Emerging markets mostly quiet but Asia’s primary picks up; Middle East, Africa spreads wider

By Rebecca Melvin

New York, July 5 – The emerging markets saw a mostly muted session on Wednesday following Tuesday’s Independence Day holiday break in the United States.

In Latin America, there were no new issues, a trader said, but market players anticipate that Chile’s Cencosud SA, which is tendering for up to a total of $750 million of its 5.5% senior notes due 2021 and its $1.2 billion issue of 4.875% senior notes due 2023, will offer new notes soon.

The Santiago, Chile-based retail company is expected to price the new notes via J.P. Morgan and BofA Merrill Lynch, which are also dealer managers for the tenders.

Earlier in the session, there were deals announced and priced in Asia.

Hindustan Petroleum Corp. Ltd. priced $500 million of 10-year 4% senior bonds (expected: Baa3//BBB-) in a Regulation S deal.

The deal came at a spread of 167.5 basis points, tighter than initial guidance set in the Treasuries plus 200 bps area.

MUFG will bill and deliver and is a joint bookrunner for the Mumbai-based oil and natural gas company’s sale along with Citigroup, DBS Bank Ltd., SBI Capital and Standard Chartered Bank.

Proceeds will be used to fund capital expenditures for ongoing and future products.

Also in Asia, Beijing-based internet data services company 21Vianet Group, Inc. said it expected to offer dollar-denominated senior notes following an investor roadshow that will begin on July 6.

Barclays and Credit Suisse will act as joint global coordinators, joint bookrunners and joint lead managers for the offering.

Proceeds from the Regulation S offering will be used to refinance the company’s outstanding indebtedness, to fund future capital needs and for general corporate purposes.

21Vianet is a carrier-neutral internet data center services provider based in Beijing.

In local currency, Taipai, Taiwan-based Pegatron Corp. priced NT$7 billion of corporate bonds with maturities of three, five and seven years. The three-year bonds carry a coupon of 0.91%, the five-year bonds have a coupon of 1.06%, and the seven-year bonds bear interest at 1.2%.

Capital Securities Corp. is the lead underwriter.

Proceeds will be used to repay loans and for working capital.

Elsewhere, the Kazakhstan Finance Ministry said it sold KZT 250 billion of long-term treasury bonds (Meukam-120, 18th issue) at a special trading session held on Monday. The 10-year bonds have a fixed coupon of 9%, and the amount of accepted orders represented 100% of the planned placement.

Qatar sees selling

In the Middle East, Qatar is facing potential punitive actions by Saudi Arabia, Egypt, Bahrain and the United Arab Emirates after signaling its rejection of a 13-point list of demands that include curbing diplomatic ties with Iran, severing links with the Muslim Brotherhood and closing the Al Jazeera television network.

Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al-Thani said that the demands didn’t represent reasonable and actionable grievances.

Qatar saw sellers, especially for bank paper.

And the rest of the Gulf Cooperation Council countries were also weak, especially in the longer end of the yield curves, a trader said. For sovereign paper of Saudi Arabia, the curve was wider by 3-5 basis points.

Although “the dispute is unlikely to be resolved in the near future... there is hope that the list provides a base for discussions,” MUFG Securities’ analyst Trieu Pham wrote in a note.

The rest of the Middle East and North Africa also saw weakness amid another drop in oil prices and higher Treasury prices, according to a trader.

Markets were also focused on clues about U.S. monetary policy with the release on Wednesday of the Federal Reserve Open Market Committee minutes from its June meeting. Fed officials have indicated there is a strong chance they will start shrinking the central bank’s $4.5 trillion portfolio of bonds and other assets beginning in September and postpone another interest-rate increase until December.

The indications represent a change from the earlier plan to raise rates in March, June and September.

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