Emerging markets assets finish session stronger; demand sighted for IPIC, TAQA securities

By Christine Van Dusen

Atlanta, Dec. 20 - Emerging markets assets saw firm spreads and fairly solid trading on Tuesday, even as commodities, currencies and equities started the day weaker and investors looked ahead to the Christmas holiday and year-end.

"We have commodities at year lows, currencies weak and equities trading heavy, but emerging Europe, Middle East and Asia is adopting a clever strategy of simply hiding, so there is barely any impact and spreads all look firm," a London-based trader said.

The exception, he said, was Kazakhstan. There, domestic unrest pushed spreads wider for KazMunaiGaz bonds by 50 basis points.

"But other Kazakhstan quasi-sovereigns are holding in well," he said.

By the afternoon in the United States, the overall picture was improving on better economic news from the United States, including word that housing starts hit their highest level in November since April 2010.

"We've had a fairly large boost to global markets, with the S&P up 3%, so we've seen some nice gains across currencies and spreads tightening on debt," said Nick Chamie, head of emerging markets research for RBC Capital Markets. "Of course, the markets have been running short on risk for quite some time. As we get closer to year-end and closing positions, any rallies are going to be met with a lot of short-covering as people begin to go on holidays."

Against this backdrop, the Republic of the Philippines was planning notes for January, a market source said.

MENA, Turkish banks trade well

Retail demand was noted on Tuesday for International Petroleum Investment Co. (IPIC), Qatar, Abu Dhabi National Energy Co. (TAQA) and Abu Dhabi Islamic Bank.

"Middle East and North Africa are still trading very well, with all the five-year dollar benchmarks still seeing retail demand," he said.

And though Turkey's currency was weak on Tuesday, banks continued to perform.

"Turkish banks are not losing their allure," he said, noting that their bonds were outperforming the sovereign's by 20 bps over the week.

Philippines plans bonds

The Philippines' new deal is expected to be dollar denominated and benchmark-sized and to price as soon as January, the source said.

No other details were immediately available.

Otherwise, deal-related news was limited on Tuesday.

"That's all but petered out now," Chamie said.

Traders were looking ahead at the new issues that could come to the market in the new year, including notes from Angola, Zambia and possibly Azerbaijan, a trader said.

"We'll also see still more sukuks," he said.

Dubai on deck

Another trader said he'll be on the lookout for deals from Dubai, including Dubai Holdings.

"There will clearly be a lot of loans needing to be rolled over as well, and with the European banks reportedly struggling with liquidity this will be a very interesting 12 months," he said. "I tend to think Dubai will continue its muddle-through; however I'm not ruling out some strange headlines and misunderstood situations as the year unfolds."

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