Based on President-elect Donald Trump’s decision of overhaul of trade with China and possibly of continuous rising interest rates, the outlook appears to be gloomy. Regional non-bank borrowers face $76.4 billion of dollar bonds maturing in 2017, 24 percent more than this year, Bloomberg-compiled data show.
On 30 Nov 2016, OPEC members agreed to cut production from January 2017 for 6 months. Saudi Arabia being the largest oil producers in the OPEC took the lead and curbed more than it promised. The oil report from OPEC also justified the members are sticking to their pledge in reducing the production. Iranian Oil Minister Zanganeh told state TV that OPEC and non-OPEC oil producers are committed to the production cut. Focuses remain on the next OPEC meeting which will be held in May 2017. Some interesting fact is that Russia has also cut production but its production has exceeded Saudi Arabia. The questions remains are will Russia stay committed to cut production, will Saudi Arabia be tempted to increase production in order not to lose market shares.
Resource prices as a whole are down 64 percent from their peak before the 2008 global financial crisis, the Bloomberg Commodity Index shows. Singapore, whose economy relies on shipping and oil service firms, was exposed first because the companies were smaller and less able to tap government support.
Oil services firms Swiber Holdings Ltd. and Swissco Holdings Ltd., defaulted on it bonds in 2016. We believed that defaults could include Singapore’s developers after home prices dropped by the most in more than seven years in the three months ended Sept. 30. There is also no lifting of cooling measures on the private properties in the latest announce of the nation budget, to rub salt into the wounds, more grants were allocated to HDB housing which might affect the decision of some buyers. China’s overheated housing market was cooled in November as authorities rolled out renewed buying curbs.
Real estate firms in the Asia-Pacific region face $8.7 billion of dollar bonds due 2017, while energy-related companies including coal miners and oil services firms must repay $12 billion. Commodities trader Noble Group Ltd.’s dollar bonds maturing 2020 traded at 84.2 cents on the dollar on Monday, while oil producer MIE Holdings Corp.’s dollar notes due 2018 traded at 83.3 cents, Bloomberg-compiled data shows.
Although more defaults, mergers and acquisitions are expected among oil services and shipping firms throughout Asia, but in our point of view, that does not mean all commodities will be facing downwards pressure. Malaysia has been attracting foreign countries to invest in accommodation and transport infrastructure. A major project in the pipe line is the High Speed Railway (HSR) which will connected KL to Singapore.
Indonesia is also one of the top markets for restructuring work in 2017. President Jokowi will be anxious to drive Indonesia markets if he intended to put his accomplishment on his record card for the re-election of President even though the next election is only due to held in 2019.
