Emerging markets mixed; Cemex, Digicel bond roadshows end Wednesday; spreads generally wider

By Aaron Hochman-Zimmerman

New York, March 3 - Emerging markets bounced up and down with equities on Tuesday as markets everywhere continued to remain fixed on the action in both the equity market and in Washington, D.C.

"It's all equities," a trader said.

In emerging market trading, prices were, for better or worse, unable to stray far from their opening levels on Tuesday.

Some were able to eke out small gains, but largely the brakes were on until more clarity came from the United States.

On the primary side, investors were interested to see how the two high yielding Latin American timezone deals would fare.

Roadshows for a $500 million deal from Mexico's Cemex SAB de CV (//BB) and a $435 million deal from Jamaica's Digicel Ltd. (confirmed B1//existing B-) will end on Wednesday with pricing expected to follow.

From the major markets, volatility fell by 1.72 to end at 50.93, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging markets were drawn wider by 10 basis points to a spread of 682 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

LatAm tracks sideways

Bond activity in Latin America just drifted on Tuesday after the beating sustained during Monday's equity fallout, said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

Bids had been weak in Brazil and Mexico, he said, but the market saw "a little bounce from yesterday."

The 5 7/8% Brazilian bonds due 2019 took on 0.375 point to 94 bid, 94.75 offered.

Meanwhile in Venezuela, prices where hardly affected by the nationalization of rice producers over the weekend, Alvarez said.

The idea that the market can be "shocked" by news about president Hugo Chavez has nearly "evaporated," he said.

The 9¼% Venezuelan bonds due 2027 added 0.125 point to 54 bid, 55 offered.

In Ecuador, president Rafael Correa pushed his case against France's oil firm Perenco SA.

The government has accused Perenco of withholding nearly $350 million in taxes.

The 8% Ecuadorian bonds due 2030 were seen unchanged at 29.25 bid, 31 offered.

Also in the category, Argentina's discount bonds due 2033 lost 0.25 point to 27.625 bid, 28.5 offered.

Asia slightly higher

Asia was "essentially fairly quiet," a trader said, but where there was activity "flows were more constructive."

There was "more risk getting taken," but "prices haven't reacted that much," he said.

Indonesia, the most recent issuer, has edged out the other issuers in activity, he said.

Now, the bonds are generally "stabilized" and "that's the best you can say," he said.

Meanwhile, in Indonesia inflation was already calculated lower in February than in January.

February registered 8.6% inflation compared to 9.2% in January, the Jakarta Post reported.

The rupiah was seen trading at 12,160 to the dollar.

The Indonesia bonds due 2014 closed at 97 bid, 97.5 offered, while the bonds due 2019 closed at 96.5 bid, 97 offered.

Also in Asia, in the Philippines, the central bank predicts another drop in inflation during February, according to the Manila Times.

Inflation is likely to be somewhere between 6.6% and 7.5% from 7.1% in January.

"The series of rollbacks in local diesel prices and fare reductions as well as lower international prices of oil could cause a month-on-month decline in inflation," said bank governor Amando Tetangco.

Still, price increases on foods and processed fuels may push inflation into the higher end of the predicted range, the report said.

The peso was seen trading at 49.045 to the dollar.

The Philippine government bonds due 2030 were seen at 113 bid, 114 offered.

Elsewhere, Pakistan's sovereigns due 2017 were quoted at 44 bid, 48 offered.

Emerging Europe holds

Emerging Europe eased lower after Monday's larger losses and was subject to more spread widening.

In Russia, the national oil firm OAO Gazprom "will not impose penal sanctions on Naftogaz," said chief executive officer Alexei Miller about Ukraine's national energy company NJSC Naftogaz Ukrainy.

Miller has been in talks with Naftogaz chief Oleg Dubina to negotiate through Naftogaz requests that Gazprom sell Ukraine less gas than agreed to by prime ministers Vladimir Putin and Yulia Timoshenko.

Also in Ukraine, the government voted to remove foreign minister Volodymyr Ohryzko after what was seen as his poor handling of a recent border dispute with Romania and his hard-line approach to Russia, reports said.

Also in emerging Europe, Turkey is likely to reach a loan agreement with the International Monetary Fund after the March 29 elections, said Arzuhan Dogan Yalcindag, the chairwoman of Turkish Industrialists' and Businessmen's Association, according to the Hurriyet Daily News.

"It seems like the new deal will be signed after the elections. This is saddening," Yalcindag said in the report.

Yalcindag's organization has been lobbying the government to reach a deal with the IMF.

"The public debt is expected to be around $50 billion. So it is not only about the private sector's external loans. Therefore the IMF and its financial resources are essential for Turkey. We wish it didn't have to be, but this is the reality," she 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.