EM assets 'resilient' as Asian issuers kick-start primary market; Korea Finance plans deal

By Christine Van Dusen

Atlanta, Oct. 9 - Singapore's United Overseas Bank, Hong Kong-based Lifestyle International Holdings, Sunac China Holdings Ltd. and India's Syndicate Bank sold notes on Tuesday as investors continued to hunt for yield, a strategy that helped boost some emerging markets bonds during the session.

"Global risky assets remain resilient, underpinned by monetary policy support from major banks," according to a report from Barclays.

So Tuesday's session was fairly solid, a London-based trader said.

"I tend to think the major risks to this market at this point in time remain supply and US Treasury and S&P gyrations," he said. "While the geo-political risks to the region remain, I would argue they have been there for months and years and, if anything, that probably helps the technical point of view in that the weaker hands don't get involved."

Ongoing demand from retail investors was sighted for Emaar Properties, Majid al Futtaim and Jebel Ali Free Zone, a trader said.

"These bonds feel fine for the near future," he said.

Long-dated bonds performed well during the session, he said, particularly the 2041s from International Petroleum Investment Corp., the 2036s from Abu Dhabi National Energy Co. and notes from RasGas.

"Qatar's 2042s are almost 30 basis points tighter on the month, and the combination of a lack of meaningful supply, high ratings, a distinct lack of dealer inventory and huge demand from funds and life insurers sees many of these bonds almost bid-only," he said.

Higher-beta credits also performed well, including Kuwait's Kipco and Bahrain.

"Bahrain's 2022s were at 107 on the bid side," a trader said. "That still looks OK for a sovereign from the region."

Qatari Diar's 2020s moved 10 bps tighter, while two-way flow was noted for most names from Dubai.

"Dubai Holding's 2014s traded today at 7%, still somewhat appealing for a 15-month maturity," a trader said.

Bank deals tick up

Investors continued to show measured interest in the recent deals due 2017 from Qatar Islamic Bank and First Gulf Bank PJSC, which both priced at par.

"The order books on the recent Qatar Islamic Bank and First Gulf Bank deals were both solid," the London trader said. "They have not exploded higher in secondary, but rather have ticked up steadily, a function of pricing coming right in courtesy of a positive gray market, large order book and syndicate desks printing at the tighter end of range."

Qatar Islamic Bank's notes were seen at 100.05 bid, 100.20 offered, while First Gulf's traded at 100.28 bid, 100.40 offered.

Lebanon quiets

Lebanon was quiet on Tuesday ahead of a possible swap or new issue, a trader said, and buyers were seen for higher-yielding names.

And South Africa's bonds were wider by 15 bps on Tuesday morning.

"The market came back near lunchtime to trade unchanged, or slightly tighter, before fading again into the close," he said. "The benchmark 2024s are closing 18 bps wider on the week."

PDVSA unfazed by Chavez win

Looking to Latin America, Venezuela remained in focus following Hugo Chavez's unsurprising reelection to the presidency.

"Since the market has been skeptical about the chance of a victor for the opposition, we expect a limited sell-off in Venezuelan and PDVSA (Petroleos de Venezuela SA) assets," according to a report from Barclays.

Indeed, most PDVSA bonds were unchanged, including the company's 2022s, seen at 102.509 bid, 103.667 offered. PDVSA's 2017s, however, moved down to 86.526 bid, 88.788 offered, according to ShibuiMarkets.

Ukraine bonds creep lower

From the Ukraine, trading activity has ramped up only slowly after the Monday holiday in the United States, said Svitlana Rusakova of Dragon Capital.

After trading at 99.75 bid, 100.75 on Friday, Ukraine's 2020s moved a touch lower, she said. And the sovereign's 2021s - which on Friday stabilized at 100.5 bid, 101.5 offered - started the week at 100.25 bid, 101.25 offered.

Bonds from Naftogaz slipped to 101 bid, 102 offered on the news that bondholders had received their coupon payments, she said.

And Oschadbank was quiet, while Mriya Holdings saw some buyers.

United Overseas does deal

In its new deal, United Overseas Bank priced a $500 million issue of 2 7/8% notes due Oct. 17, 2022 at 99.575 to yield 2.967%, or Treasuries plus 230 bps, a market source said.

