Investors await Brexit vote; Lat-Am activity ‘muted’ but tone firm; Jiangsu Hanrui eyes notes

By Christine Van Dusen

Atlanta, June 21 – Emerging markets investors were focused on Tuesday on the upcoming Brexit vote and awaited the United Kingdom’s decision about staying in or exiting the European Union. But unlike some other sessions, this wait-and-see stance did not spawn a negative environment for the asset class.

“Investors are rather anticipating the UK referendum on its EU membership that will take place on Thursday,” a London-based strategist said. “This week has seen markets being buoyed by hopes that the ‘remain’ camp will eventually succeed. Nonetheless, the outcome remains highly uncertain.”

A poll, published Tuesday morning, indicated a two-point lead for the “leave” camp, he said.

In trading from Latin America, volumes and inquiry were “fairly muted” on Tuesday but better than the previous session, a New York-based trader said.

“And the breadth of inquiry is also much deeper than the last three to four sessions,” he said. “Tone remains firm across most high-grade and high-yield credits, and most clients’ flows are pretty evenly balanced.”

Mexico-based Cemex SAB de CV, however, continued to see better selling, he said.

“Consistent, but not heavy,” he said. “But this has been taking place the better part of two months and selling has not increased as the curve has strengthened the last few sessions.”

Banks from Mexico were firmer, he said, with “decent volumes going through, and balanced inquiry,” while high-grade corporates from Mexico were “lagging the slight move higher we’ve seen overall, after Brexit fears were somewhat alleviated yesterday.”

Banks and corporates from Colombia were mostly unchanged, while banks from Peru have managed small gains on the week, he said.

High-grade bonds from Chile were firmly bid and widened before tightening later in the day, he said.

Oi seeks bankruptcy protection

In other news from the region, Brazil-based telecommunications company Oi SA filed for bankruptcy protection after failing to agree on a debt-equity swap with its creditors.

The company is the fourth-largest in the sector and has to support a large fixed-line network while also managing mobile and pay-TV networks, according to a report from Cedric Rimaud, director of emerging markets research for Gimme Credit, an independent research service on corporate bonds.

“The total debt amounts to $19 billion, and there is said to be $14 billion of outstanding credit-default-swaps written on the company’s creditworthiness, reducing the incentives for some bondholders to agree to the terms of the restructuring,” he wrote.

Middle East busy

From the Middle East, trading was busy for much of the session, with a few low offers on recent new issues that were lifted as the session went on.

Abu Dhabi and Qatar saw their paper trade higher, then fade slightly, a London-based trader said.

“It’s a very mixed and balanced bag, depending on the bond and technicals,” he said. “Perpetuals, if anything, are better-offered.”

Abu Dhabi National Energy Corp.’s bonds remained popular, as did DP World’s 2023s.

Russia may face more sanctions

Investors were also watching Russia, where Ukraine-related sanctions were expected to be extended by the European Union.

“Recent media reports have, however, thrown light on diverging views among officials,” the strategist said.

He pointed to the foreign minister in Germany, who has suggested that the European Union could “lift sanctions step-by-step as Russia fulfills parts of the Minsk accords,” he said.

And Turkey’s Turkiye Finans Katilim Bankasi AS received some attention on Tuesday after Fitch Ratings upgraded the bank to BBB after the completion of Qatar National Bank’s majority acquisition.

Jiangsu Hanrui on roadshow

China’s Jiangsu Hanrui Investment Holding Co. Ltd. is on a roadshow for a dollar-denominated issue of notes, a market source said.

Guotai Junan International is the sole global coordinator and, with China Securities International, the joint bookrunner and joint lead manager for the Regulation S deal.

The Zhenjiang-based company focuses on infrastructure construction, civil engineering and real estate development.

China Southern seeks issuance

China Southern Airlines Co. Ltd. is looking to issue up to RMB 4.7 billion of notes, according to a company filing.

The tenor of the Securities and Exchange Commission-registered deal, which could be issued in tranches, will not exceed five years.

The proceeds will be used for working capital, to replace bank loans, to improve the company’s debt structure and to lower financial costs.

Other details were not immediately available on Tuesday.

The airline is based in Guangzhou, China.

Wuxi prints bonds

On Monday, China’s Wuxi Construction and Development Investment Co. Ltd. priced a $300 million issue of 3¼% notes due 2019 (expected ratings: /BBB/BBB+) at 99.983 to yield Treasuries plus 240 basis points, a market source said.

The notes were talked at a spread of 260 bps.

Standard Chartered Bank, JPMorgan and Wing Lung Bank were the joint global coordinators and – along with China Minsheng Banking, Shanghai Pudong Development Bank, HSBC and Bocom International – the joint bookrunners and joint lead managers for the Regulation S deal.

Wuxi Construction is a Wuxi-based developer, operator, manager and builder of property.

© 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.