Emerging markets end stronger; tone improves with retailers' sales; Kospo sets talk for $300 million

By Aaron Hochman-Zimmerman

New York, April 10 - Emerging markets ended the session on the way up as March sales figures for U.S. retailers lifted equities and led the market tighter.

"It continues to be a better market," an emerging markets strategist said.

The day after Kazakhstan's Halyk Bank's $500 million deal priced, the primary seemed ready to move another corporate as Korea Southern Power Co. issued talk of Treasuries plus 220 basis points for its $300 million offering.

In trading, "spreads tightened today," the strategist said, but volumes remained light and volatility was still on the minds of investors.

Volatility sank in the morning and finished lower by 0.83 at 21.98, according to the VIX index. The index is a commonly used gauge of market volatility.

Asia 'sneaky firm'

Asia quietly posted a better day, said a trader, who called the action "sneaky firm."

Despite the improvements, "I would say conviction is not there," he said. "It was extremely choppy on light volumes."

The day ended strong, but "it's hard to say exactly why," he added, although U.S. equity markets showed some strength in response to sales figures from Wal-Mart Stores Inc. and some other retailers - and took heart from those even as many companies in the sector reported weak demand for the month.

Meanwhile, Indonesia's House of Representatives passed a sukuk law, according to the Jakarta Post.

The government may now issue sharia-compliant sovereign credit, which is expected to draw "enormous amounts of funds" from interests in the Middle East, the report said.

"We still do not know whether we will issue the sharia bonds in foreign currencies or rupiah. We will evaluate the market first," said Anggito Abimanyu, head of fiscal policy for the finance ministry.

The first of the sukuk issues is expected on the domestic and international stage in the beginning of the second quarter, the report said.

The Indonesian sovereign bonds due 2017 were quoted at 103.25 bid.

Elsewhere, in the Philippines, export sales were up by 10.7% in February to $4.8 billion from $3.7 billion during February 2007, according to the national statistics office.

In January, exports rose 6.4% to $4.2 billion.

Electronics made up most of the of the exports' value at $2.4 billion, or 59.6%. Textiles followed at $177.4 million.

The Philippines' government bonds due 2030 were spotted at 132 bid.

In Pakistan, the streets of Karachi calmed on Thursday after 10 were killed in riots Wednesday, reported the BBC.

Cars were burned and mobs of mostly lawyers clashed after Sher Afgan Niazi, a former cabinet minister of president Pervez Musharraf, was attacked by opposition supporters.

The Pakistani bonds due 2017 were seen at 86 bid.

Kospo expected Friday

A relatively busy week in the primary is expected to end with the pricing of Korea Southern Power Co.'s (A1/A-) deal.

Kospo announced talk in the Treasuries plus 220 bps area for its $300 million five-year bonds.

ABN Amro, Citigroup and Deutsche Bank will act as bookrunners.

The Seoul-based energy firm ended its roadshow Thursday.

Also in Asia, China Petroleum & Chemical Corp. announced plans to issue a 20 billion yuan five- to 10-year bonds in the domestic market. The coupon will not exceed 90% of the central bank's loan rate.

Half of the proceeds will be used to improve Sinopec's debt structure. The remainder will be used for working capital.

Sinopec is a Beijing-based energy and natural resource developer.

LatAm winds tighter

Trading in Latin America spreads came back in after some widening Wednesday, a strategist said.

The tone was light going into the end of the week along with positive earnings and small gains in U.S. equities.

In Brazil, "people are looking at inflation [but] they still don't see a major problem in it. They understand that the currency appreciation should to a certain sense compensate for some of the run-up in inflation and help the overall equation and that over time this should trend to the downside," said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

"It's a big question mark, I think, but that's currently what the outlook and sentiment seems to reflect," he added.

The real was seen trading at 1.682 to the dollar.

The 11% Brazilian bonds due 2040 were spotted at 135.5 bid, 135.75 offered.

Meanwhile, in Venezuela president Hugo Chavez said he will nationalize Sidor, owned by Luxembourg's Ternium SA.

The Venezuelan government already owns a 20% stake in the steel producer, but vice president Ramon Carrizalez informed Ternium of the nationalization pointing to workers rights.

"Ternium awaits the opportunity to engage in discussions with the Venezuelan authorities," the company said in a brief statement.

The 9¼% Venezuelan bonds due 2027 were seen at 96.75 bid, 97.25 offered.

Kirchner to meet farmers

In Argentina, president Cristina Kirchner is scheduled to meet with representatives of the farmers, currently on a 30-day strike suspension, according to the Buenos Aires Herald.

Some within the groups of farmers suggested resuming the strike if Kirchner did not agree to meet within two days after they requested a meeting on Tuesday.

The 8.28% Argentine discount bonds due 2033 were quoted at 84.75 bid, 85.5 offered.

Emerging Europe firms

Emerging Europe improved slightly as U.S. equities helped set a more positive tone to the light trading.

In Ukraine, the parliament voted to accept the invitation to join the World Trade Organization, reported the Itar-Tass News Agency.

"Ukraine is fully ready for joining the WTO," said deputy economics minister Valery Pyatnitsky, adding that nearly 60 laws will have to be passed to comply with WTO rules. The necessary laws are mostly cosmetic, the report said.

The accession agreement was signed by president Viktor Yushchenko and WTO director-general Pascal Lamy on Feb. 5. The rada had until July 4 to approve the agreement.

Prime minister Yulia Timoshenko reassured neighboring countries, especially Russia, that Ukraine's membership is not a cause for concern.

The Ukrainian government bonds due 2016 were seen at 99.9 bid, 100.9 offered.

In Russia, the state-run nuclear power firm Rosatom announced plans to sign an agreement with the industry and trade ministry of Mongolia, Rosatom said in a press release.

The two will split the cost of jointly developing a small- to medium-sized nuclear reactor in Mongolia as well as the mining of the required uranium.

Although plans have not been finalized, "we can offer a very wide spectrum of reactors," the director general of Rosatom, Sergey Kiriyenko, said.

Meanwhile, the Russian sovereigns due 2030 were quoted at 115.25 bid, 115.4 offered.

Elsewhere in South Africa, the national power firm Eskom said energy costs will double during the next two years as a result of the country's energy crisis.

The government approved a 14.2% price increase this year, the BBC reported, but some had hoped for a 53% increase.

Now Eskom said it may require nearly a 100% price increase, the BBC reported.

Problems with the power infrastructure will require 343 billion rand in repairs and maintenance over the next five years.

Turkey to open new steel hub

Turkey will be made one of four steel hubs for the London Metal Exchange, the Turkish Daily News reported.

The exchange will open its steel futures trading on April 28, the report said.

In recent years the LME has considered trading steel futures but finally made the decision to begin the program with "the industrialization of China and other emerging economies, including some Gulf nations and North Africa is one reason," said Martin Abbott, chief executive of the LME in the report.

"Another one is the 're-energizing' of some of the 'old Eastern bloc nations,' particularly Ukraine. Consequently, there is an increase in amount of international trade in steel," he added.

The Turkish government bonds due 2030 were spotted at 151.1 bid, 151.6 offered.

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