EM feeling better than prices show; Argentina leads gains in trading; Newland prices $220 million

By Aaron Hochman-Zimmerman

New York, Nov. 14 - Emerging markets showed more improvement in sentiment than actual value, but did manage to reverse a downward trend which began late last week.

Rather than pitching excess weight from the primary calendar, as has happened in recent sessions, a deal priced to end a streak of postponements.

Panama's Newland International Properties sold a $220 million seven-year deal at 96.934 with a coupon of 9½% to yield 10¼%.

"If they make it, it will be a miracle," a syndicate official said when price talk was revised to the 10% area from 9 3/8% to 9 5/8%.

When it priced, he said: "I guess that is good news for the market, and even better for them."

In trading, Argentina gained the most ground in the high-beta arena as 1.25 was added to its discount bonds due 2033.

There was "a little bit of upside [Wednesday]," according to Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

"People are starting to feel a little more comfortable with the U.S. consumption situation," he said.

"This may be the last window of opportunity with full-fledged liquidity," he said referring to the upcoming weeks shortened by holidays.

"Volume and liquidity will compress greatly," he said.

In general "it feels like we've hit December early," a trader said about a market he sees as slowing already.

"The overall market is still quite heavy," another trader said.

"You'll need multiple days of real stability" before risk reduction eases, he said.

"It's going to be choppy for the next few sessions," he added.

On Wednesday, volatility hung near Tuesday's close for most of the session before spiking up 1.84 to end at 25.94, according to the VIX index. The index is the widely accepted measure of market volatility.

As a sector, emerging markets tightened, according to JP Morgan's EMBI+ index, which narrowed 5 basis points to a spread of 217 bps. The EMBI+ gauges the amount of extra yield investors require to hold assets in emerging markets debt.

Sentiment higher than prices in emerging Europe

Investors in emerging Europe woke up to find a better tone in the wake of a strong showing in Asia, although "it hasn't really followed through to the same level in Europe," a trader said.

"It all seems slightly better today," he said, yet "it's in the ether, it's theoretically better."

Turkey has still held back from making a large-scale incursion into Iraq, even after military flights over Kurdish towns were presumed by some to be reconnaissance missions.

Turkey's benchmark issue due 2030 was spotted unchanged at 158 bid, 158.25 offered.

Russia's domestic gas and energy prices will not be influenced by higher fuel prices around the world, first deputy prime minister and OAO Gazprom chairman Dmitry Medvedev told the Interfax news agency.

"There are clear directives, the government has decided on how to handle the gas and energy price policy for the next few years, there will be no surprises and all parameters we have agreed upon," he said.

"The parameters that would establish domestic prices as profitable as export prices will be met," he added.

The Russian sovereigns due 2030 were down by 0.25 to trade at 112.625 bid, 112.75 offered.

LatAm stronger on U.S. optimism

With the high-betas in front, Latin American trading strengthened, thanks to rising optimism over the U.S. economy.

In Argentina, the nomination of Martin Lousteau for minister of economy is seen as "a very minor positive," according to IDEAglobal's Alvarez.

Still, any amount of stability that the former head of the Banco de la Provincia de Buenos Aires brings as a "sort of a continuity figure" is better than the likely negative reaction to any of the other candidates for the position, he said.

Argentina's 8.28% discount notes were up 1.25 to trade at 97 bid, 97.5 offered.

In Venezuela, president Hugo Chavez indicated during an interview with Venezuelan state-run television that Spanish commercial interests may be harmed by the ongoing quarrel between Chavez and king Juan Carlos of Spain.

After a reported outburst from Chavez, king Juan Carlos told Chavez to 'shut up' at the Ibero-American Summit in Chile which precipitated a review by the Venezuelan government of political, diplomatic and economic policy toward Spain.

Chavez has stated that he does not wish for a lasting conflict, but has continued to use harsh words in reference to the king, as well as calling former prime minister Jose Maria Aznar a fascist.

"I don't think that anything will come from it," Alvarez said.

Despite his eruption at the summit, Chavez thinks of Spain as an economic ally and an "entry point" into the European economy, he said.

The Venezuelan 9.25% sovereign bond was higher by 0.75 to trade near 104.65 bid, 105.4 offered.

Less volatile Brazil saw its sovereigns due 2037 up approximately 0.75 to trade at 113.5 bid, 113.9 offered.

The Brazilian 11% notes due 2040 were spotted at 134.15 bid, 134.35 offered.

In Asia, strong morning fades

The benchmarks in CDS and foreign exchange were shining in Asia, but "other than that there wasn't much," a trader said.

The benchmark performances offer "somewhat of a misleading image," he said, adding: "The overall market is still quite heavy."

The Philippines was rocked Tuesday by a terrorist bomb that killed Filipino congressman Wahab Akbar, however the attack did not translate into market instability.

"It was a targeted assault on the congressman," the trader said.

Most believe "it's an isolated incident," he said.

The Philippines' sovereigns due 2030 were quoted unchanged at 131.25 bid, 132.25 offered.

Indonesia's benchmark sovereigns lost 0.25 to trade around 103.5 bid, 104 offered.

In Pakistan, an opposition leader and former cricket star Imran Khan was arrested during his first public appearance since the state of emergency was declared.

He was arrested before he could address a crowd of student protestors at the University of Punjab in Lahore.

President Pervez Musharraf still insists he will eventually restore the country's democratic institutions.

The infrequently traded Pakistani bonds due 2017 were spotted at 86 bid, 88 offered.

Primary stops the bleeding

The primary market, which had watched a parade of new deals postponed since Nov. 8, finally saw a deal completed.

Newland International Properties priced a $220 million seven-year senior secured bond (Ba3//BB) at 96.934 with a coupon of 9½% to yield 10¼%.

Talk had been revised up to the 10% area from 9 3/8% to 9 5/8% shortly before the pricing.

Bear Stearns had the books for the deal.

The amortizing bonds feature three years of call protection and have an average life of five years and six months.

Proceeds from the sale will be used for the construction of a 69-story resort called the Trump Ocean Club. Additional proceeds will be used to refinance existing debt.

Newland International is a property developer based in Panama.

Argentina (B3/B+) announced plans for a $250 million 10-year local reopening of its 7% bonar bond.

The offer aims to bring a 10.36% yield which translates to approximately a 608 bps spread over Treasuries.

The bond has recently traded between 603 bps and 613 bps over Treasuries.

The United Arab Emirates' Jebel Ali Free Zone FZE has set an amount of $1.5 billion to $2 billion for its two-tranche debut bond offering (A1/A+/).

A conventional dollar-denominated tranche and a five-year floating dirham-denominated sukuk will be offered in equal amounts.

The roadshow will be held until Friday.

The Dubai-based trade zone authority asked Barclays, Deutsche Bank, Dubai Islamic Bank and Lehman Brothers to act as bookrunners.

Jafza is affiliated with Dubai Ports World.

Also from the United Arab Emirates, Dubai Electricity & Water Authority will issue a benchmark-sized senior unsecured three-tranche offering (A1//AA) which will include a five-year floating rate sukuk, a five-year fixed rate conventional bond and a 10-year fixed rate conventional bond.

All of the notes will be denominated in dollars.

Barclays, Citigroup, Dubai Islamic Bank will bring the deal to market.

DEWA is a Dubai-based utility company.

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