Emerging markets investors' mood dampens as E.U. cancels part of summit; IPIC on deck

By Christine Van Dusen

Atlanta, Oct. 25 - Emerging markets assets had a bit of a topsy-turvy day on Tuesday, with optimism at the open once again giving way to some concern about the European economic situation, given that European Union leaders canceled part of the summit planned for Wednesday.

"It was another fairly constructive day with only the headlines, mid-afternoon, upsetting the apple cart," a trader said. "Otherwise we saw very solid performance by the usual suspects."

Helping to buoy the mood on Tuesday was Monday's successful deal from Mexico-based America Movil SAB de CV. The telecommunications company priced £500 million 5% notes due 2026 at 99.28 to yield 5.007% and €1 billion 4 1/8% notes due 2019 at 99.049 to yield 4.268%.

"It's easy to be positive now when you look at America Movil including a long-dated sterling tranche in their new issue," a trader said. "The streets of EM risk are once again paved with gold. Retail investors are buying again. The market has moved beyond the Euro summit."

But the market lacked substantial volume, he said.

"There are simply no sellers, and with retail investors just consistently buying, the cumulative effect is powerful," he said. "All this demand has meant a return to full screens in the broker market."

Dubai and Dubai Water and Electricity Authority were particular standouts on Tuesday morning. Both were about 5 basis points to 7 bps tighter, and DEWA's 2020s closed above par.

"What happened to that tremendous value I mentioned exactly three weeks ago? Well, the short answer is it's rapidly being evaporated as cash-rich accounts and 'jumping on the bandwagon' locals push us higher," a trader said. "It's a thin, painful market."

IPIC tightens

Demand was also noted for Abu Dhabi-based International Petroleum Investment Co.'s 2020s and 2021s, which are 15 bps tighter on the week. The oil industry investment company is on a roadshow for an issue of notes via Barclays Capital, JPMorgan, Mitsubishi UFJ Securities, Natixis and Societe Generale.

"There was some talk and rumors today in the market of IPIC's tenors and guidance [for its upcoming issue of notes,]" said a source close to the deal. "This is pure speculation as nothing has been released."

In other trading on Tuesday, Qatar's Qtel International remained solid, with its 2025 notes about 49 bps tighter on the month.

"Qatari banks also continue to do well," he said.

Lebanon holds, Kipco performs

Lebanon was holding firm on Tuesday, but also quiet ahead of a probable debt swap, a trader said.

And Kuwait names did well, he said, with Kipco 45 bps tighter on the week.

"Burgan Bank was also popular in the Street," he said. "Burgan is trading with a 108 handle. As the market continues to perform, we're seeing some bids creep in."

Dar Al-Arkan International Sukuk Co. II's 2015s were in demand and good buyers were seen for the issuer's 2016s.

"But there's no demand for their 2014s," he said. "Aldar Properties is still doing very well, however, and still refuses to give in lightly."

MENA in focus

Also from the Middle East, First Gulf Bank saw buyers near 102.5 while Dubai World's 2017s closed 11 bps tighter after third-quarter container volume rose 10%, a trader said.

"Banking results seem pretty solid, from what I've seen, in the region," he said. "And bank paper remains well bid. I'm waiting for some better spread entry points on most of them."

Looking to Africa, demand was sighted for Nigeria-based GTB Finance BV's 2016s.

"The bond looks OK versus Nigeria's 2021s, especially the month-on-month change, and will also benefit in a few months when the 2012s are paid down," he said. "African Export-Import Bank's 2016s were holding steady, 5 points off the low print."

Turkish banks see buyers

Tuesday saw Turkey start the session with fairly low activity.

"Retail investors are nibbling on Akbank papers and the Kuveyt Turk in small amounts," a trader said. "Kuveyt Turk has been really solid as it's tightly held, but that was also hit on the Street in the confusion after the E.U. finance ministers' meeting cancellation."

He also saw buyers for Garanti Bankasi AS' 2021s and sellers for Isbank's 2016s. And Yapi Kredi was lagging.

Yuksel trades up

Solid performance was noted for Turkey-based Yuksel Insaat even after Moody's Investors Service changed the company's outlook to negative from stable. Yasar Holdings also got a boost.

"Both are up 2½ points today on the back of strong U.S. retail demand, despite Moody's changing the outlook of Yuksel," he said.

The long end for the sovereigns was firmer. "But volumes going through are pretty thin," the trader said.

By the end of the day, cash bonds in Russia, Ukraine and Turkey's corporates were seeing strong demand, with just the Turkey sovereign lagging.

"Ukraine is firmer but not seeing quite the same strength as Russia," a trader said.

© 2015 Prospect News.
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