Emerging market debt posts gains on equities; ICICI Bank places $150 million in bonds

By Reshmi Basu, Paul Deckelman and Paul A. Harris

New York, Dec. 5 - Emerging market debt clocked in a positive session Tuesday, boosted by higher U.S. equities, which rose on stronger than expected U.S. services sector numbers.

In the primary market, ICICI Bank UK plc, a unit of Mumbai, India-based ICICI Bank Ltd., priced a $150 million issue of 6 3/8% perpetual bonds (expected Baa3) at mid-swaps plus 152 basis points or a spread of 198 basis points versus Treasuries.

The price came two basis points beyond the wide end of the mid-swaps plus 145 to150 basis points guidance.

Barclays Capital led the Regulation S deal.

The notes will be non-callable for 10 years. If they are not called the coupon will step up to six-month Libor plus 252 basis points.

A trader who specializes in Asian issues said that the new deal "traded up - 196 [bps], then 193, 192.

"Overnight, it was very quiet in New York.

"Right now, it's a 192/188 market," he added.

Meanwhile more corporates added to the pipeline.

Hong Kong's Chong Hing Bank Ltd. plans to sell an inaugural issue of $100 million in 10-year subordinated notes.

The notes will be callable in December 2011 and the coupon will step up by 100 basis points if the securities are not redeemed.

Goldman Sachs and HSBC are running the Regulation S deal.

Investor presentations are scheduled to take place in Hong Kong on Wednesday, Dec. 6.

Out of India, State Bank of India set price guidance for a $300 million offering of five-year eurobonds (Baa2/BB+/BBB-) at Libor plus 50 to 55 basis points.

The deal will be structured as floating-rate notes.

Barclays Capital, Citigroup, and Deutsche Bank are joint bookrunners for the Regulation S offering.

Pricing is expected to take place later this week.

And Kazakhstan's TuranAlem Finance BV set price talk for an issue of sterling-denominated fixed rate notes (Baa1/BB/BB+) at the 7 1/8% area.

JSC Bank TuranAlem will guarantee the issue.

Deutsche Bank is managing the Regulation S deal.

EM higher on firmer equities

Emerging market debt capitalized on firmer U.S. equities Tuesday, as the market looked to kick off a year-end rally.

The market saw a quiet open as spreads were marginally tighter across the spectrum, according to a market source.

However, the momentum in U.S. stocks bolstered sentiment across Latin America as investors fed their hunger for high-yielding credits, noted sources.

"Following Brazil, the market is trading well right now," noted a second trader.

He said he had seen "better buying, as far as emerging markets today [Tuesday], especially Mexico was about 8 bps tighter, [maybe] 5 bps tighter, Peru was about 10 bps."

The upward move made it the second positive session for Mexico. In the prior day, the country gained momentum as local markets rallied on optimism over the new administration of president Felipe Calderon.

During Tuesday's trading the Mexico bond due 2026 gained 0.45 to 163.50 bid, 163.80 offered. On Monday, the 2026 bond was higher by 0.85 to 162.25 bid, 163.35 offered

Elsewhere, the bellwether Brazilian bond due 2040 spiked to 133.50 bid, 133.65 offered, up 0.35. The Argentine discount bond due 2033 picked up 0.60 to 101.20 bid, 102.50 offered.

But, Venezuela was unable to extend gains on Tuesday. On Monday, the nation rallied on the back of a problem-free and peaceful reelection win by president Hugo Chavez.

The second trader observed that "prices were actually lower on the day by ¼ point."

In trading, the Venezuelan bond due 2027 eased 0.15 to 125.15 bid, 125.50 offered.

Ecuador keeps sliding

And in a repeat performance, Ecuador emerged as an underperformer in Tuesday's session on uncertainty surrounding president elect Rafael Correa's Wall Street unfriendly rhetoric regarding debt restructuring.

During the session, the Andean nation's bond due 2015 shed 0.15 to 87.70 bid, 88.50 offered.

Colombia's headline risk up

Meanwhile, even a developing political crisis in Colombia did not prevent the country from tracking U.S. equities higher.

In the last few weeks, headline risk in the Latin American nation has picked up speed. President Alvaro Uribe's party has been rocked by allegations of links between party members and paramilitaries.

Investors have expressed a fear that as the investigation unfolds the scandal may eventually reach the president, which in turn could jeopardize his efforts to push through structural reforms such as the tax bill, which has floundered in terms of support.

Nonetheless one market source noted that the impact from the scandal has not impacted investors' appetite in local markets in a drastic way. And the local headlines have had even less effect on the country's external debt.

Still, early last week, political developments pressured both the local currency and stock market.

Looking ahead, the story will most likely generate volatility for the markets, which means that in the short term investors could see dips as a buying opportunity since the crisis will not impair the growth of the economy, added the source.

During the session, the Colombian bond due 2012 added 0.20 to 117.95 bid, 118.15 offered while the bond due 2033 moved up 1 point to 141.50 bid. 142.50 offered.

Asian credits rally

Moving to Asia, the first trader said that "all of Asia was very firm today [Tuesday].

"The market was incredibly firm today [Tuesday], with both the long end of Philippines and the long end of Indonesia trading up a point from yesterday's [Monday] close in New York."

Corporate movers

In corporate news, Standard & Poor's affirmed its BB credit ratings on Brazil's sugar and ethanol producer Cosan SA Industria e Comercia, citing the protected nature of the sugar industry,

In trading, the Cosan 8¼% bond due 2049 added 0.20 to 95.83 bid, 96.50 offered.

Moving to Hong Kong, Panvas Gas Holdings Ltd. saw its bonds surge on news that Standard & Poor's placed its ratings on positive watch.

On Tuesday, its 8¼% bonds due 2011 were up 3.88 to 108.50 bid, 109.13 offered.

And Russia's oil giant OAO Gaprom gained on an outlook upgrade by Fitch Ratings, citing the government plans to liberalize Russia's power and natural gas prices by 2011

During the session, its 9 5/8% bond due 2013 gained 0.13 to 119.38 bid, 119.88 offered.

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