China Development sells notes; EM starts stronger, then weakens on Fed; roadshow for Hua Han

By Christine Van Dusen

Atlanta, Jan. 27 – China Development Bank sold notes on Wednesday, another rollercoaster session for emerging markets assets, starting off stronger on the jump in oil prices, then retreating after the Federal Open Market Committee’s remarks.

“The Fed ignited some market concern, as they remain focused on global macro weakness and how contagion may be at play,” a trader said. “Risk assets don’t seem to like a Fed on hold, as it signals broader issues for the economy at large.”

Though oil climbed more than 11% on Tuesday on remarks from Iraq’s oil minister – who said that Saudi Arabia and Russia could cooperate with cutting output – prices “continue to show significant volatility,” according to a report from Barclays Capital.

And after the Federal Reserve on Wednesday noted the slowing of the economy in late 2015 and said it would raise interest rates gradually, “the market retreated alongside other risk assets,” a trader said.

From Latin America, bonds from Peru were firm on Wednesday morning, with buyers seen for the sovereign’s 2037s, another trader said.

Overall, credits from the region “that have been consistently pushed lower within this global volatility and malaise started to turn back around yesterday and are gaining a bit more momentum today,” a New York-based trader said early on.

The names that were improving the most included Brazil-based Petroleo Brasiliero SA, Brazil’s Vale SA and Mexico’s Cemex SAB de CV. Brazil-based Braskem SA continued to move higher.

“Colombia bank paper also looks to be bouncing off recent lows with little volume and inquiry,” he said.

CDS widen

But at the end of the day, Brazil’s five-year credit default swaps spreads were 477 basis points after trading as tight as 462 bps. Mexico’s closed at 200 bps after trading as tight as 191 bps and closing Tuesday at 202 bps.

“Cash prices were well-bid for most of the day leading up until 2 p.m. but started slumping to close the session, with prices off 25 cents to 50 cents from the highs, but still firmer than yesterday,” another trader said.

Venezuela, PDVSA dip

Venezuela’s 2027s moved to 35.25 from 34.25, while PDVSA’s 2015s finished at 39.25 from 39.50.

“Flows were dominated by better buyers today, with volumes calming down later in the session once markets weakened,” the trader said.

The market also continued to watch Turkey-based Finansbank AS, as National Bank of Greece moved forward with its plan to sell 100% of its stake in the Turkish lender to Qatar National Bank.

On Wednesday, Finansbank’s 2019s were up at 104 5/8 in the Street, a trader said.

Azerbaijan, Indonesia deals

Azerbaijan received some attention on Wednesday as the Central Bank looked to consolidate the country’s banking system, closing four banks in the past week, according to a report from Schildershoven Finance BV.

“In our view, it is a positive for the International Bank of Azerbaijan, as it should strengthen the bank’s positions in the market,” the report said.

Meanwhile the sovereign was said to be readying an issue of dollar-denominated notes.

Market sources were also whispering about a possible issue of notes from Indonesia, which could total $2 billion and may be led by CIMB, Citigroup, Deutsche Bank, Dubai Islamic Bank and Standard Chartered Bank.

Traders also mentioned that Buenos Aires could issue between $500 million and $1 billion of notes this year.

CDB prices notes

In its new deal, China Development Bank priced an additional $1 billion 2½% notes due Oct. 9, 2020 at 100.913 to yield Treasuries plus 85 bps, a market source said.

Bocom HK, KGI Asia, CCB International, ICBC, ABC International, Standard Chartered, JPMorgan, HSBC, Mizuho Securities and Bank of China were the bookrunners for the Regulation S deal.

The proceeds will be used for working capital and general corporate purposes.

The original $1 billion 2½% notes due in 2020 priced in September at 99.613 to yield 2.583%, or Treasuries plus 120 bps.

The company also set talk for a benchmark-sized tap of its 7/8% notes due in 2018 at mid-swaps plus 75 bps.

China Development Bank is a financial institution based in Beijing.

Hua Han on roadshow

China’s Hua Han Health Industry Holdings is on a roadshow for a dollar-denominated issue of notes, a market source said.

UBS is the bookrunner for the deal.

The roadshow began on Tuesday and will end on Friday.

The issuer is a Hong Kong-based holding company.

© 2015 Prospect News.
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