South Africa dips, Turkey narrows; Bank of Sharjah sets roadshow; Russia, Nordgold get attention

By Christine Van Dusen

Atlanta, Jan. 30 – Bonds from South Africa underperformed and Turkey opened tighter– even after the latter sovereign suffered a ratings downgrade – on a quieter Monday, as many Asian markets remained on holiday for the lunar new year.

“Headlines from the weekend were mainly centered on Trump’s executive order to ban immigrants from seven predominantly Muslim countries, notably Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen,” a London-based analyst said. “Trump’s executive orders weigh as a cloud of uncertainty across asset classes.”

Indeed, growing concern among United States allies led to some profit-taking on Monday, according to a report from Schildershoven Finance BV.

Meanwhile, the euro zone is awaiting elections, he said.

Looking to Turkey, the sovereign was downgraded on Friday by Fitch Ratings to BB+ from BBB-. And S&P revised its outlook on the BB rating to negative from stable.

Turkey’s ratings are now fully in the non-investment grade territory, the analyst said.

“While Fitch’s decision, in our opinion, was in line with market consensus, S&P’s revision of the BB rating to outlook negative from stable posed a surprise,” he said.

“Nonetheless, Turkish credit starts the week in a very resilient tone,” he said, noting that sovereign credit default swaps spreads entered the week between 4 basis points and 5 bps tighter and cash bonds six bps to 7 bps tighter.

The underperformer on Monday, instead, was South Africa. Sovereign cash was 3 bps to 5 bps wider heading into the morning session after senior leaders of the African National Conference said that president Jacob Zuma threatened to fire ministers who had called for him to step down.

“As we move into February, it will be a busy schedule, with nonfarm payrolls being the highlight at the end of the week,” he said.

Russia eyed

Investors were also keeping an eye on Russia following Trump’s weekend meeting with Russian president Vladimir Putin. The two leaders “pledged better business ties and cooperation in fighting the Islamic State,” Schildershoven said in its report.

“The chance to restore the US-Russia ties may support investors’ demand for the Russian assets, including eurobonds,” the report said.

Nordgold could buy shares

In other news from Russia, Moscow-based Nordgold received attention on the news that the mining company may buy out minority shareholders as a means to improve its credit metrics.

“Nordgold may delist from the London Stock Exchange or buy back stakes from minority shareholders,” Schildershoven said.

The company’s bonds didn’t move much on the news, the report said.

Yingde in spotlight

From Asia, China’s Yingde Gases Group continued to grapple with infighting among its directors and major shareholders while United States-based Air Products was said to be mulling a solid offer.

“The support of the Yingde Gases’ sale plan to Air Products by the financial adviser for Yingde directors Sun Zhongguo and Trevor Strutt is a positive factor for the company’s bonds,” Schildershoven said in a report. “The sale of the company is the best solution for the bondholders.”

Bank of Sharjah sets roadshow

In deal-related news, United Arab Emirates-based Bank of Sharjah will set out on Tuesday for a roadshow to market a dollar-denominated issue of benchmark-sized notes due in five years, a market source said.

Bank ABC, Emirates NBD Capital, JPMorgan and National Bank of Abu Dhabi are the bookrunners for the Regulation S deal.

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