Fortnight ended Mar 21, 2014

Global Risk Syndicate

Asia High Yield Market Overview

View of the Asian High Yield markets this fortnight…
Macro Overview
Market Statistics
Global markets over the past fortnight have been very volatile. Russia’s
annexation of Crimea and sanctions against Kremlin officials caused European Benchmark Rates Mar 7 Mar 21 Change
equities to trade down -0.5% to -2.5%. The Fed’s projections that rates would
end 2015 and 2016 at 25bp and 50bp higher than market expectations also 5-year UST 1.64% 1.71% +7bp
caused a minor sell-off in equities after the FOMC meeting. Risk sentiment was 10-year UST 2.79% 2.76% -3bp
however, hardest hit in Asia, as the region continued to digest weakening Market Indices
economic data out of China, volatility in the RMB and concerns over further Hang Seng Index 22,660 21,437 -5.40%
Chinese defaults. YTD yoy growth in China’s retail sales and industrial production
Shanghai Composite Index 2,058 2,048 -0.51%
fell significantly short of market consensus. The RMB’s trading band was
widened to +/- 2% of its daily reference rate, with the daily fix progressively BSE Sensex 30 21,920 21,754 -0.76%
weakening over March. Compounding the weakness, it was reported that Jarkata Comp 4,686 4,700 +0.30%
Zhejiang Xingrun, a Chinese developer, would default on RMB3.5bn (US$570m) PSEi 6,482 6,339 -2.21%
Asian High Yield Market Overview

of loans. Asia IG Index 125 136 +11bp

Primary High Yield Euro Xover 260 245 -15bp
ViX (Volatility Index) 14.11 14.42 +0.31
US$1.6bn priced in the past four weeks from five transactions. 2014 YTD Asian
High Yield volume now stands at US$7.0bn (-57% YoY).
– PT Multipolar, a NR/B+/B+ rated Indonesian computer and technology retail
company, priced a US$30m reopening of their 5NC3 Senior Notes on 28 EM Fund Flows (US$m)
February at 103.5% to yield 8.77%. DB acted as Joint Global Coordinator and
Total HC LC
Joint Bookrunner
19-Mar ($833) ($464) ($344)
– Times Property, a B2/B/NR rated Chinese real estate developer, priced
4 week average ($648) ($414) ($241)
US$225m of 12.625% 5NC3 Senior Unsecured Notes on 12 Mar at 99.278 to
yield 12.825% 4 week total ($267) ($266) ($21)
YTD Flow ($11,853) ($3,991) ($7,026)
– Wynn Macau, a Ba2/BB/BB rated casino and gaming resort, tapped US$750m
of its US$600m 5.25% 8NC3 Senior Unsecured Notes on 13 Mar at a price of
100.75 to yield 5.09%. DB acted as Joint Global Coordinator and Joint
Bookrunner Asian HY Primary Volumes (US$m)
– iGate Corporation, a Ba3/BB-/NR rated Indian IT company, priced US$325m 2013YTD 2014YTD Run rate % Vol
of 4.75% 5NC2 Senior Unsecured Notes on 19 Mar at par to yield 4.75%. .
Total $16,345 $7,330 -55% 100.0%
DB acted as Joint Bookrunner
China Property $7,500 $5,275 -30% 72.0%
– Pactera Technology, a (P)Ba3/BB-/NR rated Chinese information technology
China Industrials $1,400 $450 -68% 6.1%
and software company, priced US$275m of 8.00% 7NC3 Senior Secured
Notes on 20 Mar at par to yield 8.00%. Philippines $2,200 $0 -100% 0.0%
Indonesia $1,715 $255 -85% 3.5%
Secondary High Yield
India $0 $0 n/a 4.4%
– Chinese property names fell by 2-4pts, as the sector felt heavy on the back of Other $3,530 $1,025 -71% 14.0%
onshore defaults. Prices are starting to find a bottom however with fast money
short covering in single B names and adding in BBs.
Chinese industrials traded with a mixed tone, as some earnings softness was
–
balanced against positive technicals from the lack of supply. Indonesian
corporates saw net buying by real money the end of last week.
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

Soho China $400m/2022 Ba1/BB+/BB+ 7.125% 90.5 8.71% +69bp Zoomlion $600m/2022 -/BB+/BBB- 6.250% 87.6 8.13% +7bp

Agile $500m/2019 Ba2/BB-/BB- 8.500% 96.1 9.38% +104bp Citic Pacific $1bn/2023 Ba1/BB/- 6.800% 93.3 7.88% +16bp

Longfor $500m/2023 Ba2/BB/- 6.750% 88.6 8.61% +50bp Parkson $500m/2018 Ba2/BB/BB 4.500% 90.0 7.37% -9bp

Cogard $750m/2023 Ba3/BB-/- 7.500% 91.5 8.91% +81bp Yingde Gas $425m/2018 Ba3/BB-/BB 8.250% 99.3 8.34% +94bp

Shanshui
Evergrande $1.5bn/2018 B2/BB-/- 8.750% 93.0 10.71% +101bp $400m/2017 -/B+/BB 10.500% 105.6 8.39% +82bp
Cement
Central Melco
$400m/2018 B1/BB-/- 6.500% 90.8 9.21% +108bp $1bn/2021 B1/BB-/- 5.000% 99.0 5.17% -36bp
China Crown

Kaisa $800m/2018 B1/B+/- 8.875% 95.8 10.19% +154bp Fosun $400m/2020 B1/BB+/- 6.875% 92.5 8.53% +51bp

