Emerging markets tone firms; Latin America, Korea in focus; Pemex, Gol, Woori Bank price

By Christine Van Dusen

Atlanta, July 13 - Emerging market sentiment improved on Tuesday after U.S. aluminum producer Alcoa Inc. beat analysts' estimates for second-quarter earnings and provided a positive forecast for the rest of the year, giving investors a sense that other companies' financial results could be similarly upbeat and that the global economic crisis isn't as bad as initially feared.

And though the summer doldrums had appeared to set in on Monday, on Tuesday it was a brighter day for emerging markets.

There's a "strong equity market, somewhat quelled European Union fears and a strong new issue calendar that continues to churn out deals across the emerging markets universe," a New York-based trader said.

By mid-morning, yields on 10-year Treasuries were at their highest in more than two weeks.

"It's getting much firmer in tone overall," said Enrique Alvarez, debt strategist with think tank IDEAglobal.

"We were in the doldrums, but some pep was added to the market courtesy of the United States," he said. "That is in turn affecting overall risk accumulation and being taken as a positive for Latin America."

Latin America perks up

Renewed investor demand was particularly apparent in Brazil's sovereign debt, which on Tuesday was hitting "historical price highs on the back end of the yield curve," Alvarez said. "And Colombia continues to ride a positive wave motivated by the Standard & Poor's outlook improvement of the past days. And the election is out of the way."

Colombia was also in focus due to the success of its issue of $500 million equivalent 7¾% global TES bonds due 2021, which priced Monday at 107.424 to yield 6¾%. The bonds - a re-tap of the $800 million equivalent 7¾% global TES bonds due 2021 issued April 14 - are denominated in pesos but payable in U.S. dollars.

The issue was "a huge success," Alvarez said. "It was highly oversubscribed, so that tends to say to me that there is appetite out there and plenty of cash, so I would not be surprised by any attempts to tap the market (in Latin America) across the board."

Pemex, Gol price

Indeed, some Latin American issuers brought deals to market on Tuesday.

Mexico's Petroleos Mexicanos SAB de CV (Pemex) priced $2 billion 5½% notes due 2021 at 99.011 to yield 5.65%, or Treasuries plus 250 bps, in a Rule 144A transaction with Deutsche Bank, Goldman Sachs and HSBC.

And Brazil's Gol Linhas Aereas Inteligentes SA brought a deal to market. The Sao Paulo-based airline priced $300 million 9¼% notes due 2020 at 99.409 to yield 9½%, or Treasuries plus 638.5 bps.

Bank of America Merrill Lynch, Citigroup, Itau and BB Securities were the bookrunners for the Rule 144A deal.

Also from Latin America, Medellin, Colombia-based Bancolombia SA plans to issue as much as $636 million in subordinated notes due 2020, according to a market source and a 424B2 filing with the Securities and Exchange Commission. Bank of America Merrill Lynch and JPMorgan are the bookrunners for the deal.

Proceeds will be used to strengthen capital structure, for regulatory compliance and for general corporate purposes.

Argentina, Portugal ratings change

Another positive for Latin America: Argentina's default rating was removed by Fitch Ratings after the success of the sovereign's recent debt exchange.

But there was some negative news from the region. Portugal's rating was downgraded two steps by Moody's to A1 as a result of the sovereign's economic issues and deteriorating debt picture.

But overall Latin America is looking stronger and could see more new deals in the weeks to come.

"There could be new issuance bound for the market," Alvarez said. "I think the conditions have improved markedly."

Korea gets active

Asia was also in focus on Tuesday, with particular attention being paid to Korea as Seoul-based Woori Bank priced $600 million 4¾% notes due 2015 at 99.356 to yield 4.885%, or Treasuries plus 300 bps, the low end of price talk. Bank of America Merrill Lynch, Deutsche Bank, HSBC Holdings, ING, UBS and Woori Investment & Securities were the bookrunners for the Rule 144A and Regulation S deal.

This follows Korea Exchange Bank's recent $500 million 4 7/8% notes due 2016, which priced last week at 99.32 to yield Treasuries plus 325 bps, and Korea Housing Finance Corp.'s $500 million 4 1/8% notes due 2015, which priced last week at 99.878 to yield Treasuries plus 235 bps.

Korea is a country to watch, said Deutsche Bank managing director Benjamin Pace at a reporters' breakfast on Tuesday. The sovereign, he said, is the "closest to being an emerging economy."

He also spoke highly of Indonesia and Malaysia, in addition to Mexico, Hungary and Poland.

"EM economies are one of the better investment opportunities going forward," Pace said.

PTTEP on roadshow

Also on Tuesday, PTTEP Australia International Finance Pty Ltd. - a subsidiary of Bangkok-based PTT Exploration and Production PCL - continued its roadshow for a planned issue of senior unsecured notes, a market source said.

RBS and Credit Suisse are the bookrunners for the deal, which is being marketed in the United States this week.

Proceeds will be used for general corporate purposes and for funding the company's Montara project in Australia, according to a Moody's Investors Service report.

And on tap for later this week, the trader said, is the planned benchmark-sized offering of dollar bonds from Qatar sovereign wealth fund Qatari Diar. Price talk was set at Treasuries plus 185 bps for a tranche of five-year notes and the Treasuries plus 195 bps area for a tranche of 10-year notes.

Also coming soon, he said, is a deal from Mexico's Grupo Famsa SAB de CV. The retail company is planning to issue up to $200 million in notes with a maturity of up to five years. The notes could price as soon as this week.

Andrea Heisinger contributed to this report

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