EM assets suffer amid anxiety about debt crisis; Majid Al-Futtaim, Temir Zholy eye deals

By Christine Van Dusen

Atlanta, June 25 - Emerging markets assets on Monday morning began to crack under the pressure of the euro zone's debt debacle and concern that the upcoming European Union summit would yield little in the way of solutions for the global economic crisis.

"Until last week, risky assets had been largely resilient to the weakening trend in global data," according to a report from Barclays Capital Markets. "While expectations are building for moves by the European Central Bank and the Bank of England at their July meetings, the Fed stopped short of full-scale asset purchases at its meeting last week and instead extended Operation Twist to the end of 2012. This has dented one of the pillars of support for risky assets and sentiment."

In order for risky assets to maintain some sort of equilibrium, Barclays said, the European Union needs to make significant progress at its June 28-29 summit.

But investors are skeptical on that front.

"I don't really see anything major being figured out there," a New York-based syndicate source said.

On Monday, the Markit iTraxx SovX index spread widened by 10 basis points. The corporate-focused LUCI Crossover Index spread was 21 bps wider.

As the session went on, emerging markets assets improved somewhat, a trader said.

"Despite a fairly poor start, [emerging markets] was relatively stable. Spread gyrations are totally at the mercy of supply and demand dynamics, and client inquiries, as usual," he said. "We're looking for a more active day tomorrow, and still on spread terms, there are some pockets of value out there."

The primary market was mostly quiet, with Dubai-based Majid Al-Futtaim, Kazakhstan's Temir Zholy Finance BV and two Asian issuers - Taiwan's Yieh Phui Enterprise Co. Ltd. and China's Avic International Holdings - pondering new issues.

Also on Monday, market watchers were whispering about possible dollar notes from India's Power Grid Corp., State Bank of India and Jindal Steel and Power.

Dubai, Jafza bonds see buyers

With stocks weak, U.S. Treasuries higher and spreads wider, buyers were seen for bonds from Dubai and Jebel Ali Free Zone and Dar al-Arkan's 2015 notes, a London-based trader said.

"Very supportive flows into Dubai government sukuks and Jafza's 2019s, pushing those bonds to fresh highs," he said, noting that Jafza's 2019 bonds were trading with a 104 handle on Monday.

"And there are further flows into the name," he said. "The prints are at 104 in the Street with the yield at 6.28%."

Dubai's 2022 bonds were 25 bps tighter on the week. "They're now bid in the high 105s," he said.

And Dar al-Arkan's 2015 notes were trading with a 105 handle amid market expectation that the issuer's 2012 notes would be paid down.

"So there's a lot of chasing the yield offered by the 2015s," he said.

Abu Dhabi Islamic popular

Abu Dhabi Islamic Bank was also popular in trading on Monday, while International Petroleum Investment Co.'s curve was about 6 bps wider with limited flows and interest.

"There's still some interest in IPIC's 2020s," a trader said. "Qatar is five to six bps wider, but a lot of that is Treasuries-related. We're still seeing better demand for this credit."

Bahrain concludes its roadshow on Tuesday for its planned issue of $1.25 billion bonds due in between seven and 10 years. Standard Chartered, JPMorgan, Gulf International Bank and Citigroup are the bookrunners.

"We've seen ongoing demand for their 2018s, which are 20 bps tighter on the week," he said.

Investors on Monday showed interest in bonds from Qatar's RasGas Co. Ltd., the London trader said.

Dolphin Energy, Egypt up

Abu Dhabi-based Dolphin Energy's 2021 bonds were also having a good run, a trader said.

"They're up 2½ points in two weeks, trading with a 110 handle now," he said.

Buyers were seen for Egypt's 2020 bonds and 2040 bonds, which were up two points after Mohamed Mursi won the country's first free presidential election.

Meanwhile, South Africa's five-year credit default swaps were trading Monday at 172 bid, 177 offered.

"The sovereign bonds are a little heavy," he said.

South Africa's 2016 bonds were trading at 107.25 bid, 108.25 offered while its 2041 bonds were seen at 125.50 bid, 126.25 offered.

Dubai developer taps leads

In deal-related news, property developer Majid Al-Futtaim has mandated JPMorgan, National Bank of Abu Dhabi, Barclays Capital, Standard Chartered and UBS to lead a roadshow for a possible issue of dollar notes, a market source said.

The marketing trip began Monday.

"Majid Al-Futtaim is returning for some global investor meetings, interestingly with a dollar Regulation S deal possible," a trader said.

New deals ahead

Kazakhstan-based railway operator Temir Zholy is on a roadshow for an offering of eurobonds, according to a company announcement.

JSC Kazkommerts Securities is leading the marketing trip, which began on Sunday.

Taiwanese steel producer Yieh Phui is planning a roadshow for a possible issue of renminbi-denominated notes, a market source said.

BNP Paribas is arranging the marketing trip.

Also, Chinese holding company Avic is planning a renminbi-denominated issue of notes, a market source said.

Aleesia Forni contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.