Morning Commentary: Investors await results of Brexit vote; EM bonds ‘insulated’

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 237.5 basis points over mid-swaps – saw some action.

The notes traded Thursday morning at par bid, 100.25 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 didn’t seem to 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 toward the ‘remain’ campaign,” he said. “We open up cautiously positive this morning.”

© 2015 Prospect News.
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