Hangzhou Hikvision sells notes on topsy-turvy session for EM; Lat-Am names see wild swings

By Christine Van Dusen

Atlanta, Feb. 3 – China’s Hangzhou Hikvision Digital Technology Co. Ltd. sold notes on yet another topsy-turvy session for emerging markets assets, which were quiet and timid as equities suffered and then bounced back as oil prices rose.

U.S. Treasuries sold off on Wednesday morning, but that was “more of a function of position-squaring in front of Friday as opposed to a meaningful risk-on situation,” a trader said. “Clients are also subdued and are better sellers overall, but nothing too chunky in size, it seems.”

Most of the light volumes focused on names like Brazil-based Petroleo Brasileiro SA, Vale SA and some high-grade credits from Mexico.

“With the move in stocks, oil and U.S. Treasuries I was expecting more drama on the open, but so far it’s been rather orderly,” a trader said. “Spreads are wider with Treasuries, but we have not seen the scramble for the door that we saw in January.”

Investors continued to selectively buy risk, another trader said, and seemed to have “a more constructive attitude” about emerging markets.

“Liquidity is still challenging, but that’s not going to change anytime soon, so we all just have to deal with it,” he said.

By the end of the day, Latin American credit had gone through “wild swings” as the market “looked to be selling off when we came in, but a pop in oil saw a big reversal to the upside,” a New York-based trader said.

Brazil’s five-year credit default swaps spreads closed at 481 basis points from 493 bps, while Mexico’s ended the day at 203 bps from 206 bps.

“Cash prices are firm despite U.S. Treasury weakness, as spread tightening keeps levels mostly unchanged from yesterday,” he said.

PDVSA, Venezuela tick up

PDVSA’s 2017s closed at 41 from 40.25, while Venezuela’s 2027s finished at 36.50 from 36, the trader said.

“Flows on the lighter side today, with not a whole lot of conviction either way,” he said. “If oil can maintain this level, EM credit can start to grind tighter and higher as global risk sentiment will improve overall.”

Lat-Am corporates see swings

Corporates from Latin America were timid and sluggish at the start of the day, then saw a “huge” turnaround on oil, another trader said.

“Not a huge push higher, but when combined with diminished selling interest from accounts, and even some scattered buy interest, higher nonetheless into the close on the aggregate,” he said. “We will continue to get pushed around like this until global volatility lessens, and if we are unable to open the spigot on our pipeline for newbies.”

Volumes decreased for banks from Colombia, he said.

Turk Eximbank bonds climb

The new notes from Turkey’s Turkiye Ihracat Kredi Bankasi AS (Turk Eximbank) – $500 million 5 3/8% notes due 2021 that priced at 99.568 to yield Treasuries plus 411.5 bps – were fairly active in trading on Wednesday.

The bonds were seen at 100¼ bid, 100.45 offered on Wednesday morning, a trader said.

Citigroup, HSBC, ING, Mizuho Securities, MUFG Securities and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

‘Strange moves’ for Turkish banks

Other Turkish banks saw some demand on Wednesday, another trader said.

“We had a few strange moves in Turkey banks, with a few bids, as equities fell – only to trade up,” he said. “The new [Turk Eximbank] 2021 was up at 100.625, a new high. Spreads tightening 10 bps to the sovereign on the move.”

Middle East in focus

Bonds from Qatar and from Nigerian banks also saw some demand, “despite the loathing of all things Sub-Sahara,” a trader said.

Meanwhile, oil-related credits continued “taking a beating,” another trader said, pointing to Kuwait Energy plc. The company’s 2019 bonds were trading Wednesday with a 79 handle after trading as high as 99 in May of 2015.

“Another choppy session, although volumes are below average,” he said. “The tone for most of the day was pretty supportive.”

Bahrain’s bonds moved wider by about 6 bps, he said.

“Another tricky day, but I suspect there will be some further adding on the ‘right’ names at the open tomorrow morning,” he said.

Hangzhou Hikvision sells notes

In its new deal, China’s Hangzhou Hikvision Digital Technology priced €400 million 1¼% notes due Feb. 18, 2019 at 99.959 to yield 1.264%, or mid-swaps plus 140 bps, a market source said.

Citigroup, Deutsche Bank, Morgan Stanley, Agricultural Bank of China, Bank of China, BofA Merrill Lynch, China Construction Bank, CICC HK Securities, HSBC, ICBC, SMBC Nikko, Shanghai Pudong Development Bank, Standard Chartered Bank and UBS were the bookrunners for the Regulation S deal.

The proceeds will be used for the procurement of fixed assets and for general corporate purposes.

The Zhejiang-based issuer develops, manufactures and sells video surveillance products.

Koc Holding seeks issuance

In other news, Turkey’s Koc Holding AS is looking to issue up to $1 billion of bonds this year, a market source said.

Other details were not immediately available on Wednesday.

The issuer is an industrial conglomerate based in Istanbul.

Kexim attracts orders

The new issue of notes from Export-Import Bank of Korea (Kexim) – $400 million 2 1/8% green notes due 2021that came to the market at 99.745 to yield 2.179%, or Treasuries plus 87.5 bps – drew a final order book of more than $1.1 billion from 64 accounts, a market source said.

The notes were talked at a spread in the 105-bps area.

BofA Merrill Lynch and Credit Agricole CIB were the bookrunners for the Securities and Exchange Commission-registered issue.

The proceeds will be used to fund projects that “promote the transition to low-carbon and climate resilient growth,” according to a company filing.

The projects could include those that foster renewable energy, reduce carbon emissions, promote energy efficiency and encourage environmentally friendly industries and technologies.

About 48% of the orders went to Asia while 35% went to Europe and 17% to the United States.

Asset managers picked up 40%, insurance 30%, banks 20% and central banks 10%.

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