Emerging markets unchanged; Argentina sees low for quarter; Mexico, Gazprom bring deals

By Aaron Hochman-Zimmerman

New York, March 27 - Emerging markets ended quietly unchanged as equities scaled the peaks and valleys.

Investors yawned through a slow day that saw a few losses in Latin America, mixed with light price action across the sectors.

In trading, Argentina led the retreat for the second day in a row as its farm crisis persisted. It dropped 1 point from its discount bonds due 2033.

The primary, after a long winter's nap, saw new paper offered by Mexico, which brought an offering of warrants to exercise for 21 of its outstanding sovereign issues. Also, Russia's OAO Gazprom will release dollar-denominated loan participation notes.

True to its name, volatility whipped around on Thursday but ended lower by 0.20 at 25.88, according to the VIX index. The index is a common measure of market volatility.

With what Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal, called a "slow, but reoccurring retreat in Treasuries," emerging markets wound tighter by 5 basis points to a spread of 294 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimates the amount of extra yield investors will require to keep assets in emerging markets debt.

LatAm flat, Argentina sinks

In Latin American trading, "I think Argentina had a pressured day, everything else traded to the lateral side," said IDEAglobal's Alvarez.

Venezuela has been getting hit along with Argentina, a trader said.

Venezuela was "rattled" on Wednesday after it announced a new method for calculating inflation, Alvarez said.

"It smells very much like they'll go the route of Argentina," he said referring to the widely held belief that Indec, Argentina's statistics reporting agency, takes a great deal of liberties with the figures it publishes.

"Then throw in the fact that crude traded at over $107 per barrel," he said, as oil prices have kept Venezuela from suffering too much.

Still, the bonds have underperformed lately, he added.

The 9¼% government bonds due 2027 shed 1 point early in trading but scraped back to a loss of 0.5 point to 95.15 bid, 95.75 offered.

Brazil kept its gains narrow during Thursday's trading.

The 11% bonds due 2040 added just 0.1 point to 133.95 bid, 134.05 offered, while the 7 1/8% bonds due 2037 were better by 0.25 point at 108 bid, 108.3 offered.

In corporates, GOL Linhas Areas Inteligentes SA and TAM SA are "each softer today as JetBlue pressures both," the trader said.

Farm strike enters third week

In Argentina, work stoppages, protests and blockades have left shelves understocked with meat, dairy and grain products as protests became increasingly violent.

Farmers claim increases in export taxes are taking too great a toll on their livelihoods, but president Cristina Kirchner has refused to budge. Even the government of former president Nestor Kirchner was more forgiving of similar demonstrations, the Buenos Aires Herald reported.

The government has insisted that the revenues are necessary and help fight inflation.

Both sides have said they will make no concessions, but market sources have indicated that Kirchner will likely give up ground if the protests become more violent and paralyzing to the nation's economy.

Local papers did give some indication that the strike may be coming to an end, a trader said.

The sovereigns have taken most of the pressure, the "corporate market is pretty much dried up for now," he said.

The 8.28% Argentine discount bonds due 2033 shed 1 point to 84.15 bid, 84.90 offered.

"The bonds are at their lowest point since the fourth quarter last year," Alvarez said.

Mexico offers warrants, Gazprom LPNs

While news of loan participation notes from Russia's OAO Gazprom hit the airwaves, Mexico returned to the sovereign stage with an offer of warrants.

The United Mexican States (Baa1/BBB/BBB+) announced the offer of 1 million series XWA08 debt exchange warrants and 250,000 series XWB08 debt exchange warrants that will allow holders to trade a series of 21 older bonds for five newer local currency exchange securities.

The warrants will be exercisable for the exchange securities on Oct. 9. The government may elect to postpone the exercise date until Oct. 24.

If the MBonos securities, which have different minimum values assigned, are below their price limit on the exchange date, the warrants will be voided.

The Udibonos securities will be exercised at the applicable dollar-peso or euro-peso exchange rates on Oct. 7.

The warrants will be issued via auction from March 27 to April 3.

Barclays and Merrill Lynch will act as bookrunners for the offering.

After the announcement of the warrant issue, the Mexican sovereigns due 2017 slipped 0.2 point to 104.9 bid, 105.1 offered.

Also, Gazprom (A3//BBB-) announced it will offer dollar-denominated loan participation notes from a $30 billion program.

Morgan Stanley and Citigroup have been asked to act as bookrunners for the deal.

