Emerging markets mixed on rate cut; Markets close for May Day; CapitaMall prices S$160 million

By Aaron Hochman-Zimmerman

New York, April 30 - Gains in emerging markets were short-lived after equities slipped on the announcement accompanying the 25-basis-point rate cut from the Federal Open Market Committee.

Still, Latin America outperformed as Standard & Poor's handed the keys to the investment-grade washroom to Brazil.

The Brazilian bonds due 2040 added 1.5 points on the news of the rating upgrade to BBB- from BB+.

In the other sectors, "people were hoping for a more conciliatory Fed statement," a trader who specializes in Asian credit said.

"Credit closed a little wider after being firmer in the morning," he said.

In the primary, Singapore's CapitaMall Trust Management Ltd. priced S$160 million as many expect both the pipeline and the secondary market to slow severely as much of the world will celebrate International Labor Day, or May Day, on Thursday.

Volatility held still ahead of the rate cut but jumped as investors showed their disappointment. The VIX index ended higher by 0.55 at 20.79. The index is a frequently used gauge of market volatility.

LatAm rides Brazil's IG rating

In Latin America, debt performed well as one of their own was promoted to the ranks of investment grade by S&P, a strategist said.

Brazil was given the lowest investment-grade rating of BBB-, and "with that the rest of the market has done better," the strategist said.

The highly traded 11% Brazilian bonds due 2040 jumped 1.5 points to 136.15 bid, 136.25 offered.

Meanwhile in Venezuela, blackouts covered half of the country and may have been caused by an explosion at a hydroelectric station in Caracas, CNN reported.

The chief of the Venezuelan electric authority, Hipolito Izquierdo, said he expected that the problem would be fully resolved by 9:30 p.m. local time Wednesday.

The 9¼% Venezuelan government bonds due 2027 held unchanged at 91.75 bid, 92.25 offered.

After Wednesday's strong showing, "the next two days are dead for our markets," the strategist said, as many international markets are closed for International Labor Day.

Talks more likely in Argentina

In Argentina, "the market seems to be going toward the negotiation process and that's bringing a little bit of good sentiment," the strategist said.

The farmers had stated that without progress the strike would resume on May 2, but lately rumors have indicated that the day may be pushed back.

The farmers also promised not to allow food shortages in any renewed protests, according to the Buenos Aires Herald.

The 8.28% Argentine discount bonds due 2033 added onto a 1.1-point gain on Tuesday with a gain of 1.65 points to 80 bid, 80.5 offered.

Asia gives up early gains

Asian trading "felt good, until it didn't," a trader said, as credits that were healthy in the morning came down with equities after the dust from the rate cut settled on the market.

In general, price action was unremarkable on the day before Asian market closings for May Day.

In the Philippines, president Gloria Arroyo announced that there will be major changes to her cabinet soon, according to the Manila Times.

"Yes, there would be a [Cabinet] revamp next month," president Arroyo told reporters during a dinner Monday night, the report said.

Arroyo did not specify which officers may stay and which may go, but ambiguously declined to answer questions about executive secretary Eduardo Ermita, who is rumored to be the next ambassador to the United States.

The Philippine sovereign bonds due 2030 added 0.125 point to 131.75 bid.

In Indonesia, the government said it will increase supply on a strained energy market and revenues by selling half of its 14 million barrel crude oil reserve.

Over the course of eight months this year, the government will sell 30,000 barrels per day, the Jakarta Post reported.

In 2007, domestic consumption reached 500,000 barrels per day, yet the government still expects production to hit 977,000 barrels per day.

Light sweet crude was seen trading as low as $113.30 per barrel.

The Indonesian sovereigns due 2017 were seen unchanged at 102.25 bid.

Also in Asia, the leaders of Pakistan's ruling coalition met in Dubai, United Arab Emirates, to find a strategy to restore the judges removed by president Pervez Musharraf during last November's state of emergency.

Still no details emerged from the discussions.

The Pakistani bonds due 2016 were also spotted unchanged at 86 bid.

CapitaMall prices S$160 million

Also in Asia, CapitaMall Trust Management Ltd. priced S$160 million two-year notes at six-month Singapore dollar swap rate plus 165 bps.

DBS Bank acted as the bookrunner for the deal.

The notes come from a S$1 billion medium-term note program, which has now issued S$465 million.

Proceeds will be invested in asset enhancement projects and will be used as general working capital.

CapitaMall is a Singapore-based real estate investment trust.

Emerging Europe quiet ahead of Fed

Trading in emerging Europe remained quiet as the world waited to hear from the FOMC.

In Turkey, economy minister Mehmet Simsek said the country's GDP may grow 6% each year until 2018, according to the Turkish Daily News.

Turkey can sustain a real GDP growth of 6% if not more and overtake countries like Canada, South Korea and Italy in the next decades," he said at an economic forum.

The economy grew 5.7% in 2007, despite two elections and global volatility, he said.

Simsek did acknowledge the inflation of the lira but claimed that about two-thirds of the 9.2% inflation rate is due to globally rising commodity prices.

The lira was seen trading at 1.274 to the dollar.

Also in Turkey, the parliament eased a law which banned "insulting Turkishness."

The move was hailed by the European Union as a "welcome step forward" toward democratization and eventual membership in the economic bloc.

In Serbia, the media has noted a sharp division between supporters of E.U. membership and those opposed.

Prime minister Vojislav Kostunica has said he will ask the parliament to kill any agreements made with the West by pro-European president Boris Tadic, the BBC reports.

Elsewhere, the government of Belarus removed U.S. diplomats over differing interpretations of human rights.

The United States and European Union have condemned the government for human rights abuses, but president Alexander Lukashenko remained unmoved by the West's criticism.

"If the Americans introduce new sanctions and think we will collapse, that's rubbish," he said, according to the BBC.

He also said he would not release any political prisoners.

Russia warned by NATO

Meanwhile, Russia was warned by NATO over its proactive and aggressive approach to Georgia.

Both Russia and Georgia have recently traded salvos of diplomatic language accusing each other of provoking war over Georgia's breakaway region of Abkhazia.

Greater numbers of Russian and Georgian troops have recently been mobilized around Abkhazia and South Ossetia.

The Russian sovereigns due 2030 slipped 0.375 point to 114.75 bid, 115.25 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.