Morning Commentary: EM primary in deep summer lull; market players await September

By Rebecca Melvin

New York, Aug. 21 – Emerging markets debt remained quiet on Tuesday with low volume in the secondary market and continued dormancy in the primary market.

A lull that is typical during the summer months has been more pronounced this year due to troubles that hit the Turkish lira, Argentine peso and other emerging-markets currencies last spring in the face of the strengthening dollar, but some wonder if the full-blown lira crisis that hit this month will push issuers further away from the market, even in September, when issuance typically restarts.

“I suspect September and October could be active if the backdrop is OK,” a London-based market source said, adding that there are Gulf Cooperation Council sovereigns that are expected to bring deals as well as a few banks.

Turkey is more of a question mark, the market source said. “Clearly, nothing can happen at the moment.”

Some regions have been particularly hard hit by currency turbulence. In Latin America, there have been only a handful of U.S. dollar-denominated deals that have priced since May.

The Central & Eastern Europe, Middle East and Africa region has also been painfully slow, while Asia continues to pump out deals, albeit at a slower pace.

For the week ended Aug. 10, Hong Kong-based China Merchants Port Holdings Co. Ltd. priced $1.5 billion of five- and 10-year notes, China Mengniu Dairy Ltd. sold $500 million 4¼% five-year bonds and Macau’s Sands China sold $5.5 billion of notes due 2023, 2025 and 2028.

Notably South Africa’s Eskom Holdings SOC Ltd. came in the middle of the summer lull with $1.5 billion of notes in two tranches with 10-year maturities. The $1 billion 10-year tranche that is guaranteed by the South African government and the $500 million tranche of 10-year notes that is not guaranteed both saw strong demand. That deal was brought by joint bookrunners Barclays, JPMorgan, Standard Bank and ABSA Bank.

Also, Angola priced a $500 million tap of its 9 3/8% notes due 2048 in the middle of July.

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