Emerging markets volumes light on day; Tinkoff Credit, IOI deals not likely to be imminent

By Aleesia Forni

Columbus, Ohio, May 18 - Volumes were light on the day, though the market is seeing a positive pullback on a spread basis, one London-based source remarked.

Additionally, investors continue to favor more liquid curves and avoid risk for the most part, the source added.

The source is also seeing an "obvious" regional pull for shorter dated bonds and sukuk in the secondary market.

The Markit iTraxx SovX CEEMEA index, which tracks Central and Eastern Europe, the Middle East and Africa credit default swaps, sat at 335 basis points near the London close on Friday, 5 bps tighter than the day's high print.

Issuers postpone deals

In the primary market, Tinkoff Credit Systems wrapped up a roadshow this week in Asia and Europe, though one market source said the lending company may not bring an issuance until later this month, citing the current market climate as the driving factor.

IOI Corp. also hit the road last week, though an immediate issuance is unlikely, according to a syndicate source.

IOI announced its launch of a $1.5 billion euro medium-term note program on Tuesday, which will allow the company to tap into the liquidity of the debt capital markets, as well as provide the company with the flexibility to raise funds through the issuance of notes.

These postponements extend a number of corporate names that have announced their intentions to wait out the current market.

As previously reported, Baoxin Auto Group Ltd. and China Zheng Tong Auto Services Holding Ltd., completed roadshows this month, but both will hold off on offerings due to market conditions.

Europe remains focus

One market source commented that the market will need to "generally stabilize" before these issues will be taken to the market, which will include "some sort of resolution" regarding Greece's exit from the euro and the overall concern in Europe.

The source noted the huge rush for issuers to bring deals in the first quarter, which has slowed as the market enters the second quarter.

However, even when the market had been accepting of adding risk, many have had to come at "generous" terms, the source said.

"Investors are likely to remain focused on political news in Europe over the coming weeks," a release from Barclays Research echoed.

"Given the risks of heightened uncertainty and volatility ahead of the Greek elections, we think it is appropriate to turn more defensive on EM assets, avoiding higher beta assets for directional trades at this stage."

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