Investors on sidelines, avoid risk on Korea, China, Ireland concerns; China's ICBC prices

By Christine Van Dusen

Atlanta, Nov. 23 - Tension on the Korean border - along with concerns about China, Ireland and the Federal Reserve's bond-buying program - slowed issuance, raised risk aversion and pushed prices down for emerging markets assets on Tuesday.

Only Beijing-based lender Industrial and Commercial Bank of China Ltd. priced notes while two Russian issuers planned new issues and Vietnam's Vinacomin pulled its deal.

On reports of artillery fire between North and South Korea, the JPMorgan Emerging Markets Bond Index Plus widened by about 5 basis points - with Argentina up by 5 bps and Venezuela wider by 23 bps - and the Markit iTraxx SovX index widened by about 3 bps.

For five-year credit default swaps, Venezuela and Hungary were the biggest movers, wider by 51 bps and 22 bps, respectively, according to a report from RBC Capital Markets.

"The North Koreans have gained the world's attention once again. Net-net it's been a jittery morning," a London-based trader said. "But the market, despite being cautious at the open, was never in full-blown panic."

For the most part, EM investors avoided the drama by staying safely on the sidelines and protecting the gains they've made so far this year, said David Riedel, president of Riedel Global Experts, an EM consulting firm.

"It's been a great year, and they don't want to mess with what they've already got," he said. "They're taking risk off the table."

ICBC sells notes

Given the shots fired in Korea, Ireland lost some prominence in the news on Tuesday, though investors were still keeping an eye on the troubled sovereign - which plans to detail its four-year fiscal plan on Wednesday - and were no longer feeling buoyed by its plans for a bailout.

Also weighing on investors' minds was the fact that the minutes from the recent meeting of the Federal Open Market Committee showed some disagreement over the newest quantitative easing measures.

And then there were the worries about China's attempts to rein in inflation as its banks neared their annual lending quotas.

"People are very concerned about China and its ability to tap on the brakes successfully and slow the economy without bringing it to a screaming halt," Riedel said.

Still, one Chinese issuer did manage to print notes on Tuesday: Beijing-based lender Industrial and Commercial Bank of China sold $500 million 5 1/8% notes due 2020 at 99.737 to yield 5.159%, or Treasuries plus 235 bps, with Bank of America Merrill Lynch and HSBC.

But government-owned Vietnam National Coal and Mineral Industries Holding (Vinacomin) canceled its planned offering of up to $500 million of 10-year notes via Credit Agricole, Citigroup and ANZ Securities in a Rule 144A and Regulation S deal.

"It's hard, during a period like this with questions about where the markets are headed," Riedel said. "Vietnam is a frontier market, and during a period like this - when we're flooding to gold and people are taking risk off the table - it's not a time to be looking at frontier markets for new issuance."

Russian offerings ahead

Tuesday also saw the Ministry of Finance of the Russian Federation mandate Deutsche Bank, HSBC, JPMorgan, Renaissance Capital and VTB Capital to market a ruble-denominated offering, a market source said.

The roadshow is expected to begin the week of Nov. 29.

Also from Russia, the real-denominated notes due 2015 from VTB Bank were whispered at a yield in the 12½% area, a market source said.

BTG Pactual and VTB Capital are the bookrunners for the Regulation S-only deal.

And Chile-based forestry products company Inversiones CMPC SA mandated Citigroup, Itau and JPMorgan for a roadshow beginning Thursday, a market source said.

The trip will start in Singapore and travel to Hong Kong, Los Angeles and Boston before wrapping up on Dec. 1 in New York.

Market-watchers were also talking about the possibility of several new deals in 2011 from Dubai-based Noor Islamic Bank, as well as potential new issuance from Bahrain in the first half of 2011.

"But I would suspect issuance has been put on hold for now," the London trader said.

© 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.