Hana Bank, Bahrain's Gulf International Bank print bonds as EM assets end day weaker

By Christine Van Dusen

Atlanta, Dec. 7 - South Korea-based Hana Bank and Bahrain's Gulf International Bank sold notes on a Wednesday that started out strong for emerging markets assets and ended with a whimper, as the euro zone's continuing troubles took their toll.

Early in the day, activity was focused on the recent new deals from International Petroleum Investment Co., Abu Dhabi National Energy Co. and Qatar.

"There's still very good follow-through and demand," a London-based trader said during the European morning. "Elsewhere the market is just benignly happy, enjoying the bid in the broader market."

But by the afternoon, the Markit iTraxx SovX index spread had widened by 15 basis points.

"This whole euro thing [has] dominated everything all year, despite EM's best efforts to differentiate itself," he said.

The day's biggest losers were Turkey and Russia's Gazprom, he said, with Turkey's regional tensions scaring off marginal buyers.

"A firmer start has faded into weakness in the afternoon," another trader said. "Sovereigns are clearly the laggard, which are more than a point down in the long end."

On the corporate side, Akbank's 2018s were hit at 99.50 and bank spreads were mostly wider.

"We've seen better retail investor buying on Akbank's 2015s and Isbank's 2016s," he said. "Even the Middle East and North Africa favorites have seen better selling. Retail investors remain very active and better buyers."

Russia's corporate bonds were firmer at the open while Gazprom traded heavily versus the rest of the sector, a trader said.

"Gazprom is feeling the pain today," he said.

And Kazakhstan's BTA Bank was weaker, with retail investors intent on selling.

"BTA Bank was downgraded to CCC, but no one cares," he said.

Venezuela trades higher

Venezuela's bonds were trading higher on Wednesday amid some real buying but also rumors that president Hugo Chavez is sicker than initially thought, a Connecticut-based trader said.

"Overall it looks like the downgrades in Europe didn't affect us too, too much," he said. "We're off the highs but not dramatically so. People expected this."

Trading, for the most part, was a bit on the slow side during Wednesday's session.

"There's still a lot of cash out there, but things are kind of passively moving higher, rather than a lot of buying," he said.

Mixed day for recent issues

Looking at recent new issues from the EM universe, performance on Wednesday was mixed, the Connecticut trader said.

One deal that was not doing very well was the €1.85 billion issue of notes due 2018 and 2022 from Brazil's Petrobras International Finance Co., a unit of energy company Petrobras.

The deal included €1.25 billion 4 7/8% notes due 2018 that priced at 99.021 to yield 5.066% and €600 million 5 7/8% notes due 2022 that priced at 99.266 to yield 5.977%.

"That's not doing so hot," he said.

Tencent underwhelms

Another recent issue that was performing poorly on Wednesday was the $600 million 4 5/8% notes due 2016 from China-based Tencent Holdings Ltd.

The holding company, which focuses on online advertising and internet and mobile phone services, priced the notes on Monday at 99.74 to yield Treasuries plus 375 bps via Goldman Sachs, Deutsche Bank, Credit Suisse and HSBC in a Rule 144A and Regulation S deal.

"That one is down pretty significantly," the Connecticut trader said. "It feels like most people are closed for the year. Clearly, money needs to be put to work, but it seems like more of a lack of wanting to trade. Deals that come cheap get traded tighter. Our analysts didn't particularly care for the Tencent deal. There's just no follow-through and no will to trade stuff tighter."

Hana Bank sells notes

In its new deal, South Korea-based lender Hana Bank priced a $550 million issue of 4¼% notes due June 14, 2017 at 99.458 to yield 4.362%, a market source said.

Barclays Capital, Bank of America Merrill Lynch, Citigroup and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes and refinancing for foreign currency denominated debt.

Bahrain's GIB does deal

Also on Wednesday, Bahrain-based merchant bank Gulf International Bank priced a $300 million issue of sukuk notes due Dec. 7, 2014 to yield Libor plus 130 bps, according to a company announcement.

JPMorgan was the bookrunner for the deal.

No other details were immediately available on Wednesday.

South Africa ponders sukuk

In other deal-related news, South Africa is considering an issue of sukuk notes, a market source said.

The sovereign has sent out requests for proposals for the possible deal.

In November, the sovereign mandated Barclays Capital, Nedbank Capital and Rand Merchant Bank for a roadshow from Nov. 23 to Dec. 1.

"South Africa is joining the sukuk party," a trader said. "They have one of the richest dollar curves in emerging Europe, the Middle East and Asia so I guess they are keen to protect it."

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