International Container, IDBI eye bond market amid volatile day; post-holiday pace muted

By Christine Van Dusen

Atlanta, April 25 - Though continued concern about the global economic crisis weighed on the markets Monday and stunted new issuance, several issuers - including Philippines-based International Container Terminal Services and India's Industrial Development Bank of India Ltd. - took steps toward the market.

"There was certainly some market weakness," said Nick Chamie, head of emerging markets research for RBC Capital Markets. "That's been the order of things for much of today. And given the increasing anxiety over the coming ending of quantitative easing and concerns around the U.S. fiscal and debt situation, as well as Europe and its sovereign debt problems, there's plenty on everyone's plate to keep an eye on."

As a result, he said, emerging markets investors - who experienced significant gains in the last six months - were looking to reduce their exposure to risk.

"Volumes remain low," a market source said. "Outside of the occasional burst of activity, there's nothing too consistent at all."

The JPMorgan Emerging Markets Bond Index Plus spread widened 3 basis points to Treasuries plus 267 bps. Venezuela was a standout at 14 bps wider on the recent news that president Hugo Chavez will raise taxes on oil enterprises and use the money for social spending ahead of the 2012 election.

Wharf cancels notes

The current volatility led Hong Kong-based property and infrastructure developer Wharf Finance Ltd. to postpone its planned benchmark-sized dollar-denominated offering of notes due 2021, a market source said.

Details were not immediately available on Monday.

UBS was the bookrunner for the Regulation S-only notes, which were whispered at the Treasuries plus mid-200 bps area.

Proceeds were to be used for general corporate purposes.

Also from Asia, Philippines-based port management company International Container Terminal Services mandated Citigroup and HSBC as the bookrunners for a dollar-denominated issue of perpetual notes, a market source said.

The Regulation S notes will be marketed during a roadshow starting April 26.

Proceeds will be used for acquisitions and new projects.

IDBI taps bookrunners

In other deal-related news, India-based lender IDBI mandated BNP Paribas, Credit Suisse and UBS for an offering of Swiss franc- and dollar-denominated notes, a market source said.

The franc notes will likely price in May, the source said. The dollar notes - which are expected to total $250 million and carry a seven-year tenor - could come to the market soon afterward.

This comes as issuance from Indian banks is expected to grow, with the total amount of bonds forecast at $7 billion to $9 billion for the year, according to a research report from Nomura.

Other Indian lenders that are expected to issue notes include Syndicate Bank - with dollar notes via Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank, HSBC, JPMorgan and UBS - and State Bank of India.

Banco Galicia on deck

Market-watchers were also keeping an eye out for the seven-year issue of up to $300 million of notes from Argentina-based lender Banco de Galicia y Buenos Aires.

The notes, via UBS and Deutsche Bank, are expected to price April 28.

"But that's about it right now, because of the volatility," a market source said.

Said Chamie: "By and large most deals have been shelved, outside of some very small deals. I think that while there have been inflows back into EM, coming back quite strongly in comparison to the first quarter's outflows, there does seem to be a certain degree of hesitance on the part of issuers given the volatility in the markets, making it more difficult to come to market."

Inflows rise

Indeed, inflows into emerging markets bond funds have bounced back over the last month, with about $486 million for the week ended April 20. That marked the fourth straight week of inflows for the funds, according to a report from data tracker EPFR Global.

"With developed markets' debt problems brought sharply into focus by Standard & Poor's downgrade of the outlook for U.S. paper, fresh speculation that Greece will be forced to default on its crushing debt burden and the debate in Japan over additional bond issues to finance reconstruction, investors gravitated toward emerging markets assets," EPFR said.

This movement should provide "a helpful tailwind for EM asset prices in the near term," according to a separate report from RBC Capital Markets.

Emerging Europe gets funds

Global funds rotated exposure from Brazil and the Middle East to emerging Europe while also reducing their allocations for several Latin American markets, EPFR said.

"But it was Asia, rather than emerging Europe, which benefited as the weighting for the former climbed to a new record high," the report said. "The shift was partly in response to investor demand."

Emerging markets bond funds with an Asia focus continue to attract more fresh money - as much as 10 times more - than their counterparts in Latin America and Europe, the Middle East and Africa.

Meanwhile bond fund managers increased their weighting in Thailand and South Africa to record highs, to the highest level on record, EPFR said.

"The Philippines, however, saw its average weighting fall below 2% for the first time in more than eight years," the report said.

© 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.