Emerging market securities trading mixed; Turkey's bonds gain ground; market tone encouraged

By Aaron Hochman-Zimmerman

New York, March 11 - Emerging markets saw some bright spots on Wednesday, but generally securities trading activity was largely calm as credits were able to maintain their levels after Tuesday's strong showing.

Turkey continued to look cheap to a few accounts as its bonds due 2030 picked up 2 points, but elsewhere, investors' interest was still distracted by major market corporate paper.

The primary market also drifted further off course as investors' wait-and-see attitude was inspired by the scent of a new direction for the market.

Also on Wednesday, JPMorgan Chase & Co.'s Jamie Dimon's quote about "modest signs" of recovery followed a report by Citigroup Inc.'s Vikram Pandit on his bank's profitability. The news created a small group of investors who allowed themselves to be optimistic, at least in the near term.

Meanwhile from the major markets, volatility continued its decline by 0.76 to 43.61, according to the VIX index. The index is a frequently used gauge of market volatility.

Emerging Europe gains

Emerging Europe crept higher as the equity markets largely held their Tuesday rallies and even posted higher levels during Europe's afternoon.

Still, "there is not much going on in emerging markets," a Zurich-based trader said.

The trading action and attention "is more on the corporate side ... still the same," he said.

Some accounts checked emerging market prices and nibbled at Russia's bonds, but many of the traditional corporates remained at low levels, he said.

Meanwhile in Russia, new amendments to the budget law will invalidate the 2010 to 2011 budgets, said finance minister Alexei Kudrin, according to the Itar-Tass News Agency.

Spending cuts of up to 30% will hit the budgets from 2009 to 2011, Kudrin said, but the 1% limit on deficit spending will be suspended until 2012.

The Russian sovereign bonds due 2030 took on 1.25 points to 90.5 bid, 91.5 offered.

While Moscow was readjusting its budget, the government in Ukraine already realized that it would have to ask Russia for a $5 billion loan in order to pay for its shipments of Russian gas.

"We are holding consultations with Ukrainian Finance Ministry officials," Kudrin said, according to the RIA Novosti News Agency.

Still, "no decision has been made yet," he said.

The Ukrainian bonds due 2016 were quoted at 34 bid, 36 offered.

In Turkey, the 2009 economic growth targets will be amended, said deputy prime minister for economic affairs Nazim Ekren, according to reports.

A new stimulus package may also be forthcoming, he said.

"We launched initiatives directed toward the various sectors and regions in our previous three packages. The main problem now is the contraction in foreign demand," he said.

New initiatives may also include tax incentives for foreign investors.

Even with a new round of stimulus, "it is inevitable that the 2009 budget is likely to lead to a wider budget deficit compared to previous budgets," he said.

The Turkish government bonds due 2030 lifted 2 points to 125 bid, 126.5 offered.

Quiet LatAm holds value

LatAm continued on a tempered trajectory while equities held an even keel after the morning's spike.

Tone was strong, but the sector remained largely quiet, a trader said.

Still, "we saw a little buying in Chile," he said.

Elsewhere in Argentina, farmers and the government put another meeting behind them without much resolution to the year-long export tax battle.

Some on the farmers' side called for renewed roadside protests, while the administration called the demonstrations counterproductive.

The peso was seen trading at 3.6445 to the dollar.

Asia trades flat

Asia held steady, but market sentiment remained relatively strong as Wall Street supported Tuesday's rally.

In the Philippines, the government intends to borrow nearly $750 million to $1 billion via retail Treasury bonds in order to cover debt maturing in 2009, the Manila Times reported.

There are no current plans to issue globally, said national treasurer Roberto Tan, in the report.

The government expects its outstanding debt to hit PHP 3.97 trillion in 2009, up from PHP 3.85 trillion in 2008.

In Indonesia, the national chamber of commerce, known as Kadin, asked banks to cut lending rates in order to provide capital to the real economy.

"If banks don't want to cut their lending rates, they don't support the real sector. It will be useless if the central bank rate cut doesn't make banks" to follow in the example, said chairman M.S. Hidayat, according to the Jakarta Post.

Kadin's projections expect the economy to grow by no more than 4% in 2009. The government posts a more optimistic figure of 4.5%.

The rupiah was seen trading at 11,975 to the dollar.

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