EM assets, sentiment get boost from Italy rumors, U.S. retail sales; IPIC, TAQA active

By Christine Van Dusen

Atlanta, Nov. 28 - Emerging markets assets posted solid gains on Monday as sentiment got a boost from better Black Friday retail sales numbers from the United States and rumors that Italy would receive a bailout loan from the International Monetary Fund.

"I suspect from these rumors that where there is smoke, there is fire, and the market is sniffing that something is going on," a trader said. "Plus, I guess we were in an oversold position at the back end of last week. And let's not forget it was not exactly all-hands-to-the-pump last week, given the United States holiday."

The Markit iTraxx SovX index spread was 20 basis points tighter.

"Thanks to the lack of meaningful activity since last Wednesday, emerging markets have avoided the worst of risk aversion and are now free to enjoy the more positive mood today, as U.S. consumers spent nearly $400 per head last Friday, versus $365 a year ago," a London-based trader said. "What a difference a long weekend makes.

"The EM world is looking like a much better place today, after the total despondency at the end of last week."

Bonds from Abu Dhabi's International Petroleum Investment Co. (IPIC) were once again active, particularly the 2016s and 2017s.

"The 2020s, 2021s and 2022s caught a bid late in the day," a trader said. "The 2020s and 2022s look interesting to me, versus these 2017s."

Also solid on Monday was Abu Dhabi National Energy Co. (TAQA).

"TAQA remains solid with the 2016s through the 2019s pretty well supported," he said.

Overall, flows were light.

"The same orders do the rounds throughout the day," he said. "The bottom line is, I think we have three more weeks of this semblance of liquidity and then it's 'next stop, January 2012. The traditional rally into year-end and spike higher in the first few days of January may have to be put on hold this year. Still, I don't want to be too much of a scrooge; there is a bucket-load of value for locals - or anyone, for that matter - who has cash.

Russian corporates firm up

In other trading on Monday, Russia's corporate bonds were seen firming up, with the metals and mining industry outperforming oil and gas, a trader said.

Still, OJSC Gazprom managed to get a lift during the session, with its 4.95% notes due 2016 trading at 99.25 bid, par offered. The notes priced at par on Nov. 16. The Moscow-based gas company's recent 5.999% notes due 2021 - which also priced at par - were seen Monday at 98.25 bid, 99 offered.

Russia-based Gazprombank's bonds were also lifted on Monday. The lender's 7.933% 2013s were trading at 104.75 bid, 105.50 offered while its 6¼% 2014s were trading at 100.25 bid, 101 offered. The issuer's 6½% 2015s were seen at 100.50 bid, 101.25 offered.

Vimpelcom tightens

Russia's high-beta corporates were also doing well on Monday, a trader said.

"Vimpelcom's 2022s are 50 bps tighter," he said.

Meanwhile, Turkey's sovereign bonds lagged while its bank paper saw the retail investor bid return, he said.

"Good performance by the banks, but Turkey is generally lagging," he said. "There is good retail investor interest on Akbank's 2015s, which are optically cheap at these levels."

Ukraine tightens

Looking to the Ukraine, the sovereign curve tightened 40 bps on the news that VTB Bank will expand its $2 billion loan.

"Even with the expectation that it will lead to some kind of 'white knights' structure, as per Gazprom, the Ukraine curve is now tighter," a trader said.

From the Middle East, bonds from Dubai were well supported on Monday, with retail investor demand seen for Emirates' 2016s.

"And long-dated Dubai Water and Electricity Authority and Dubai's 2020s traded higher," he said.

IPIC in focus

Taking a closer look at Abu Dhabi's IPIC, the 2016 bonds remained a solid performer while the company's 2017s continued to trade well, a trader said.

The company recently priced $1.5 billion 3¾% notes due 2017 at 99.669, $1.5 billion 5½% notes due 2022 at 99.743 and $750 million 6 7/8% notes due 2041 at 99.097.

"Selling the 2017s to move into the 2020s and 2022s looks interesting," he said. "Better buyers are around on the 2041s today."

This followed Thursday's fairly lackluster session for the credit, given the Thanksgiving holiday in the United States.

"IPIC tried to start off the day on the right foot before being hit again mid-morning," he said. "Their 2022s are 25 bps wider, dragging Mubadala's 2021s down with it."

Only IPIC's 2016s held up well that day, he said.

TAQA active during holiday

Despite the holiday lull, Abu Dhabi's TAQA remained active during the Thursday and Friday sessions.

"You have to respect the 2016s which, while they look rich to me, have solid technicals," a trader said. "[On Friday] there were buyers."

Thursday also saw some nibbling on the recent 2016 notes from Abu Dhabi Islamic Bank, which closed Thursday at 100.05 bid, 100.15 offered after pricing at par.

The final book for that deal was $2 billion from 122 orders, with 57% from the Middle East, 29% from Europe, 13% from Asia and 1% from others.

Banks accounted for 52%, fund managers 28%, central banks and agencies 16%, private banks 2% and others 2%.

"We also saw some demand on Dubai World and the Dubai sovereign," he said. "Qatar was quiet, but overall, dealers are still happy sitting on the offer ahead of possible supply."

Qatar wraps marketing trip

In deal-related news on Monday, Qatar wrapped up a roadshow on Monday for a possible issue of notes, a market source said.

Citigroup, HSBC, JPMorgan, Mitsubishi UFJ, QNB Capital and Standard Chartered Bank arranged the trip, which started Nov. 25 and traveled to London and New York.

"Qatar sovereign paper is in a wait-and-see mode as their roadshows hit New York," a trader said. "Secondary flows will remain quiet until the market sees guidance on any possible transaction that emanates from the investor presentations."

Chile's ENAP on roadshow

And Chile-based hydrocarbon exploration and production company Empresa Nacional del Petroleo (ENAP) was on a roadshow for a possible issue of notes, a market source said.

BBVA, HSBC, JPMorgan and Mitsubishi UFJ Securities arranged the marketing trip, which began Nov. 25 in London and travels to Los Angeles and New York before concluding on Nov. 30 in Boston.

And South Korea-based Korea Gas Corp. was on a roadshow for a possible issue of notes via Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS, a market source said.

The trip began Monday and will travel to Singapore, Hong Kong, London, Sydney, Boston and New York.

Optus, Baosteel sell notes

On Friday, Singapore's Optus Finance Pty. Ltd. priced a A$75 million issue of fixed-rate notes due Dec. 5, 2018, according to a company announcement.

Credit Agricole was the bookrunner for the transaction.

Proceeds will be used for general corporate purposes.

Optus Finance is a subsidiary of Singapore Telecommunications Ltd., a broadband service provider based in Singapore.

And China-based iron and steel company Baosteel Group priced a three-tranche issue of RMB 3.6 billion notes due 2013, 2014 and 2016, a market source said.

The deal included RMB 1 billion 3 1/8% notes due Jan. 1, 2013, RMB 2.1 billion 3½% notes due Jan. 1, 2014 and RMB 500 million notes due Jan. 1, 2016, all of which priced at par.

China Merchants Securities, DB Bank, Deutsche Bank, HSBC, ICBC International and Standard Chartered Bank were the bookrunners for the Regulation S deal.

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