Emerging markets keep climbing; LatAm lags; primary activity heating up in Asia, South Korea

By Aaron Hochman-Zimmerman

New York, March 17 - Emerging markets turned in another positive performance on Tuesday, although it tempered the steep upward trajectory it set on Monday.

For now, "the world looks alright," a trader said.

Eventually prices will rise high enough for accounts to exit positions they were obliged to maintain during the market's lows, he said.

"It's going to happen," he said, it is just a question of when.

Still, in the meantime, "you can't sit on your hands," he said.

Corporates in South Korea did not seem ready to let the rally fade without making some noise.

Steel producer Posco will end a roadshow for a dollar-denominated offering on Wednesday, but others especially in the banking sector were discussed as possible issuers.

In trading, Latin America continued to struggle to make good use of another strong Wall Street session.

Venezuela lost 0.25 point from its benchmark issue due 2027, even as oil nearly touched $50 per barrel.

Also from the major markets, volatility made a steady dive toward 40.00 but came up short as it lost 2.94 to close at 40.80, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging markets tightened by 8 basis points to a spread of 631 bps, according to JPMorgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors will demand to hold assets in emerging market debt.

Asia 'pretty firm'

Asia traded "pretty firm" again on Tuesday even as Indonesia fell from its Monday highs, a trader said.

On the primary side, Vietnam readied the $100 million tranche of its $300 million local offering, and South Korea's corporates provided plenty of conversation.

The Industrial Bank of Korea, the Export-Import Bank of Korea and Korea Railroad were all discussed as possible issuers, he said.

"The question is how much actually comes," he said.

South Korea's Posco will complete a roadshow on Wednesday, but no deal is guaranteed, he said.

"There's tons of Korean supply," he said, which has caused "a little weakness" and selling of existing paper as many expect new deals will come with a concession.

The South Korean five-year CDS tightened 50 bps in the past three or four sessions, he said, to 375 bps bid.

The Indonesian bonds due 2019 fell 0.625 point to 103.625 bid, 104.125 offered.

In China, foreign investment has fallen during the first two months of 2009, according to a BBC report.

By the end of February, the figure stood at $13.3 billion for the year, a loss of 26.2% compared to the same period of 2008.

Elsewhere in Asia, the Philippines' bonds due 2030 tacked on 1.25 points to 115 bid, 116 offered, while Pakistan's bonds due 2017 were seen at 43 bid, 48 offered.

Emerging Europe 'feels better'

"Everything's calmer," for emerging Europe, a London-based trader said, as many had left their desks early to lift a pint for St. Patrick's Day.

"It feels better," although "there's nothing much to say about individual names," he said, particularly on the corporate side.

"Turkey and Ukraine are in demand," he said, even on relatively low market news.

"The G20 is just words," he said.

The Turkish sovereigns due 2030 were seen at 123.75 bid, 124.25 offered, while the Ukrainian bonds due 2016 were spotted at 42 bid, 45 offered.

"Ukraine is really on fire," he said, and in the good way.

Also in Russia, president Dmitry Medvedev announced that the government will undertake a massive refitting of the military, reports said.

Both nuclear and conventional forces will be overhauled and updated due to regional instability and NATO expansion, Medvedev said.

Moscow plans to spend nearly $140 billion on defense through 2011.

The Russian government bonds due 2030 slipped 0.3 point to 92.5 bid, 92.75 offered.

LatAm crawls higher

Latin America traded better by "very small margins," said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

"It's still a very laid back, lazy market," he said, but more in the slothful way rather than the relaxed way.

The market "won't absorb U.S. guidance or leadership," he said.

Little news has trickled out of the sector, but a bubbling trade quarrel between the United States and Mexico in a concern, he said.

The Mexican government placed tariffs on 90 U.S. industrial and agricultural products in retaliation for the cancellation of a pilot program, which allowed Mexican trucks to ship goods directly across the border.

Without the pilot program, the Mexican government claimed the United States is not in compliance with Nafta provisions.

"You want to keep your eye on that," Alvarez said, especially as a prolonged recession may build more protectionist populism in the United States.

The 5.95% Mexican bonds due 2019 added just 0.05 point to 96.2 bid, 96.375 offered.

In Venezuela, bond prices fell even as oil traded as high as $49 per barrel on Tuesday.

The 9¼% Venezuelan sovereigns due 2027 fell by 0.25 point to 56.3 bid, 57.45 offered.

Elsewhere in Argentina, the 8.28% discount bonds due 2033 improved by 0.25 point to 26.5 bid, 27.75 offered.

Also in Brazil, the 5 7/8% Brazilian government bonds due 2019 inched up by 0.125 point to 94.3 bid, 95 offered.

© 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.