KWG $600m/2019 B1/B+/- 8.975% 91.3 10.66% +96bp MIE $200m/2018 -/B+/B 6.875% 95.0 8.41% +47bp

Greentown $700m/2018 B2/B+/- 8.500% 97.5 9.28% +109bp Studio City $825m/2020 B3/B-/- 8.500% 111.0 6.45% -10bp
(a) As of 21 March 2014 and change compared to 7 March 2014
 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% 108.0 5.85% +4bp STATS $611m/2018 Ba1/BB+/- 4.500% 100.5 4.36% -7bp
Adaro $800m/2019 Ba1/-/BB+ 7.950% 106.0 6.33% +15bp Olam $750m/2018 -/-/- 6.750% 104.0 5.58% -132bp
C.Listrindo $500m/2019 Ba2/BB-/- 6.950% 105.6 5.62% +8bp
MMI $300m/2017 Ba3/B+/BB- 8.000% 99.4 8.24% +14bp
Tower
$300m/2018 Ba3/-/BB 4.625% 98.4 5.08% +1bp
Bersama SMC $800m/2023 -/-/- 4.950% 87.3 6.78% -122bp
Lippo
$403m/2020 Ba3/BB-/BB- 6.125% 95.5 6.98% +20bp ICTSI $400m/2023 -/-/- 4.750% 95.6 5.17% -12bp
Karawaci
Berau
$500m/2017 B1/BB-/- 7.250% 99.3 7.53% unchg JG Summit $750m/2023 -/-/- 4.500% 94.8 5.12% -56bp
Coal
Indika $500m/2023 B1/-/B+ 6.375% 79.3 9.96% +64bp SMIC $500m/2019 -/-/- 4.250% 99.6 4.23% -15bp
Star
$350m/2020 B2/-/B+ 6.125% 97.5 6.64% +34bp EDC $300m/2021 -/-/- 6.500% 104.0 5.78% -4bp
Energy
Gajah
$500m/2018 B2/B+/- 7.950% 101.4 7.33% unchg Vedanta $750m/2018 Ba3/BB/BB 9.500% 111.0 6.53% +48bp
Tunggal
(c) As of 21 March 2014 and change compared to 7 March 2014

Deutsche Bank Asian High Yield Research Highlights

MIE Holdings Corporation: One of the best values in Asia HY (d)
MIE 2016s (7.1% ytm) & 2018s (8.0% ytm) arguably offer one of the best values in the Asian HY space at gross leverage of only about 2x. This is
evident in Figure 1. We do acknowledge that these bonds have looked cheap for a while and still slightly underperformed this year. So what could be the
catalyst for them to finally perform? We believe a decent set of results reported yesterday is a good start, especially after the profit warning. Going
forward, we would like to see continued successful expansion in Kazakhstan & SGE to provide growth as China oil fields are maturing, bridging of the
small funding gap (as explained later), potential call of the 2016s (first callable in May'14), removal of the overhang from Petrochina investigation, and
perhaps a turnaround in equity price (down almost 20% ytd). None of these catalysts might play out in the immediate future, so investors will need to be
patient and be content with (high) carry in the interim. Note that we currently don't expect the 2016s to be called as MIE will likely need to tap the bond
market for the same, which it is unlikely to do at current levels in our view.

China Property Credit: Jan/Feb sales showing signs of weakness (e)

About two-thirds of the Chinese property issuers that we monitor have released their contracted sales in the first two months. Overall contracted sales
of property issuers rose 14% yoy in 2M14, underpinned by a 1% increase in volume and a 13% rise in prices. That said, the 14% yoy growth rate has
decelerated remarkably from a sharp growth of 113% yoy in 2M13. While this slowdown in sales growth should not come at a surprise, given a larger
base of last year and when sales rebounded significantly in 2013, a worrying trend we observe from the Jan/Feb sales is: Most developers recorded
negative sales growth year-on-year. The sales were concentrated in several big developers including China Vanke, Country Garden, and Evergrande. 17
out of 27 developers saw sales declines in the past two months. 18 of them experienced negative yoy growth in volume, although 18 posted positive
growth in prices. As a result, overall sales fell 5% yoy and volume dropped 14% yoy in 2M14 in terms of the median average.

d) Deutsche Bank Market Research, 24 March 2014 https://gm.db.com/global_credit/publications/asia_companies/china_prop_12mar14.pdf

e) Deutsche Bank Market Research, 12 March 2014 https://gm.db.com/global_credit/publications/asia_companies/miehol_12mar14.pdf

Credit Rating Changes

Ratings
Date Company Agency Old New Comment

- S&P lowered ANTAM’s rating as it believes the company's operating

efficiency, cash flows, and liquidity will decline over the next 12 months. The
ban on exports of unprocessed mineral ores in Indonesia is likely to persist
21 Mar 2014 PT ANTAM Tbk. S&P B+ / Neg B- / Devp. beyond July 2014. meaning that ANTAM will unable to export nickel ore,
which accounted for close to 70% of the company's gross profit in 2013. A
lasting ban will also require the company to invest significantly in ore-
processing infrastructure to monetize its nickel-ore reserves

- Ratings upgrade reflects Powerlong's improved liquidity position, as

Powerlong Real B3 B2
18 Mar 2014 Fitch contributed by higher growth in contracted sales. Upgrade is also supported
Estate (positive) (stable)
by Powerlong‘s increased level of recurring income

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 judgment as of the date of this material and are subject to change without notice. Past performance is not necessari ly indicative of future 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
completeness of the information contained herein. DB shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on the accuracy of any information or any statement contained herein or any errors or omissions
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.