Solid week for EM; Turkey, Zambia outperform; El Salvador, Ghana underperform; DIB picks banks

By Christine Van Dusen

Atlanta, Feb. 3 – Emerging markets assets finished the week on strong footing, even amid concerns about the global political picture, with Turkey and Zambia standing out as outperformers.

“Sentiment in EM remains solid with Trump now two weeks in office,” a London-based analyst said. “Without doubt, political uncertainty remains a key risk in the weeks ahead.”

Oil contributed to the bigger picture, with some gains over the week amid ongoing reductions by OPEC members. Kazakhstan on Friday said it has cut production by more than 1.67 million barrels per day.

“It was another rock-solid week in EM,” the analyst said. “In a busy week, in terms of central banks and macro, we saw the dollar retreating and U.S. rates tightening, which provided a supportive backdrop for most of the week before both reversed into Friday ahead of nonfarm payrolls data from the U.S.”

January nonfarm payrolls for the United States grew by a greater-than-expected 227,000, while the unemployment rate edged up to 4.8%.

Overall, spreads tightened for emerging markets credit, with Zambia a “stellar outperformer” after inviting the International Monetary Fund for program talks. The sovereign’s 2024s tightened by about 50 basis points over the week.

El Salvador was an underperformer as a result of political concerns. And Ghana remained volatile after findings of undisclosed fiscal spending.

Turkey “continued its relief rally,” he said, noting that the sovereign’s 2026s tightened 15 bps.

And banks outperformed the sovereign curve, “defying concerns of a sell-off after Fitch’s downgrade last week,” he said.

Yapi Kredi considers issuance

In particular, Turkey’s Yapi ve Kredi Bankasi AS (Yapi Kredi) received some attention on after releasing earnings that showed a growth in deposits.

The bank “might also return to markets to refinance its upcoming redemption,” the analyst said. “The bank has a maturing eurobond in five days – $500 million – and in the conference call the bank said that all options, including a eurobond issuance, are still on the table.”

Primary could perk up

Looking to the primary market, activity is expected to pick up next week as many Asian investors return from the Lunar New Year holidays.

Nigeria and Tunisia are rumored to be considering deals, denominated in dollars and euros, respectively.

And the Province of Buenos Aires is said to be preparing for a roadshow to market a dollar deal.

DIB mandates bookrunners

In other deal-related news, Dubai Islamic Bank PJSC has mandated Bank ABC, Boubyan Bank, Emirates NBD, HSBC, Maybank, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered as bookrunners for a dollar-denominated issue of Islamic bonds, a market source said.

The deal is expected to be benchmark-sized.

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