United Overseas Bank, ANZ and HSBC were the bookrunners for the Regulation S-only notes, the proceeds of which will be used for general corporate purposes.

And Lifestyle International Holdings printed a $300 million issue of 4¼% notes due Oct. 16, 2022 at 99.188 to yield 4.351%, or Treasuries plus 265 bps.

Bank of America Merrill Lynch, JPMorgan and Standard Chartered were the bookrunners for the Regulation S deal.

Syndicate Bank, Sunac price

Also on Tuesday, Syndicate Bank priced a $500 million issue of 4 1/8% notes due April 12, 2018 at 99.572 to yield Treasuries plus 355 bps, a market source said.

The notes priced on the high end of talk, which had narrowed to the Treasuries plus 360 bps area.

Citigroup, Deutsche Bank, HSBC, JPMorgan and Standard Chartered were the bookrunners for the Regulation S deal.

Sunac China Holdings priced a $400 million issue of 12½% notes due Oct. 16, 2017 at par to yield 12½%, a market source said.

Deutsche Bank, Bank of America Merrill Lynch and Citigroup were the bookrunners for the Regulation S deal.

Proceeds will be used to finance new land acquisitions and for general corporate purposes.

Hong Kong issuers pick leads

Also from Asia, Hong Kong's Regal Hotels International Holdings Ltd. mandated ANZ and JPMorgan to lead a roadshow this week for a possible issue of dollar notes, a market source said.

The deal would be part of a new $1 billion MTN program, established on Oct. 5.

The roadshow will begin Oct. 10 in Hong Kong and conclude Oct. 11 in Singapore.

And China Tianrui Group Cement Co. Ltd. has mandated Deutsche Bank and Citigroup as bookrunners for a Regulation S issue of dollar bonds (expected ratings: B2/B/), a market source said.

A roadshow to market the deal began on Tuesday.

Korea Finance deal ahead

Korea Finance Corp. is planning to issue about $500 million worth of renminbi- or yen-denominated notes before the end of the year, a market source said.

No other details were immediately available on Tuesday.

Gold development and exploration company Mongolia Resources Corp. has mandated Bank of America Merrill Lynch, HSBC and ING as bookrunners for a dollar-denominated issue of notes, a market source said.

The Rule 144A and Regulation S deal's roadshow will begin Wednesday in Hong Kong and travel to Singapore, London, New York and Boston before wrapping up on Oct. 17 in Los Angeles.

Slovenia taps bookrunners

In other deal-related news, the Republic of Slovenia has mandated BNP Paribas, Deutsche Bank and JPMorgan for a possible issue of dollar notes, a market source said.

The deal will be marketed during a roadshow in the United States.

Moscow-based Russian Railways set price talk for a two-tranche issue of ruble- and dollar-denominated notes due 2019 and 2022, a market source said.

The tap of the company's ruble 8.3% notes due April 2, 2019 was talked at the 8% area.

The second tranche - an increase of the 5.7% dollar notes due April 5, 2022 - was talked at the 4.1% area.

JPMorgan, RBS and VTB Capital are the bookrunners for the Regulation S-only deal.

Qatar bank oversubscribed

The recent $750 million issue of 2½% notes due in 2017 that Qatar International Islamic Bank priced at par drew $6 billion in orders, according to a company press release.

The notes yielded 2½%, or mid-swaps plus 175 bps, tighter than initial talk in the mid-swaps plus 190 bps area.

HSBC, QNB Capital and Standard Chartered Bank were the bookrunners for the Regulation S issue of Islamic bonds.

About 48% of the orders came from the Middle East, 30% from Asia, 18% from the United Kingdom and Europe and 4% from the offshore United States.

Banks picked up 42%, fund managers 39%, agencies 10%, private banks 6% and insurance and pension funds 3%.

Citic's notes attract orders

The final book for Hong Kong-based Citic Pacific's recent $750 million issue of 6.8% notes due Jan. 17, 2023 was more than $7 billion from 250 accounts, a market source said.

The notes priced at par via Deutsche Bank, UBS, HSBC and Standard Chartered.

About 87% of the orders came from Asia and 13% from Europe. Private banks accounted for 52%, funds 36%, banks 5%, insurers 5% and others 2%.

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