EM assets stay solid amid revived economic concerns; Poland, Qatar bonds may be good bets

By Christine Van Dusen

Atlanta, Aug. 10 - Emerging markets assets remained somewhat firm on a slow summertime Friday, even as economic data from China - lower-than-expected rises in imports and exports for July - renewed concerns about the global financial picture.

"The market seems rather complacent regarding global macro risks, which may continue for a few weeks. It is too early to call recent policy intervention - particularly the potential ECB bond purchases - a game changer for emerging market assets," according to a report from Barclays Capital. "The room for disappointment could outweigh any potential positive news or the limited positive news over the past few weeks. We remain cautious, especially as valuations appear stretched, and suggest investors look for cheap hedges."

In trading on Friday, Sharjah Islamic Bank's 2016 notes closed Friday at 106.62 bid, 107.62 offered, unchanged from Thursday.

Bahrain's 2014 notes also finished the week unchanged at 106.25 bid, 107.25 offered.

The sovereign's 2022 notes closed Friday at 100.70 bid, 101.20 offered after Thursday's close of 100.66 bid, 101.16 offered.

Bahrain-based BBK's 2015 notes ended Friday at par bid, 101 offered, unchanged.

In other trading from the Middle East, Mumtalakat Holding's 2015 bonds closed Friday at 102.38 bid, 103.38 offered. On Thursday the notes were seen at 101.25 bid, 102.25 offered.

The recent notes from National Bank of Abu Dhabi - a $750 million issue of 3% notes due 2019 that priced at 99.731 to yield mid-swaps plus 180 bps - were quoted at 99.85 bid, 100.15 offered after closing Thursday at par bid, 100 1/8 offered.

Citigroup, JPMorgan, Standard Chartered and National Bank of Abu Dhabi were the bookrunners for the Regulation S-only deal.

Croatia could perform

Bonds from Croatia, Turkey and Latvia, particularly the five- to seven-year sector, have further room to perform, Barclays Capital said in a report.

"The risk of a downgrade to high yield has not vanished for Croatia, but the comparatively stable political situation and comfortable financing position of the government is in stark contrast to some of Croatia's regional peers, particularly Serbia," the report said.

"Serbian credit has underperformed significantly as changes to the central bank law, restricting its independence, prompted the resignation of the central bank governor, put in jeopardy its relations with the [International Monetary Fund and European Union] and was one of the reasons for the rating downgrade by Standard & Poor's."

Investors could also find good opportunities in the short end of Poland and the long end for Qatar, Barclays said.

"Qatar's spread curve seems rather flat historically and versus peers," the report said.

Africa in focus

Looking to Africa, it was a solid week for notes from South Africa, as well as Nigeria's Access Bank plc, a London-based trader said.

The $350 million issue of 7¼% notes due 2017, quoted Thursday at 99.75 bid, 100.50 offered, traded Friday at par bid, 100.75 offered.

Citigroup and Goldman Sachs were the bookrunners for the Rule 144A and Regulation S deal.

Tunisia's 2013 notes closed Friday at 101.75 bid, 102.75 offered, unchanged from Thursday. The sovereign's 2020 notes, which ended Friday at 95 bid, 97 offered, were also unchanged.

Egypt's 2020 bonds finished Friday at 97.50 bid, 98.50 offered after closing Thursday that 97.37 bid, 98.37 offered. The sovereign's 2040 bonds ended Friday at 88.25 bid, 89.25 offered after Thursday's close of 88.37 bid, 89.37 offered.

And Senegal saw its 2021 bonds finish the week at 113.75 bid, 114.75 offered, following Thursday's levels of 114 bid, 115 offered.

PDVSA 2015s recommended

From Latin America, local law bonds from Argentina continue to normalize, Barclays said. "We remain cautious on the credit, especially given the challenging growth outlook."

The bankers recommend switching out of Petroleos de Venezuela SA's (PDVSA) 2014 notes into the oil company's 2015 notes, because the bond curve is steep.

"The PDVSA 2015s have the same risks of a local law bond, yet trade 150 bps wider than the PDVSA 2014s with just one year in maturity extension," Barclays said.

© 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.