Emerging markets regains footing; Venezuela leads charge; Kexim prices 1.2 billion Mexican pesos

By Aaron Hochman-Zimmerman

New York, Jan. 23 - Emerging markets collected itself and posted gains as equities roared back from the precipice where they stood on Monday.

"It had been a wild and crazy ride on the U.S. side," said Enrique Alvarez, a Latin America debt strategist at think tank IDEAglobal.

Trading in emerging markets was light, but positive in many sectors.

"A lot of CDS more than anything else," a buysider said.

Venezuela led the winners as it posted a 2.35 gain to its government bonds due 2027.

In the primary, the Export-Import Bank of Korea latched onto an opportunity to place new paper as it priced an eight-year deal sized at 1.2 billion Mexican pesos.

For now, the market proved it was satisfied with the 75 basis point emergency intervention of the Federal Open Market Committee on Tuesday.

"The market has proved again that it's in charge," a trader said.

"It's really a bastard child, isn't it? It wants 75 [bps], it gets it, now it wants another 50 [bps].

"The market gets what is wants," he said.

Even as positive feelings return, the market still must be concerned with the fate of the bond insurers, a trader said.

"This has been one of the major concerns hanging over the market," he said.

However the companies have taken the positive step of talking to the market about financing, he said.

Volatility itself went for a ride on Wednesday as the VIX index saw a high of 34.42, but calmed and dropped in the afternoon to end the day lower by 1.99 at 29.02. The index is a frequently used yardstick of market volatility.

Treasuries gave up some ground as markets improved. Emerging markets was able to tighten in by 7 bps to a spread of 285 bps, according to JP Morgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors require to hold money in emerging markets debt.

LatAm latches onto stocks' recovery

Latin American credits took some arrows in the week's sessions, but on Wednesday "with the rapid turn in the Dow [Jones Industrial Average], there has been some upside in debt," said IDEA global's Alvarez.

The middle of the curve in Brazil and Colombia showed strength, he said.

"We've seen some buying in Venezuela," he added.

President Hugo Chavez's announcement that he intends to nationalize farmland will likely have little effect on the country's debt, Alvarez said, adding that it may be difficult to find something he has yet to nationalize.

The Venezuelan 9.25% bonds due 2027 led the winners with a leap of 2.35 to trade at 100.85 bid, 101.5 offered.

"Brazil's rates were left unchanged, but that was expected," a buyside source said.

The Brazilian 7.125% bonds due 2037 added 0.35 to trade at 110 bid, 110.5 offered. The 11% bonds due 2040 improved by 0.3 to 134.4 bid, 134.5 offered.

The Colombian 7.375% bonds due 2017 were quoted at 108.5 bid, 110 offered. The bonds due 2037 were spotted at 104.75 bid, 105.5 offered.

In Argentina, positive reports came from talks between president Cristina Kirchner and labor leader Hugo Moyano, according to the Buenos Aires Herald.

Labor agreed to ease its salary demands, while Kirchner offered more healthcare assistance from the government.

"That's a good sign, that would be a positive," Alvarez said.

Labor relations have been at the crux of the inflation story, he said.

The 8.28% Argentine bonds due 2033 were quoted unchanged at 92.25 bid, 93.5 offered.

Also, after two years as president Bolivia's Evo Morales praised the reforms his government has enacted and asserted that they are permanent.

He made little mention of the fractured electorate and the often vocal opposition to his policies.

Asia makes up lost ground

Asian credits clawed back after ugly trading at the start of the week.

"The market was set up for some form of turnaround," a trader said.

"It was too bearish and too over-hedged, that's why you've seen such a sharp reaction," he said.

In the Philippines, stock market volatility has caused some companies to delay IPOs, the Manila Times reported.

The 75 bps emergency cut helped settle trading which allowed for stability to return to the peso as well.

The peso was seen trading up 0.3 to the dollar at 41.12.

