Emerging markets primary activity slows; Noble Group prices notes; Asia a region to watch

By Christine Van Dusen

Atlanta, July 30 - Emerging market debt issuance slowed its breakneck speed on Friday, with just one new deal pricing from Hong Kong's Noble Group, as investors digested the recent spate of new deals and prepared to shuffle off into the summer slowdown.

"It's been a pretty slow day in general," an economic strategist said.

But the market was "very firm," a New York-based source said. "Overall the bids have kind of come back and it's just firm. Volumes are pretty light, and it seems like there is some two-way activity. Certain bonds that have done well are lagging now.

"People are rotating into cheaper bonds a bit. But overall the underlying bid is very, very good in terms of new issues."

Brazil performs, CrediQ prices

The tap issue from Brazil - a $75 million add-on to the $787.5 million 4 7/8% notes due 2021 that priced this week at 102.707 to yield 4.546% - was "choppy" on Friday, he said. "But overall, performance was good."

The market was digesting two deals from late Thursday, including a $1 billion add-on to the 5 5/8% notes due 2021 from Turkey. That tap issue priced late Thursday at 103.021 to yield 5¼%, or Treasuries plus 226.7 bps, via Goldman Sachs and Barclays Capital in a drawdown from a Securities and Exchange Commission shelf registration.

The original issue totaled $1 billion and priced at 98.986 to yield 5¾%.

And El Salvador-based automotive financing company Grupo Financiero CrediQ Corp. priced $20 million 7¾% notes due Aug. 6, 2012 at 99.095 to yield 8¼%, according to an informed market source.

BCP Securities was the bookrunner for the Regulation S-only transaction.

The notes are part of the company's $150 million short-term notes program and guaranteed by CrediQ SA de CV, CrediQ Inversiones Costa Rica SA, Financiera CrediQ SA and Grupo Financiero CrediQ SA.

Proceeds will be used for general corporate purposes.

Beyond that, "there's nothing else," a Brazil-based market source said. "The markets are virtually closed until September."

Asian economies improving

Other sources disagree, saying they believe the primary market will stay active for at least one more week before diving headlong into the summer slowdown.

August typically may be "terrible for everyone," the strategist said. "But next week there's data coming out of China and more data out of Korea, and Indonesia also has some new data, so other stuff could come out next week. Even though it may be slow, there's still some stuff to pay attention to."

This week's data from the region showed that Hong Kong saw the pace of year-over-year growth slow to its "lowest level in some time now," he said.

But mortgage lending "grew again in June," he said. "Of course with respect to money supply and money lending in general, that's an underpinning of growth in Hong Kong. So you're going to see bank lending appreciate, and that is encouraging in respect to the sustainability of the rebound."

In Korea, "industrial growth production fell a little," he said. But it was still "healthy" on a year-over-year basis.

Noble Group prices notes

These factors could all help improve conditions for Asian borrowers, he said.

Already this summer the market has seen a good chunk of new issuance from Korea - described as the "closest to being an emerging economy" by Deutsche Bank managing director Benjamin Pace - with deals from Seoul-based Woori Bank, Korea Exchange Bank and Korea Housing Finance Corp.

And on Friday, Hong Kong-based shipping company Noble Group priced a $750 million two-tranche bond issue via JPMorgan in a Rule 144A and Regulation S transaction, according to an informed market source.

The deal included $500 million 4 7/8% bonds due 2015 that priced at 99.842 to yield 4.911%, or Treasuries plus 330 bps, and $250 million 6 5/8% bonds due 2020 that priced at 99.704 to yield 6.666%, or Treasuries plus 375 bps.

Proceeds will be used for general corporate purposes.

The 2015 bonds were trading in the secondary at 327 bps bid, 321 bps offer. And the 2020 bonds were trading at 374 bps bid, 367 bps offer.

Asia in focus

Asia, it seems, is a region to watch.

Indeed, last week bond funds "slowly but steadily" cranked up their exposure to the region, said Cameron Brandt, global senior analyst for data tracker EPFR Global.

Asian emerging economies, along with many others in the EM universe, are "a better combination of growth and indebtedness than their developed market peers," Brandt said.

As these economies improve, so too will "the ability of corporates and sovereigns to do new issues," the strategist said.

One new Asian corporate issuer is preparing to bring a deal to market. Singapore-based semiconductor-maker Stats ChipPAC Ltd. plans to conduct an investor roadshow during the Aug. 2 week for its $600 million offering of five-year senior notes, according to market sources.

The Rule 144A and Regulation S offering - which is being led by joint bookrunners Credit Suisse and Deutsche Bank Securities via the emerging markets syndicate desk - is expected to price late that week.

The notes come with three years of call protection.

Proceeds will be used to fund a cash distribution to shareholders and to finance the tender offer and consent solicitation for the company's 6¾% senior notes due 2011.

Investors also are waiting on a new issue from Shanghai-based women's apparel company E-Land Fashion China Holdings Ltd., which plans to sell $200 million senior unsecured notes due 2013 via Morgan Stanley.

Inflows hit high

The Asian market recently caught the eye of a Russian issuer. Moscow-based lender VTB Bank priced S$400 million 4.2% loan participation notes due 2012 via OCBC and VTB Capital, according to a company press release.

The initial size of the deal was S$100 million.

"Despite the announced ambitious pricing level, the transaction generated strong investor interest," said deputy chairman and chief financial officer Herbert Moos, in a written statement. "Asian markets are interesting for VTB for the diversification of its funding sources."

Investors from Singapore, Hong Kong, other Asia-Pacific countries and Europe participated in the transaction, he said.

In other emerging markets news, inflows into EM bond funds hit $1.31 billion for the week ended July 28, according to EPFR. That's a 15-week high and up from $875 million during the previous week.

"That's slightly in favor of funds with local currency mandates," Brandt said.

"There's an overall bias toward fixed income," he said. "Enough people were thoroughly scorched by equities. Anything that smacks of a quantifiable income stream looks pretty good."

Paul A. Harris contributed to this report.

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