EM assets see mixed flows in quiet session ahead of holiday; Petrobras arranges roadshow

By Christine Van Dusen

Atlanta, Nov. 23 - Emerging markets assets ended Wednesday on a quiet note in light of continued concern about the global economic situation and ahead of the Thanksgiving holiday in the United States.

"The ongoing pressure in the European government bond markets, and the failure of the Bund auction, are undoing an early attempt to add some risk in emerging Europe, Middle East and Asia," a trader said. "Overall, though, the selling has been limited, so it's just prices being marked lower."

The exceptions, in terms of selling, were Russia's Gazprom and Turkey's long end.

"In Russia, Fitch affirmed the BBB- rating but their curve remains under pressure," he said. "Most interesting is that the curves of the three pending issuers - Gazprombank, Abu Dhabi National Energy Co., Qatar - are all holding firm."

Better buying was seen for Turkish banks as the sovereign kept rates unchanged and shrugged off Fitch Ratings' outlook change to stable from positive.

Kazakhstan's bonds were under pressure, as were notes from Ukraine.

"All, bar one of Ukraine's sovereign issues, are yielding over 10% now," he said.

Said another trader, "The backdrop remains very heavy as we head into a Thanksgiving-inspired market lull. The market, for the most part in my world, was pretty well offered but it wasn't utter carnage as one might have expected, given the moves in some currencies."

Liquidity is expected to get worse as year-end approaches, he said.

"It's pretty awful at the moment, but I just can't see it improving," he said. "Accounts don't want to cross bid and offers or try to lift dealers who have no inventory - and will simply lift broker screens to replace bonds - when they can sit back and pick and choose the new issues. This year-end malaise will continue."

Flows mixed

Flows, meanwhile, were a mixed bag on Wednesday.

"The Street was pretty heavily leaning on International Petroleum Investment Co.," a trader said, noting that some nibbles were reported for the Abu Dhabi-based issuer's 2021s. "There remain plenty of loose bonds flying around, especially on the 2020s, 2021s and 2022s."

Demand was also noted for Abu Dhabi National Energy Co. PJSC (TAQA) ahead of the company's roadshow, set for Nov. 24 to Nov. 30 in Hong Kong, Singapore, London, New York, Boston and the West Coast.

"It's a pretty impressive effort, and I expect the majority of holders to tender their 2012s into the 103.75 bid from the company," he said.

The notes are part of a tender offer, which expires Dec. 5, for $1.5 billion of the company's 5.62% notes due 2012, to be tendered for cash.

"The belly trades well," he said. "The 2016s, for example, are flat on the month. TAQA is trading better than IPIC due to paper being better placed and due to the company paying investors for the early redemption of some 2012s."

Emirates in demand

In other trading from the Middle East, retail investor demand was noted for Emirates' 2016s and some action was seen for Abu Dhabi Islamic Bank's new issue of $500 million 3.78% notes due 2016.

The notes priced on Nov. 22 at par to yield mid-swaps plus 245 bps via Abu Dhabi Islamic Bank, Citigroup, HSBC, National Bank of Abu Dhabi, Nomura and Standard Chartered Bank.

"They're now trading right around reoffer at 99.95 bid, 100.05," a trader said. "There's also some action in Qatar, Bahrain and Dubai Water and Electricity Authority."

Shougang sets price talk

Also on Wednesday, China-based steel company Shougang Holding set price talk at the high 4% area for its planned renminbi-denominated offering of two year notes, a market source said.

Bank of China, Citic Capital, DBS, ICBC and JPMorgan are the bookrunners for the Regulation S notes, which include a change-of-control put at 101%.

And Brazil-based energy company Petroleo Brasiliero SA (Petrobras) has mandated BB Securities, Bradesco BBI, Credit Agricole, Deutsche Bank, HSBC and Santander for a roadshow from Nov. 28 to Nov. 30, a market source said.

The marketing trip will travel from Paris to London, Edinburgh and Switzerland before concluding in London and Germany.

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