Emerging markets tighten; light volumes with London closed; CIMB Bank prices 1.5 billion ringgit

By Aaron Hochman-Zimmerman

New York, March 24 - Emerging markets performed well along with equities as JPMorgan Chase & Co.'s $10-per-share re-bid for the Bear Stearns Cos. lifted spirits in the market.

Volumes in emerging markets were held hostage by markets in Europe and Asia, which remained closed for the holidays.

"London was closed, it was a tradeless day," an emerging markets strategist said.

Although, "spreads obviously tightened," he said, noting the gains in stocks and the retreat in Treasuries.

Despite the lack of liquidity, he held on to a glimmer of optimism.

"We're coming into the close of the month," he said, adding: "We should expect some buying taking place as the quarter comes to an end."

A syndicate desk official was encouraged but reserved about Monday's session.

"On the one hand we've got JPMorgan pumping up the offer for Bear [Stearns]" and "you have existing home sales today, which came in higher than expected," but with such light volumes "I don't want to read too much into it," he said.

In trading, the leader was Ecuador, which posted a gain of 1.25 points to its bonds due 2030 after Moody's Investors Service upgraded its foreign-currency rating.

In the primary market, local-currency deals continued to make up the majority of pipeline production.

New offers appeared on the stage, including a dollar-denominated deal from St. Vincent and the Grenadines, and Malaysia's CIMB Bank Bhd. announced the pricing of a 1.5 billion ringgit 10-year bond.

Equities' success cut down volatility by 0.89 to end at 25.73, according to the VIX index. The index is a common measure of market volatility.

Treasuries took a step back as emerging markets wrapped up spreads by 22 basis points to end the day with a spread of 291 bps, according to JPMorgan's EMBI+ index. The EMBI+ determines the amount of extra yield investors are willing to accept in order to keep assets in emerging markets debt.

LatAm quietly stronger after holidays

Trading was positive in Latin America but not a true indicator of the market's health, a syndicate official said.

"London is closed, half of the world is closed," he said as Easter weekend holidays lingered on, producing light trading volume.

In Argentina, rhetoric came in hot and cold fits from the CGT umbrella union as the group neared a direct conflict with striking farmers.

Pablo Moyano, the son of CGT leader Hugo Moyano, said "we're going to drive past farmers with our trucks," in reference to the farmers who have blockaded highways in order to win higher wages and better working conditions, according to the Buenos Aires Herald.

The Hugo Moyano offered a more tempered reaction to the blockades.

"At some points, unions will ask to let the truckers pass, who have nothing to do with the strike," he said, adding: "We will avoid using any violence, but in any case, they will use it."

The 8.28% Argentine discount bonds due 2033 added 0.5 point to 87 bid.

Meanwhile in Brazil, the highly traded 11% bonds due 2040 were up 0.2 point to 133.85 bid.

FARC conflict embers heat up

Colombia's government announced that it believes an Ecuadorian was killed in its March 1 cross-border raid on a FARC camp.

Ecuador president Rafael Correa did not issue a statement after the admission by the Bogota government but in the past has threatened to cut further ties with Colombia if one of his citizens was killed.

The Colombian defense ministry claimed the man was a member of the FARC rebel group.

Ecuador and Venezuela cut ties with Colombia after the attack, but relations between Venezuela and Colombia have improved.

The 7 3/8% Colombian bonds due 2017 were quoted unchanged at 110 bid.

The 9¼% Venezuelan bonds due 2027 were up 0.7 point to 96.95 bid.

The 8% Ecuadorian bonds due 2030 were up 1.25 points to 96 bid.

The boost was likely due to Moody's upgrade of Ecuador's foreign-currency ratings to B3 from Caa2, but "there's not enough liquidity in it to make people want to trade it," the syndicate official said.

St. Vincent, local deals push primary

Even as many in emerging markets took the day off, the lumbering primary sent three names out onto the field.

CIMB Bank Bhd. (AA, local) priced a 1.5 billion ringgit 10-year subordinated bond, according to a press release.

The final amount was increased from the initial offer of 1 billion ringgit "due to strong investor demand," the bank said in the release.

The final book was 2.6 times oversubscribed with interest coming from "asset managers, insurance companies, statutory bodies, financial institutions and private banking investors," the release said.

CIMB Investment Bank and RHB Investment Bank were the bookrunners for the deal.

The bonds are non-callable for five years.

Proceeds will be used to refinance $300 million in subordinated debt callable in October 2008.

CIMB is a Kuala Lumpur-based retail and commercial bank.

Elsewhere, St. Vincent and the Grenadines announced it will offer a dollar-denominated bond due 2018.