Proceeds are intended to refinance short-term debt and for general corporate purposes.

Gazprom is a Moscow-based government-run oil producer.

In India, Corporation Bank informed the Bombay Stock Exchange that it has issued Rs. 30 billion in unsecured redeemable non-convertible non-cumulative subordinated bonds.

The 10-year tier II bonds were priced at par of Rs. 1 million with a 9.4% coupon, which is payable annually. There are no calls or puts.

The government-controlled investment and retail bank is based in Pandeshwar, India.

In the Middle East, Ampal-American Israel Corp. (A2, local) announced plans to offer $175 million in series B debentures.

Ampal-American is a Tel Aviv-based investment firm.

Asia frozen flat

Meanwhile, silent Asian trading was "just wrapped around Asian closing levels," a trader said about the overseas markets.

Issues have kept the pattern of following externals, but "in a tight range," he said.

In the Philippines' manufacturing sector, output increased by 0.5% in January compared to 2% growth in January of 2007.

The figure did surpass the 0.1% growth in December of 2007, the Manila Times reported.

"The increase was mainly due to the expansion in factory output of the 12 major sectors, with the two-digit increases registered by the following: leather products, miscellaneous manufactures, tobacco products, wood and wood products, fabricated metal products, beverages, and machinery excluding electrical," the national statistics office said in the report.

The Philippine sovereigns due 2030 were seen flat at 130.625 bid, 131.125 offered.

In Indonesia, the bid by Malayan Banking Bhd. to buy a 56% stake in Bank Internasional Indonesia (BII) from Singapore's state-owned Temasek Holdings Ltd and South Korea's Kookmin Bank for $1.5 billion is MayBank's move to push itself into Indonesia's market.

Still, Maybank may be overpaying for the opportunity, analysts said, according to Indonesia's Antanra News Agency.

MayBank also recently grabbed a 15% stake in Vietnam's An Binh CJS bank for 430 million ringgit, the report said.

The Indonesian government bonds due 2017 were better by 0.25 point at 105.25 bid, 105.75 offered. The bonds due 2018 were also seen at 105.25 bid, 105.75 offered.

Pakistan's foreign office was busy Thursday denying any unusual connections exist between Tuesday's swearing in of prime minister Yusuf Raza Gillani and the arrival of U.S. deputy secretary of state John Negroponte and assistant secretary of state Richard Boucher, the BBC reported.

The United States has had a convoluted relationship with the Pakistani government, which is an ally against pro-Taliban militants but has also been widely criticized for human rights abuses.

"There's been some short covering over there," the trader said about the Pakistani bonds.

The Pakistani government bonds due 2017 were seen holding at 86 bid, 88 offered.

Hushed emerging Europe ends flat

Emerging Europe trudged through a quiet day with some slight gains as equities rode the rollercoaster in the United States.

In Russia, natural resources minister Yuri Trutnev announced that the government plans to spend up to $168 billion on the development of natural resources before 2020.

Nearly 90% of the money will come from private investors, Trutnev said.

Projects attached to the money will mostly be focused on developing hydrocarbons with some attention paid to precious and ferrous metals.

Also, the central bank reported Thursday that its foreign reserve reached $502.2 billion on March 21.

The Russian government bonds due 2030 added 0.3 to 115.4 bid, 115.55 offered.

Elsewhere, Ukraine's sovereign bonds due 2016 were quoted at 99 bid, 100 offered.

Meanwhile in the Middle East, after a pipeline was bombed in Iraq, oil prices went reeling out to $107 per barrel, according to a BBC report.

The city of Basra, where the pipeline is located, has become the scene of new clashes between U.S. troops and militia fighters loyal to cleric Moktada al-Sadr.

Light sweet crude was later seen lower but edged back to more than $107 per barrel.

Turkey reworks GDP

Elsewhere in Turkey, the nation's GDP was recalculated at $651 billion for 2007 when tallied under the new system, said deputy prime minister Nazim Ekren, according to the Turkish Daily News.

Ekren also announced that the country's per capita income was $9,000, but the government has set a target of $10,000 per capita income by 2013.

"The period 2002 to 2007 has been one of normalization for Turkey," Ekren said in the report.

"Structural reforms on the macro level, plus competition-enhancing micro reforms in goods and services sectors, will help us reduce inflation," he said.

The economy has grown between 6.5% and 7% since 2003.

The Turkish sovereigns due 2030 were spotted unchanged at 150.125 bid, 150.375 offered.

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