Emerging markets sturdy; trading volumes negligible; investors continue to wait on primary action

By Aaron Hochman-Zimmerman

New York, Dec. 22 - Emerging markets investors tread lightly on Monday, barely making a sound during the pre-holiday session.

"Most traders are already on break," a syndicate official said, as volumes "decreased sizably ... It's been killed."

Still, there is hope for January's primary scene.

"There will be a couple issuers in January," the official predicted.

"It would make sense for them to come," he said, now that Mexico proved that the better rated issuers will likely meet with willing investors.

Peru is a possible "blue chip" issuer considering a try at the primary, he said.

Early on in the year it will be "just your sovereigns," he said.

Meanwhile, from the major markets, volatility sank but snapped higher to end down by 0.37 at 44.56, according to the VIX index. The index is a common measure of market volatility.

As a sector, emerging markets tightened 4 basis points to a spread of 697 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors will demand to hold assets in emerging market debt.

Emerging Europe flat, frozen

Emerging Europe froze in the winter market conditions as investors watched the clock tick down toward the New Year.

In Russia, the upper house of parliament and regional assemblies approved a measure, which is expected to make way for prime minister Vladimir Putin to become president Putin, once again.

The bill extends the presidential term to six years from four years, which, by many calculations, gives the still popular Putin another four years of eligibility for the country's highest office.

President Dmitry Medvedev is expected to sign the bill into a law, which will take effect after the next presidential election.

Many believe Putin will return to office after Medvedev's first term is completed.

Meanwhile, Medvedev met with Alexander Lukashenko, the president of Belarus, on Monday to finalize a payment schedule for Russian gas shipments.

"An agreement was reached at the talks on the main principles of work in the field of gas supplies to Belarus and payments for them next year," Kremlin spokeswoman Natalia Timakova said, according to the Itar-Tass News Agency.

Also, a meeting of 12 gas exporting countries will be held in Moscow on Tuesday to discuss gas pricing policy.

"We tried to include in the agenda as many problems as possible - from the raising of electricity tariffs in 2009 and the expected reduction of gas production to forecasts of oil prices on the world market, said energy minister Sergei Shmatko, according to Itar-Tass.

Shmatko insisted that Russia does not intend to join OPEC, but "we are working out a new format of the Russia-OPEC relations. We would like to have special relations with that organization," he said in the report.

The Russian government bonds due 2030 were quoted at 87 mid.

In Turkey, the current-account deficit fell to $2.6 billion in October compared to $3.3 billion in the same period of 2007, according to a statement from the central bank.

Turkish exports have seen more favorable currency exchange rates as the lira was seen trading at 1.528 to the dollar.

The Turkish sovereign bonds due 2030 were quoted at 142 mid.

Elsewhere in emerging Europe, Hungary dropped its interest rate by 50 bps to 10%. The reduction was the second in two weeks, and more cuts are likely, the bank said.

The forint was seen trading at 189.488 to the dollar.

LatAm holds steady

Latin American markets were stable as equities were mixed to lower and traders were all but gone for the holidays.

In Argentina, workers of the Senasa, the national health and food safety agency, began a three-day strike on Monday, the Buenos Aires Herald reported.

The workers demanded greater allowances for collective bargaining and more full-time positions.

The strike is expected to slow beef production and export.

The 8.28% Argentine discount bonds due 2033 slipped 0.5 point to 29 bid, 33 offered.

In Brazil, president Luiz Inacio Lula da Silva will host French president Nicolas Sarkozy and other European Union leaders at a financial and environmental crisis forum in Rio de Janeiro.

The two-day meetings may result in a range of climate change, financial and defense agreements.

"That's purely political; nothing's going to come from that," a syndicate official said about the meetings.

The 11% Brazilian bonds due 2040 were close to unchanged at 128.5 mid.

Also as oil prices traded as low as $40 per barrel, Venezuela's 9¼% bonds due 2027 were seen at 53 mid.

Asia silent, steady

Asia stood still as desks ran with skeleton crews and trading volumes ripped bid-offer spreads wider.

In Indonesia, the state-run energy firm PT Pertamina announced an 11 trillion rupiah spending plan, which is intended to refit its upstream production facilities as well as stimulate the economy at large, according to a report in the Jakarta Post.

The firm hopes for a 7% production increase in 2009 to more than 171,000 barrels per day.

Elsewhere, the Philippines' government bonds due 2030 were quoted at 112 mid.

Also, in China the central bank chopped its key interest rates down by 27 bps.

The deposit rate now sits at 2.25% and the lending rate at 5.31%.

The yuan was seen trading at 6.852 to the dollar.

© 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.