The Philippine bonds due 2030 gained 0.625 to trade at 131.375 bid, 131.875 offered.

In Indonesia, the government is determined to become soy bean self-sufficient by 2011, the Jakarta Post reported.

Agriculture minister Anton Apriantono expects soy bean crops to reach 2 million tons by 2011, compared to just over 600,000 tons in 2007.

Imports of soy beans should only account for approximately 10% of domestic use, he said.

The Indonesian bonds due 2018 gained 1 point to trade at 102.5 bid, 103 offered.

The Indonesian bonds due 2038 improved by 0.375 to 104.5 bid, 105 offered.

Pakistan's president Pervez Musharraf again insisted that there is a "zero percent chance" of the country's nuclear weapons falling under the control of extremists.

Meanwhile, in the remote tribal region of South Waziristan, militants killed five soldiers in a raid on the Ladha observation post.

The Pakistani bonds due 2017 were flat at 82 bid, 85 offered.

This Monday's market train wreck proved that China and other emerging economies have not decoupled from the United States, a market source said.

Also, due to a harsh winter, Chinese power grids are running close to their limits, according to a BBC report.

The expanding economy has depleted coal reserves to what was describes as an emergency level, with only enough to power the country for eight days.

Many smaller mines have recently been closed over safety concerns.

Energy reserves will likely stay tight in the immediate future, a trader said.

Kexim prices pesos

Primary issuers have to seize on any intervals of stability to complete their offerings, a trader said.

The Export-Import Bank of Korea (Aa3/A/A+) found a path between the landmines left over from Monday as it priced a 1.2 billion Mexican peso five-year floating-rate note at par to yield TIIE plus 30 bps.

Merrill Lynch was bookrunner for the registered deal.

Proceeds will be used for general operations and debt refinancing.

Kexim is a Seoul-based state-owned bank.

China's Jiangxi Copper Co. Ltd. is planning a 6.8 billion yuan eight-year note offering with warrants.

The warrants will carry a term of two years.

Both public and private investors may participate, but at least 60% of the notes will be reserved for holders of the company's A shares.

Proceeds from the proposed offer will be used to acquire new metals, repay debt and upgrade mining capacity.

Jiangxi Copper is a Guixi, China-based mining company.

Rumors of a $500 million sovereign issue from the Philippines gained momentum on Wednesday, a trader said.

"I wouldn't be surprised if they took advantage of the market and came with something fairly shortly," he said, "that would make good sense."

"I think issuers are going to have to be very opportunistic for the next quarter or so," he said.

Russia's VTB Bank is also looking to place over $1 billion in eurobonds in the first quarter of 2008, according to a report from the RIA Novosti News Agency.

The issue would come as part of the bank's $20 billion foreign debt program.

Tensions ease in Emerging Europe

Emerging Europe remained choppy on Wednesday, but its collective heart rate continued to slow after Monday's frenzy.

"It's trying to find some stability," a trader said, adding: "We're just stock watching.

"We'll see what next week brings in terms of additional cuts," he said, adding that he feels "slightly more optimistic."

In Russia, the central bank lowered the dollar's exchange rate by 25.92 kopecks to 24.6325 rubles, the Itar-Tass News Agency reported.

The Russian sovereigns due 2030 were lower by just 0.125 at 115.5 bid, 115.625 offered.

In the Ukraine, opposition leader and chairman of the Party of Regions, Viktor Yanukovich demanded that the letter sent from the government to NATO be published.

Yanukovich asked that the government be clear about its reported intent to join the alliance.

The Ukrainian sovereigns due 2016 slipped 0.1 to trade at 100 bid, 100.5 offered.

Turkey's stock market continued its drop as the country prepares to receive Greek prime minister Costas Karamanlis.

His uncle Constantine Karamanlis was the last sitting Greek prime minister to visit Turkey in 1959, according to a report in the Turkish Daily News.

Turkey's government bonds due 2017 lost 0.45 to trade at approximately 155.25 bid, 155.375 offered.

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