Emerging markets focus on primary; Peru, Poland sovereign supply eyed; Korea Gas on roadshow

By Aaron Hochman-Zimmerman

New York, July 6 - Emerging markets traded slowly on Monday, but the primary wasted no time as the second half began to take shape.

New supply was discussed in all three sectors as sovereigns from Peru and Poland neared completion and Korea Gas Corp. began marketing a dollar bond.

Major market equities were unimpressive and provided little leadership to the emerging sphere, but the market tone remained high on the primary buzz.

U.S. equities waffled lower, but volatility remained consistently higher by 1.05 to close at 29.00, according to the VIX index. The index is a frequently used gauge of market volatility.

Strong start to half

The recognized start to the second half of the year began with new offers from Peru and Poland, which were quick to strike after returning from the year's half-time.

In emerging Europe, Poland was expected to close up to a $1.5 billion 10-year senior unsecured bond (A2/A-/A-) in the Treasuries plus 300 basis points area, a market source said.

Barclays, Citigroup and HSBC will act as bookrunners for the registered deal.

Proceeds from the sale will be used for general budgetary purposes.

On Jan. 22, Poland priced a €1 billion five-year bond at mid-swaps plus 300 bps.

In Latin America, Peru was close to finalizing its $1 billion reopening of the 7.35% bonds (Ba1/BBB-/BBB-) due 2025, according to a market source.

A yield of 6.95% and a price of 103.3 were likely.

JPMorgan and UBS acted as bookrunners for the registered deal.

Proceeds from the sale will be used to repay Paris Club debt.

The bonds were originally issued on July 19, 2005 at $500 million and tapped for another $750 million on Dec. 15, 2005.

Meanwhile, Korea Gas plans to offer a dollar-denominated benchmark-sized bond (A2/A/) following a roadshow, according to a market source.

Deutsche Bank, JPMorgan and Merrill Lynch will act as bookrunners for the bonds.

The roadshow began on Monday in Los Angeles and Singapore, travels to Hong Kong and New York on Tuesday and concludes in Boston and London on Wednesday.

Korea Gas is a Bundang, South Korea-based energy firm.

Pushing power

Also on the radar of the emerging European traders, the handlers of the Nabucco pipeline project will take a major step forward when E.U. officials and representatives of Austria, Bulgaria, Hungary, Romania and Turkey will sign agreements in Ankara on July 13, reports said.

The pipeline will connect Caspian Sea gas suppliers with Europe via Turkey, Bulgaria, Romania and on to points west.

"An agreement has been reached during last month's meeting," the Turkish Foreign Ministry said in a statement.

Russia and its national gas firm OAO Gazprom favor a Black Sea route known as the South Stream pipeline, but those involved in the Nabucco project have referred to the two paths creating healthy competition.

South Stream would cross the Black Sea from Russia to Bulgaria and fork into Greece and Serbia.

Both pipelines notably bypass Ukraine, where gas debts have served to block the smooth passage of energy from Russia to the West.

Elsewhere in the European time zone, another pipeline was discussed.

Algeria, Niger and Nigeria all signed an agreement to allow for the construction of a trans-Sahara pipeline.

Many of Europe's major energy firms, including Gazprom, have shown interest in the project, reports said, but the specter of terrorist attack is a constant in the region.

A militant group called the Movement for the Emancipation of the Niger Delta on Saturday warned "the investors to the Trans-Saharan Gas Pipeline project that unless the Niger Delta root issues have been addressed and resolved, any money put into the project will go down the drain," the Wall Street Journal reported.

LatAm slow to start

Latin America traded slowly as many traders held down undermanned desks.

On the primary side, the category noted the expected new supply from Peru.

In Venezuela, the government lassoed another bank in its ongoing round-up of private firms.

Spain's Grupo Santander accepted $630 million of the $1.05 billion it will receive for Banco de Venezuela.

Elsewhere in the category, Moody's Investors Service said it will reexamine Brazil's Ba1 credit rating with its eyes toward a possible upgrade.

More Korea supply for Asia

Asia traded on Monday with the specter of more supply from South Korea as Korea Gas announced that it would market a new issue, which is expected to price Wednesday.

Also in Asia, Indonesia and Japan announced that the two will swap nearly $15 billion in rupiah for ¥1.5 billion, according to the Jakarta Post.

The move was designed to stabilize the rupiah by reducing its dollar exposure.

The rupiah was seen trading at 10,255 to the dollar.

In China, over the weekend large-scale protests in the Xinjiang province left about 150 people dead, reports said.

The Muslim Uighur group has long-resented the rule of the Han majority, and ethnic tensions bubbled over, resulting in clashes between demonstrators and police.

State media broadcast images of arrests and violence and accused the Uighur side of instigating the fighting.

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