Emerging markets mixed; Indonesia plans roadshow for new program; most Asian markets returning

By Aaron Hochman-Zimmerman

New York, Jan. 29 - Emerging markets' strong run was halted by tumbling equities and more sour headlines from the United States.

The U.S. markets "couldn't hold their rallies," a trader said, which reminded investors of how bad things can possibly be.

Still, there are positives, he said.

"Libor and the TED spread are well off the levels seen in October and November," he said, but "the financials couldn't hold their gains from yesterday" and "the euro-yen broke down."

"The risky assets have another leg down to go," he said, before the crisis is over.

Meanwhile, within the emerging markets, trading volumes were thin and few issues stood out.

On the positive side, Israel Electric Corp. Ltd. continued its climb higher, reaching 107 bid.

Conversely, Mexico's Vitro SAB de CV may have come one day closer to default.

The difficult run for stocks spiked volatility early. Numbers moved little throughout the afternoon as the VIX index closed higher by 2.97 at 42.63. The index is a common measure of market volatility.

Asia returns from holiday

Asia began to creak back to life after the Chinese New Year holiday.

"We're just getting back in the swing of things," a trader said. "People are hesitant to do a whole lot."

With little trading, the market was distracted by a U.S. market that continued to prove vulnerable, leaving the sentiment "negative, near-term," he said.

Elsewhere, whether investors are ready or not, more supply seems to be on the way from Indonesia.

Jakarta announced that a roadshow for a global medium-term note program will begin on Feb. 2 (Ba3/BB-/BB), according to a buysider.

The show may result in syndicated transactions or private placements in 2009, the buysider said.

The trader said rumors were kicked up, which held that the program would present a rupiah sukuk to the local market and five-, 10- and 30-year dollar bonds to the global market.

Barclays and UBS will manage the roadshow with stops including London, Boston, San Francisco, Los Angeles, New York, Singapore and Hong Kong.

On the news of more supply, the Indonesian bonds due 2018 were quoted at 79.5 bid.

In the Philippines, the central bank announced a 50 bps key rate cut moving the overnight borrowing rate to 5% and the overnight lending rate to 7%, according to a statement from the bank.

The monetary board was able to make the rate cut as new inflation forecasts put the predictions for 2009 and 2010 within the target range, the statement continued.

Falling commodity prices have helped to limit inflation growth.

"Monetary policy will continue to be focused on the price stability objective, while being mindful of the liquidity and credit requirements of the economy," the statement said.

The peso was seen trading at 46.85 to the dollar.

The Philippine government bonds due 2030 were spotted at 112 bid.

Also, Pakistan's bonds due 2017 were quoted at 39 bid, 43 offered.

Emerging Europe holds firm

Emerging Europe pressed higher even without the help of equities on Thursday.

Israel Electric Corp. led the charge as its new 9 3/8% bonds, which priced at 99.158 last Friday, were traded as high as 107 bid, a trader said.

Across the trading desk, there has been some buying in Corporacion Nacional de Cobre de Chile. Others "who feel they will honor their agreement with Russia," have been buying Ukraine's national oil company NJSC Naftogaz Ukrainy, he said.

Meanwhile, European Commission president Jose Manuel Barroso is expected in Moscow next week for meetings with prime minister Vladimir Putin to discuss energy policy, the RIA Novosti News Agency reported.

The Russian government bonds due 2030 remained strong and were quoted unchanged at 94 bid, 94.75 offered.

Elsewhere, Turkey's sovereign bonds due 2030 slipped 0.75 point to 142.5 bid, 143.5 offered.

Mixed LatAm pulls tighter

Latin America had a mixed Thursday as the floor fell out of Wednesday's equity rally in the United States.

"Price action in the U.S. Treasuries is not helping," a strategist said, but "generally we tightened across the board," he said.

In Mexico, the troubled glass producer Vitro SAB de CV "should have the money" to pay a $45 million coupon payment, a trader said, but as reports surfaced that Vitro may intend to skip the payment confidence fell.

"The fact that Blackstone gathered bondholders to tell them to start planning for a restructuring doesn't really give us much comfort," the trader said.

In Argentina, 97% of the local bondholders who were asked to participate in a debt swap agreed, which allowed the government to refinance more than $4 billion in debt.

If the swap was not successful, Buenos Aires would have been saddled with additional heavy debt payments for the next three years, reports said.

Meanwhile in Brazil, the 11% bonds due 2040 fell 1.75 points to 124.75 bid, 125.25 offered.

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