EM investors remain in good mood ahead of holiday; volumes thin, primary market quiet

By Christine Van Dusen

Atlanta, Dec. 21 - Emerging markets assets finished the week with thin volumes as the United States' fiscal-cliff negotiations hit a snag, raising the specter of another recession, and investors looked ahead to the Christmas holiday.

"A vote will now not occur until after Christmas giving Congress only a week to determine a solution," said a London-based analyst.

The Markit iTraxx SovX index spread started Friday 1 basis point wider while the corporate index tightened by 1 bp.

"Market sentiment continued to sour in European trading hours after Republican leader Boehner was forced to withdraw his 'Plan B' fiscal-cliff bill due to lack of support," Barclays said in a report. "News reports suggest that some Republicans were unwilling to vote for a bill that included any form of tax increase."

Still, emerging markets investors managed to maintain a mostly positive attitude on Friday.

"The general mood was very constructive," the analyst said. "Prices were moving on thinner volumes, as usual."

In the Russian space, Vimpelcom, Evraz, Severstal and Sberbank moved the most. And flows were mixed for names from Turkey.

"Generally better buyers of Akbank's 2022s and sellers of Vakifbank's 2022s taps around," she said.

And Turkey-based Finansbank AS's 2017s moved 17 bps tighter amid rumors of acquisition interest from Qatar National Bank SAQ.

In other news, money continues moving into emerging markets bond funds - they had their 28th straight week of inflows for the week ended Dec. 19, according to data-tracker EPFR Global.

"Among the emerging markets bond funds, those with local currency mandates again outgained their hard-currency counterparts, this time by a 2-to-1 margin," EPFR said in its report. "China bond funds again stood out among the EM bond country fund groups."

Qatar names in focus

In trading, Qatar Islamic Bank SAQ's recent issue of 2½% notes due Oct. 10, 2017 that priced at par was seen Friday at par bid, 100 3/8 offered, a trader said.

Deutsche Bank, HSBC, Qinvest and Standard Chartered were the bookrunners for the Regulation S issue of Islamic bonds.

Also from the Middle East, the recent $1 billion issue of 3¼% notes due 2023 from Qatar Telecom QSC (Qtel) that priced at 98.721 through subsidiary Qtel International Finance Ltd. traded Friday at 99.85 bid, 100.10 offered.

On Thursday the notes were seen at 99.85 bid, 100.05 offered, a trader said.

Barclays, HSBC, Mitsubishi UFJ, Mizuho Securities, Morgan Stanley and QNB Capital were the bookrunners for the Rule 144A and Regulation S transaction.

Saudi Electric inches up

The 2017 notes from Saudi Electricity Co. were quoted Friday at 103.17 bid, 103.42 offered after Thursday's levels of 103.18 bid, 103.43 offered on Wednesday.

The company's 2022 notes - which traded Thursday at 108.10 bid, 108.35 offered - were seen Friday at 108 bid, 108¼ offered.

Quiet session for Ukraine

Bonds from the Ukraine sovereign remained quiet at the end of the week, said Svitlana Rusakova of Dragon Capital.

"It didn't feel like anyone wanted to cross the spread and trade or even tighten the market," she said.

City of Kiev's 2015s traded at 92½ bid, 94½ offered while its 2016s were seen at 92½ bid, 94½ offered.

But corporates were busier, with two-way flows noted for Mriya Agro Holdings at 101 bid, 102½ offered.

"Also enjoying some demand were Metinvest's 2015s - at 102½ bid, 103½ offered - and Oschadbank at 94¼ bid, 95¼ offered," she said. "Even less liquid issues such as Ukreximbank 2016s and Privatbank 2016s saw some activity."

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