Morning Commentary: EM risk appetite improves on better data from China; Finansbank deal advances

By Christine Van Dusen

Atlanta, Jan. 19 – Emerging markets bonds firmed up on Tuesday, with notes from Turkey tightening as much as 10 basis points as risk appetite improved on better-than-expected – though still weak – economic data from China.

“Suddenly all the negativity has been replaced with the need to add risk assets, especially the technical ones that no one sold,” a London-based trader said. “Now, one set of positive data does not change the backdrop that has caused this January sell-off, and some are taking the opportunity to search for bids that have been absent in the market for two weeks.”

Still, liquidity was limited, he said.

Investors were also eyeing Turkey’s Turkiye Finans Katilim Bankasi AS (Finansbank), after National Bank of Greece entered into an agreement to sell its stake in Finansbank to Qatar National Bank SAQ. The deal is expected to take place during the first half of this year.

“Yesterday, the transaction took another hurdle, following the approval of NBG’s shareholders on the sale,” a strategist said.

Finansbank’s bonds tightened on the announcement but gave up some gains “amid a sell-off in EM risk since,” he said.

Finansbank’s 2017s traded at about z-spread plus 300 bps before the announcement and 285 bps after, he said. The 2019s went to 300 bps from 370 bps.

“At these levels and the current stage, we see further potential for tightening once the deal is completed,” the strategist said.

The removal of the NBG ownership, as well as the upgrade by Fitch Ratings, “will increase the investor base,” he said.

Sources were whispering about a possible issue of bonds from QNB, which could be used to support its capitalization in light of the Finansbank deal.

In other deal-related news, market sources were whispering about a possible issue of bonds from Azerbaijan.

© 2015 Prospect News.
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