Investors await Brexit vote results; tone ‘cautiously positive’; DP World notes active

By Christine Van Dusen

Atlanta, June 23 – Trading of emerging markets assets was somewhat quiet but “cautiously positive” on Thursday morning as investors awaited the results of the United Kingdom’s vote on whether to leave the European Union.

Still, Dubai-based marine terminal operator DP World’s 3.908% notes due in 2023 – which priced in May at par to yield 3.908%, or 237.5 basis points over mid-swaps – saw some action.

The notes traded Thursday morning at par bid, 100¼ offered, a trader said.

Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, Barclays, Emirates NBD Capital, First Gulf Bank, JPMorgan, National Bank of Abu Dhabi and Societe Generale CIB were the bookrunners for the Rule 144A and Regulation S sukuk.

The proceeds will be used for a tender offer for the company’s sukuk due in 2017.

Meanwhile, anticipation about a ‘remain’ or ‘leave’ vote for the United Kingdom did not harm most emerging markets bonds, a London-based strategist said.

The asset class is “generally insulated from either scenario, but sentiment will be certainly driven by the outcome. On the back of the recent performance, the upside in a ‘remain’ scenario seems rather to be limited while the downside in a ‘leave’ scenario is likely to be more pronounced.”

Most polls show that voters favor remaining in the European Union, he said.

“Markets continue to dismiss the idea of a potential ‘Brexit’ scenario as two polls from late yesterday showed a stronger tendency towards the ‘remain’ campaign,” he said. “We open up cautiously positive this morning.”

Lat-Am in focus

Latin American bonds finished the day close to the tights of the session, a New York-based trader said.

Brazil’s five-year credit default swaps spreads finished at 320 basis points from 327 bps, while Mexico’s closed at 159 bps from 163 bps as “referendum concerns ebb,” he said.

“Cash prices finish mixed, with Brazil cash continuing to outperform, whereas lower-beta, more rate-sensitive names are closing unchanged as Treasuries sell off,” he said. “Lat-Am high yield powers higher on the day.”

PDVSA’s 2017s closed at 72 from 69.50, Venezuela’s 2027s at 48.50 from 46 and Argentina’s Bonar 2024s at 115 from 113.875, he said.

Argentina moves higher

Argentina’s 2026s finished at 108.75 from 107.80, the New York trader said.

“Good two-way flows for the session, with some opportunistic late-day sellers coming through,” he said. “Markets continue to trade with a positive tone, and it looks like this rally has legs if the ‘remain’ camp prevails. If not, we may see an aggressive reversal of these gains.”

Middle East ‘fairly active’

Middle Eastern bonds put in a “fairly active and overall positive session,” a trader said. “Rates backing off as the UK starts voting on the long-awaited Brexit vote.”

Spreads were performing, he said, with recent issues from Qatar tightening by 3 bps to 4 bps and Oman seeing demand for its 2021s and 2026s.

Commercial Bank of Qatar saw its 2021s close 12 bps tighter on the day, while Saudi Electricity Co. was 50 bps tighter on the week, he said.

“Plenty of desks will be manned early tomorrow as the [Brexit] result filters through,” he said. “[The emerging markets] space has had a big rally. Certainly not set up for a disappointment.”

Ooredoo tightens

The new issue of notes from Qatar’s Oordeoo QSC – 3¾% notes due 2026 that priced at 98.964 to yield mid-swaps plus 240 bps – was tighter by 20 bps versus its launch, he said.

HSBC was the global coordinator, and ANZ, BofA Merrill Lynch, Citigroup, DBS Bank, HSBC, Mizuho Securities, MUFG Securities and QNB Capital were the joint lead managers and joint bookrunners for the Rule 144A and Regulation S deal.

Jiangsu Hanrui sets tenor

In deal-related news from Asia, China’s Jiangsu Hanrui Investment Holding Co. Ltd. set the tenor at three years for its upcoming issue of dollar-denominated 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.

© 2015 Prospect News.
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