China’s turmoil hurts EM; Lat-Am widens, but some names firm; Hungary, KEB Hana on roadshows

By Christine Van Dusen

Atlanta, Jan. 7 – Emerging markets assets continued their sell-off on Thursday as worries about China and its devalued currency sent global shares plummeting and led to a suspension of Chinese markets.

“The markets once more are feeling the pinch of a Chinese devaluation and macro concerns,” a London-based strategist said.

That led to a case of “some pretty big jitters,” a London-based trader said, and inspired a sell-off of risky assets “with no return of liquidity yet.”

The global turmoil also impacted oil, with Brent and crude prices falling, the strategist said.

In trading from Latin America, the tone was cautious, but there was “no panic” on Thursday morning, a New York-based trader said.

“Low bids, but offers aren’t aggressive either, yet,” he said. “We have been ignoring the macro situation because there has been solid, if unspectacular, buying since late in 2015 and in the first three days of the year. How we will fare if we see substantial selling is another story.”

Brazil-based Petroleo Brasileiro SA’s 2017s continued to hold their bid, he said, and Mexico-based Cemex SAB de CV saw decent Street volumes.

“Liquidity in that curve is starting to pick up, as most, if not all the issues within the curve are no longer trading to the next call,” he said. “So the curve duration is longer now, with higher yields.”

Banks from Colombia remained “pretty well-bid,” he said, after moving higher earlier in the week.

Colombia’s Ecopetrol SA moved lower after catching a bid on Wednesday, he said.

“But liquidity has picked up nicely,” he said.

Lat-Am spreads move out

At the end of the session, many Latin American spreads moved wider and cash prices moved lower, though Brazil managed to outperform, another trader said.

Five-year credit default swaps for the sovereign closed Thursday at 486 basis points from 482 bps, while Mexico’s finished at 183 bps from 178 bps.

“Cash prices made an attempt to rally earlier on, as equities and oil pared losses intraday, but the entire market made a move to the left as risk assets were sold across the board,” he said.

High yield finishes firm

High-yield names from Latin America were “surprisingly firm” on Thursday, the trader said. Venezuela’s 2027s finished at 39 from 38.50 but PDVSA inched higher, closing at 50.25 from 50.

“Argentina is slightly lower,” he said. “Flows are on the quieter side as the market may be waiting for [non-farm payrolls numbers] and overnight market moves. Hopes are for some stability overnight so that we can begin to move past this market turmoil.”

Turkish politics in spotlight

Looking to Turkey, the president addressed local mayors and promoted the idea of moving forward to a presidential system, he said.

But two opposition parties and pro-Kurdish HDP oppose such a system, which eases “some concerns of investors on the concentration of political power into one political role,” he said.

Hungary sets roadshow

Hungary will set out on Jan. 11 for a roadshow to market a possible issue of renminbi-denominated notes, a market source said.

Bank of China is the bookrunner for the Regulation S deal.

The sovereign previously announced plans for up to $1.1 billion-worth of eurobonds in 2016, most likely denominated in dollars, euros or yuan.

Roadshow for KEB Hana

PT Bank KEB Hana Indonesia is planning a roadshow, beginning Jan. 13, for a possible issue of notes, a market source said.

ANZ, BofA Merrill Lynch, Citigroup, HSBC, Nomura Securities, UBS and KEB Hana Global Finance are leading the marketing trip.

The issuer is based in Jakarta.

Jiangsu attracts orders

The final book for the new deal from China’s Jiangsu NewHeadLine Development Group Co. Ltd. –$200 million 6.2% notes due 2019 that priced at par – was more than $1.4 billion from 111 accounts, a market source said.

About 96% of the orders came from Asia. Fund managers bought 72%, private banks 6% and banks and other 22%.

The notes were talked at a yield of 6.2% to 6.3%.

Guotai Junan International was the sole global coordinator for the Regulation S deal and, with CCB International and DBS Bank Ltd., a joint lead manager and joint bookrunner.

The proceeds will be used for infrastructure development projects, refinancing of existing indebtedness, working capital and general corporate purposes.

On Thursday, the notes were spotted at 100.625, a trader said.

KDB five-years attractive

Korea Development Bank’s new $1.5 billion two-tranche issue of notes due 2021 and 2026 saw solid demand, a market source said.

The $500 million 2½% five-year notes priced at 99.986 to yield 2.503%, or Treasuries plus 82.5 bps, following talk in the 85 bps area. This tranche drew $2 billion in orders from 166 accounts, with most going to Asia and asset managers.

On Thursday the notes traded at Treasuries plus 84 bps.

KDB releases final book

Korea Development Bank’s other tranche – $1 billion 3% 10-year notes that priced at 99.401 to yield 3.07%, or Treasuries plus 87.5 bps, after talk in the 90-bps area – also attracted a good order book, a market source said.

The notes brought in $2.7 billion from 150 accounts, with Asia and insurers picking up the most.

On Thursday they traded at Treasuries plus 90 bps.

Barclays, BofA Merrill Lynch, Citigroup, Credit Suisse, HSBC, KBD Asia, Mizuho Securities and Societe Generale were the bookrunners for the Regulation S deal.

The proceeds will be used for general operations, including the extension of foreign currency loans and the repayment of maturing debt and other obligations, according to a company filing.

Asian investors like Swire

China-based Swire Properties Ltd.’s new $500 million issue of 3 5/8% notes due 2026 that priced Wednesday at 99.668 to yield Treasuries plus 147.50 bps received $1.8 billion in orders from 131 accounts, a market source said.

About 95% of the orders came from Asia and 5% from other emerging markets, with fund managers picking up 52%, banks 36%, insurers 8% and private banks and others 4%.

The notes were talked at a spread in the 150-bps area.

HSBC and JPMorgan were the bookrunners for the Regulation S deal.

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