Emerging Markets: primary still quiet; China Construction Bank prices dual-currency tranches

By Rebecca Melvin

Concord, N.H., May 13 – The emerging markets debt primary market remained mostly quiet for another week as another U.S. Federal Reserve rate hike settled in and prospects for slowing growth for emerging market economies continue to weigh on the asset class.

Economic growth in emerging markets is set to slow “sharply” in the current quarter, weighed by China, Russia and the spread of tighter monetary conditions, J.P. Morgan analysts say.

The Fed hiked its key interest rate by 50 basis points on May 4 and by 25 bps at its March meeting. It also hints that it may make more rate hikes in 2022 in its effort to contain inflation.

The JPMorgan Emerging Markets Bond Index Global Diversified index has fallen significantly for the year so far. The iShares J.P. Morgan U.S. dollar emerging markets bond ETF stood at 89.29 on Friday, which was down 16 cents, or 0.18%, on the day, but up on the week. For the year to date, the ETF price represents a 17.3% drop.

In the primary this past week, emerging market bonds that priced were green bonds.

China Construction Bank Corp. London Branch on Tuesday priced $1 billion of 3 1/8% senior green notes due 2025 and RMB 1 billion of 3.4% senior green notes due 2024, according to a drawdown offering circular.

The Beijing-based lender’s notes due 2025 priced at 99.696 to yield 3.232%, and the notes due 2024 priced at par to yield 3.4%. They were issued under the $15 billion medium-term note program established by the issuer and China Construction Bank Corp.

The joint global coordinators, joint bookrunners and joint lead managers for the notes are China Construction Bank (Asia) Corp. Ltd., CCB International Capital Ltd., ABCI Capital Ltd., Agricultural Bank of China Ltd. Hong Kong Branch, Bank of China (Hong Kong) Ltd., Bank of China Ltd., London Branch, Bank of Communications Co., Ltd. Hong Kong Branch, Hongkong and Shanghai Banking Corp. Ltd., ICBC International Securities Ltd., Industrial and Commercial Bank of China (Asia) Ltd., Industrial and Commercial Bank of China Ltd., London Branch, Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch and Standard Chartered Bank.

Additional joint lead managers were BOSC International Co. Ltd., China Citic Bank International Ltd., China Everbright Bank Co., Ltd., Hong Kong Branch, Citigroup Global Markets Ltd., CLSA Ltd., Industrial Bank Co., Ltd. Hong Kong Branch, Merrill Lynch (Asia Pacific) Ltd. and Mizuho Securities Asia Ltd.

Proceeds will be used to finance or refinance, in whole or in part, loans to customers involved in, as well as the bank’s own operational activities in, eligible green projects.

Looking ahead, Bogota, Colombia-based petroleum company Ecopetrol SA, which priced $2 billion of notes in two tranches last autumn, eyed raising funds via a sustainable bond sale when market conditions are favorable, according to sources. Proceeds of the bonds are earmarked to pay down debt.

Also for Latin America, America Movil, SAB de CV conducted a capped tender offer for up to €600 million from two securities this past week. It planned to fund the offer with cash reserves.

Specifically, America Movil offered to buy from the €1 billion outstanding ¾% senior notes due 2027 (ISIN: XS2006277508) and the €650 million outstanding 2 1/8% senior notes due 2028 (ISIN: XS1379122523).

The purchase price is 93.75 for the 2027 notes and 99.35 for the 2028 notes, excluding the applicable accrued interest payments.

The offer expired at 11 a.m. ET on Friday and results were expected to be announced on Monday.

America Movil is a Mexico City-based telecommunications company.

In economic news this past week, the U.S. consumer price index increased 0.3% in April, in line with some forecasts, but stronger than consensus. Energy prices dropped 2.7% in April after jumping 11% in March. Excluding energy, the CPI was up 0.6% in April, stronger than the 0.4% gain in March, with the food/beverages sectors continuing to post gains, as it was up 0.8% after rising 1% in each of the prior two months.

Excluding food and energy, the CPI rose more than anticipated, adding 0.6% in April compared with 0.3% in March. On a year-ago basis, the headline and core CPIs were up 8.3% and 6.2%, respectively, not seasonally adjusted.

It was the first time since August that the pace of price increases slowed. According to the Bureau of Labor Statistics on Wednesday, the CPI was up 8.3% in the 12 months ended in April, a decrease from 8.5% recorded in March. According to Moody’s analytics weekly market outlook, published Thursday, the Federal Reserve is not going to abandon its plan to aggressively remove monetary policy accommodation even if inflation has peaked.

© 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.