HSBC will act as the bookrunner for the Regulation S offering. Firstline Securities Ltd. will act as the placement agent.

Proceeds from the sale will be used to construct a national library, stadium, police stations and river defenses.

St. Vincent and the Grenadines are located 75 miles north of Grenada and is part of the Windward Island chain in the Caribbean Sea.

In local currencies, India's Punjab National Bank informed the Bombay Stock Exchange that it plans to conduct a private placement of up to Rs. 5 billion in upper tier II bonds, series IV.

The offering will open on Tuesday and settle on Wednesday.

New Delhi-based Punjab National Bank is a public-sector commercial bank.

Meanwhile in the Middle East, the United Arab Emirates' Amlak Finance PJSC approved the offer of a 1.8 billion dirham convertible sukuk and a 3 billion dirham conventional sukuk.

Approval was granted on Sunday by an extraordinary general meeting of Amlak's shareholders.

Amlak is a Dubai-based commercial and retail lender.

Asia tighter on paper-thin volume

Asia's markets also saw the day's equity rally through the filter of many closed markets.

Spreads tightened, but "it was too slow to tell" how well the markets actually performed, another syndicate official said.

In Indonesia, the government's labor oversight has "not only discouraged foreign investors from setting up much needed labor-intensive businesses here but have also undermined efforts to send more local workers overseas," reported the Jakarta Post.

The government is prepared to enforce the products of arbitration between labor and management, but the two sides have not been able to reach agreements, the manpower and transmigration minister, Erman Suparno, told the Jakarta Post.

Also, "there will be no new regulations unless we are sure the labor law will be amended. At present, we are still basing our legal frame on the current labor laws, as well as on regulations made below it," Suparno said.

In Pakistan Yusuf Raza Gillani was elected prime minister on Monday by his Pakistan People's Party (PPP), which won a majority in the recent parliamentary elections.

He immediately released the judges who were imprisoned by president Pervez Musharraf under emergency rule late in 2007.

What price rice?

In the Philippines, senators became increasingly concerned over the consequences of the rising price of rice, according to the Manila Times.

There may be social unrest and political instability if the price of rice, now on a 34-year high, continues to surge, senator Loren Legarda said Sunday, according to the report.

Senator Mar Roxas accused president Gloria Arroyo of ignoring the potential crisis.

The government allowed the prices to jump by offering a contract for rice at $708 per metric ton, a price almost 50% higher than it paid in January, Legarda said.

"We can ask people to try to consume less oil, and they may cooperate, but we can't ask people to consume less rice without inviting trouble," she said.

The Philippine bonds due 2030 tacked on 0.25 point to 130 bid, 131 offered.

Markets closed, emerging Europe resting easy

With London's market closed, investors could only wait to see how issues would react to the day's market news, a strategist said.

In Russia, finance minister Alexei Kudrin announced plans to loan the economy an additional 35% to 40% in 2008 compared to the volume of loans in 2007, according to the RIA Novosti News Agency.

The increase in loans from various banks and monetary authorities is intended to support the finance ministry's projection of 7% growth in GDP. The 2008 budget was calculated on an expectation of a 6.6% rate of growth.

"No bank in the country has gone bankrupt, and the banking system remains stable owing to the central bank," he said on Russian television's Channel 1.

Over the last three years, the Russian economy has grown at a rate of 6.4% in 2005, 7.4% in 2006 and 8.1% in 2007, according RIA Novosti.

In Turkey, the International Transporters Association (UND) claimed that land-based transport quotas imposed by the European Union have put a drag on Turkey's exports and industry, according to the Turkish Daily News.

"Turkish transporters have been subjected to unfair transport permit quotas imposed by E.U. countries. Due to the implemented quotas many foreign investors began to shift the direction of their investments toward other countries and that has been causing serious damage in Turkey's export sector and ultimately harming Turkish economy," said Cetin Nuhoglu, chairman of the Turkish Society for Quality, in the report.

Meanwhile in the Middle East, Israel's central bank cut its primary interest rate by 50 bps to 3.25%, according to a press release.

"The decision to cut the interest rate for April by 0.5% is consistent with a return of inflation to within the target range of 1% to 3% inflation in the second half of the year," the release said.

"The forces that served to moderate price increases last month, mainly the higher probability of a slowdown in the global economy and the strengthening of the shekel, continued to do so this month even more strongly," the release continued.

Also, oil prices fell as U.S. vice president Dick Cheney was in Saudi Arabia this weekend to discuss energy costs.

After the meeting, the Saudi authorities announced that they would increase production as well as invest in oil infrastructure.

Light sweet crude was seen trading as low at $100.02 per barrel but later was spotted at $100.58 per barrel.

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