offers value on a fundamental basis. While 1H’13
results showed some signs of improvement, it wasn’t meaningful. Many industrials are still small in size with high leverage, thin margins and less
transparent industries. But technicals are a different story given the short-dated nature of most of these bonds and lack of new supply. Many of them are
also callable starting next year, and if the markets are open, we would not be surprised to see some of them get replaced/exchanged with a
longer-dated bond. However, we prefer sticking to the bigger names, which interestingly are also the wider trading ones in some sectors.

Corporate Credit: Indonesia HY: down but not out(e)

Coal: Given our medium term cautious view on the coal sector, the bonds do not look particularly cheap to us. We believe BRAUIJ bonds offer the best
risk/reward in the longer term. We have a CreditSell recommendation on INDYIJ due to our expectation of cash drain by year end and weak dividend
contributions from subs. We believe investors should look at INDYIJ as a holdco and comp it to MLPLIJ and BHITIJ.
Property: We turn more neutral on the sector from a valuation perspective. However, taking a more top-down view some caution is still warranted for
fundamentals. ASRIIJ bonds offer best value in the sector, in our view. We are initiating coverage on KIJAIJ’18 with a CreditBuy as we expect results to
be supported by recurring revenues going forward. We are also initiating coverage on MDLNIJ’18 with a CreditHold. We lack long term conviction on
MDLNIJ with earnings heavily reliant on project sold to Alam Sutera. We think LPKRIJ bonds are expensive from a valuation perspective and downgrade
our recommendation to CreditSell from CreditHold.
d) Deutsche Bank Market Research, 6 November 2013
e) Deutsche Bank Market Research, 4 November 2013

Credit Rating Changes

Ratings
Date Company Agency Old New Comment

– Lingering risks associated with the company's Sino Iron project and
Ba2/
4 Nov 2013 CITIC Pacific Moody’s Ba1 uncertainties remain, including the size of capex for the remaining production
negative
lines and the actual operation cost of production

– Expect CSC's property sales to remain strong over the next 12 months at
B+/ B+/
15 Nov 2013 China South City S&P least. Also anticipate that the company will be able to sustain its improved
stable positive
financial strength, given that its project diversification has increased

– Demonstrated a good track record of sales execution since it fine-tuned its

Shimao Property Ba3/ Ba2/ stable
15 Nov 2013 Moody’s business strategy in 2011. Its strong sales are the result of its increased
Holdings positive
focus on small- to medium-sized products for the mass market
Disclaimer
This market up-date has been prepared by members of the Asian High Yield Capital Markets syndicate desk of Deutsche Bank (DB), part of its Global Banking division, solely for its investment banking clients who are existing or potential issuers of high y ield bonds and
not for any buy-side investors. It was not produced, reviewed or edited by DB's Research Department. Any opinions expressed herein may differ from the opinions expressed by DB itself or other DB divisions or departments, including the Research Department. This up-
date is intended for the recipient's personal use and DB is not soliciting the purchase or sale of any security or transaction or participation in any trading strategy. Capital markets syndicate desks are subject to additional potential conflicts of interest which the Research
Department does not face. DB may engage in transactions in a manner inconsistent with any views set out herein. DB trades or may trade as principal in any instruments mentioned herein (or related derivatives), may have proprietary positions in these instruments (or
related derivatives) and/or may make a market in these instruments (or related derivatives). Capital markets syndicate personnel are compensated in part based on transactions originated by them. Any assumptions, estimates and opinions expressed herein constitute the
author’s judgement as of the date of this material and are subject to change without notice. Past performance is not necessarily indicative of f uture results. Nothing in this market up-date is or should be construed as a recommendation by DB or as investment, legal or any
other advice from DB to the recipient or any other person. No representation or warranty, expressed or implied, is or will be made in relation to, and no responsibility, liability or duty of care is or will be accepted by DB as to, or in relation to, the accuracy, reliability or
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herein, nor does DB accept any responsibility for providing the recipient with access to further information or for updating this document or correcting any inaccuracies herein. DB has relied on certain third party sources in preparing this market up-date and has not
independently verified the information contained herein. The information contained herein does not purport to be all-inclusive or to contain all the information which might be relevant to the matters raised herein. Any forward-looking statements are not guarantees of future
performance and are subject to a number of risks and uncertainties.