Emerging markets go home for Christmas; Brazil adds late gains

By Aaron Hochman-Zimmerman

New York, Dec. 21 - Emerging markets traded more Christmas cards than credits on Friday.

"There is hardly any trading that I have heard of," a buysider said "It's very, very slow"

Bond prices were mixed, despite a good day in equities.

However, Brazil's real and its bonds due 2040 both performed well.

The 11% sovereigns led the day by gaining 1.4.

"The whole sentiment is better," the buysider said.

"Stocks are doing good," he added.

Gains in the local markets "kind of tells you FX is better, but not much," he said.

For the market's return, "it's probably a little overdone on the equity side," he said.

"With such low liquidity we may hopefully get some action next week," he said, but "I don't have any big hope of anything happening."

As emerging markets wound down for the year, EPFR Global totaled the 2007 inflows for emerging market bond funds at $4.35 billion compared to $6.23 billion during 2006.

In trading Friday, cheerful headlines helped push equities higher.

The U.S. Commerce Department announced consumer spending increased by 1.1% in November, ahead of expectations.

Also, Merrill Lynch was rumored to be holding talks with Singapore's Temasek Holdings about an investment of up to $5 billion in the bank.

Another distressed bank, Northern Rock, agreed to have a shareholder meeting on Jan. 15 to discuss how it will sell off shares.

Some of its larger shareholders have asked for restrictions on the bank's ability to sell assets, the BBC reported.

Elsewhere, a new law was passed in the United States to reduce the impact of the subprime crisis. The law places a five-year hold on interest payments and gives some subprime borrowers an opportunity to refinance at better rates.

Rising equities pushed volatility lower by 2.11 to end the day at 18.47, according to the VIX index. The index is the standard measure of market volatility.

The strong performance by the Brazilian bonds due 2040 helped emerging markets tighten 4 basis points to a spread of 239 bps, according to JP Morgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors demand to keep assets in emerging markets debt.

Brazil bonds, currency stronger in LatAm

Trading was slow in all emerging markets sectors, but in Brazil the real was stronger, a buyside source said.

"There are still concerns about inflation," he added.

Consumer prices, especially food, were up along with inflation leading many to call for higher interest rates in 2008, a market source said.

The real was seen trading at 1.79 to the dollar.

Brazil's 11% bonds due 2040 were trading up approximately 1.4 at 133.7 bid, 134.15 offered.

In Miami, four Venezuelans and one Uruguayan were indicted on charges of covering up a plot to transport $800,000 from the government of Venezuela to Argentina's new president Cristina Kirchner.

Argentina's 8.28% discount bonds due 2033 were up 0.15 to trade at 94.75 bid, 95.5 offered.

Venezuela's 9.25% sovereign bonds due 2027 held flat at 99.25 bid, 99.75 offered.

Emerging Europe going quietly into '08

Many desks were left dark and empty, but dealing rooms in Russia were busy as the second-leading mobile phone service provider, OAO Vimpelcom acquired Golden Telecom for $4.3 billion.

Vimpelcom is now the first integrated fixed-to-mobile telecom firm.

Meanwhile the new economy minister, Elvira Nabiulina, opposes higher taxes on mining and natural gas, a market source said.

Nabiulina has also called for slower appreciation of the ruble in order to meet a difficult inflation target of 7.5% to 8.5%.

Also, president Vladimir Putin has been reported as having personal wealth of over $40 billion hidden in accounts in Switzerland and Liechtenstein, a market source said.

Putin is thought to have personal interests in three oil and gas firms.

Russia's sovereign bonds due 2030 were quoted at 113.8 bid, 113.9 offered.

Turkey's government bonds due 2030 were seen at 157.3 bid, 157.8 offered.

Philippines' stocks up at year's end

In the Philippines, companies listed on the stock exchange registered higher combined net profits for the first nine months of the year, according to the Manila Times.

The 231 firms income grew 24% or PHP 200 billion.

The Philippines' government bonds due 2030 were quoted at 134.375 bid, 135 offered.

The Indonesia sovereigns due 2017 were spotted at 103.75 bid, 104.375 offered.

© 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.