Risk appetite still solid as Shinhan Bank, Unilever, Indian Railway Finance print notes

By Christine Van Dusen

Atlanta, March 28 - South Korea's Shinhan Bank, Unilever NV and Indian Railway Finance sold notes on a Monday that saw emerging markets issuers and investors continuing to shake off the negative headlines out of the euro zone, Japan and the Middle East.

"There's been an impressive ability to shrug off Japan, MENA turmoil and the Libya situation," a London-based trader said. "The longer the story remains in the news, the more investors can become desensitized to the news flow."

The JPMorgan Emerging Markets Bond Index Plus spread started the day unchanged at Treasuries plus 258 basis points.

"Any concerns about MENA, Japan, Ireland and potential rate hikes are overcome by the chance to buy dollar assets that do at least beat inflation," a London-based market source said.

Middle East remains solid

In trading, names like Bahrain, Tunisia and Egypt staged an impressive comeback on Monday, the London-based trader said.

Egypt's 2020 bonds traded at 97.50 during the day, with five-year credit default swaps at 330 bps bid, 340 bps offered.

But the best performance from the region was seen from Dubai's issuers, in response to the news of Dubai World's restructuring agreement.

"The main activity today was centered around Dubai, with more strong demand," he said. "The relative perception of Dubai as a safe haven credit in MENA ... has led Dubai tighter."

Dubai Water and Electricity Authority's paper was 60 bps tighter on the week, while the Dubai sovereign was about 70 bps to 80 bps stronger.

Spreads rally

"We are also witnessing some very strong demand on some of the previously beaten-up names," the London trader said. "As spreads have rallied, investors have been dropping down the ratings totem pole and seeking out the more distressed names."

The recent 2016 notes from Emaar Properties, for example, were seen trading up at 100.125.

The trader also saw some demand for Qatar National Bank.

"That's finally catching a bid after lagging," he said. "That's trading at 97.60 bid, 98.00 offered."

He also saw two-way action for Abu Dhabi National Energy Co. And sellers were seen for National Bank of Abu Dhabi and International Petroleum Investment Co., in particular the latter's 2021 bonds.

"That still looks like an OK value," he said. "We also saw some retail nibbling on the 2016s near the 99.50 level."

Africa in focus

In other trading on Monday, Nigeria's 2021 dollar notes remained unchanged.

"Ghana and, more noticeably, Gabon are racing higher on limited volume," a source said. "Gabon goes out at 115.62 bid."

And Turkey was trading a bit weaker on Monday.

"People are digesting the 400 bps reserve ratio hike and Syria is ticking like a bomb on the Southeastern border," he said. "Banks opened a little weaker but recouped the morning losses."

He pointed to Akbank, which saw better sellers of its 2018s. The notes were seen trading Monday at 101 bid, 101.375 offered.

And Isbank saw better buyers of its 2016s, which were trading Monday at 99 bid, 99.50 offered.

Mriya oversubscribed

Also getting attention on Monday were the $250 million 10½% notes due 2016 from Ukraine-based agriculture producer and trader Mriya Agro Holding plc.

The notes came to market on Friday at 98.876 to yield 11¼% via Merrill Lynch, RBS and UBS in a Rule 144A and Regulation S transaction.

The final book was $430 million from about 100 accounts, with 68% from the European Union, 22% from the United States and 10% from Asia. Funds accounted for 62%, hedge funds 17%, private banks 15% and banks 6%.

"We're seeing some buying of Mriya from retail, but the street is still long from the flipping frenzy early on," the London-based trader said.

The notes were seen trading Monday at 98.65 bid, 98.95 offered.

"They traded as low as 98.60 before finding some support," he said.

Shinhan prices notes

In its new deal, South Korea-based lender Shinhan Bank priced $500 million 4 1/8% notes due Oct. 4, 2016 at 99.412 to yield 4.246%, or Treasuries plus 205 bps, a market source said.

The notes priced tighter than talk, which was set at Treasuries plus 210 bps.

Merrill Lynch, BNP Paribas, HSBC, ING, JPMorgan, Mizuho, RBS and Shinhan were the bookrunners for the Rule 144A and Regulation S deal.

The day also saw British-Dutch consumer products company Unilever NV join the burgeoning renminbi market by pricing RMB 300 million notes due March 31, 2014 at par to yield 1.15%, a market source said.

Deutsche Bank and HSBC were the bookrunners for the notes, which a market source said attracted RMB 2.9 billion in orders.

Indian Railway sells notes

Also on Monday, Indian Railway Finance priced $200 million notes due March 30, 2016 at par to yield 4.406%, or Treasuries plus 220 bps, a market source said.

The notes priced at the low end of talk, which was set in the Treasuries plus 220 bps to 225 bps area.

Merrill Lynch was the bookrunner for the Regulation S notes.

This new dealsfollowed the Friday pricing of Export-Import Bank of India's CHF 175 million 3½% notes due April 13, 2016, which came to market at 100.284, a market source said.

BNP Paribas, Deutsche Bank and UBS were the bookrunners for the transaction.

In other deal-related news, Sao Paulo-based banking company Banco Santander Brasil SA mandated Morgan Stanley and Santander for a roadshow starting Wednesday, a market source said.

The marketing trip will begin in New York and Los Angeles and finish March 31 in Boston and Chicago.

Roadshows set

Several other issuers have roadshows in the works.

Abu Dhabi's government-owned investment vehicle, Mubadala Development Co. PJSC, mandated Barclays Capital, HSBC, National Bank of Abu Dhabi, Societe Generale and Standard Chartered for a marketing trip.

Hong Kong-based container manufacturer and logistics company Singamas Container Holdings Ltd. mandated RBS, DBS Bank and ING for an offering of renminbi-denominated notes, a market source said.

A roadshow will take place in Singapore on Thursday and Hong Kong on Friday for the Regulation S notes.

And PTT Exploration and Production Canada (PTTEP Canada) - part of Bangkok-based petroleum exploration and production company PTT Exploration and Production PCL - has set the tenor at 10 years for its planned dollar-denominated issue of benchmark-sized notes, a market source said.

Barclays Capital is the bookrunner for the deal.

Lotte roadshow planned

South Korea-based retail operator Lotte Shopping Co. Ltd. will set out on a roadshow starting Wednesday for a dollar-denominated issue of notes, a market source said.

BNP Paribas and Citigroup are the bookrunners for the Regulation S deal.

Market sources were also whispering Monday about a possible issue of notes from Russia-based hydroelectricity company Rushydro Finance Ltd.

"I'd be surprised if more supply wasn't forthcoming, given the rally we have had and all the talk surrounding bond mandates and supply," the London trader said.

EM opportunities expanding

In looking ahead in emerging markets investing, opportunities are expected to arise in countries outside the typical EM sphere of Brazil, Russia, India and China, according to a recent report from Mark Mobius, executive chairman of the Templeton Emerging Markets Group.

"I believe the BRIC countries will continue to do quite well at different times," he said. "Outside of the BRIC markets, we think the Next 11 countries - Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam - will be important and very interesting to watch."

He is also keeping an eye on South Africa, Kazakhstan, Poland, Ukraine, Argentina, Chile and Colombia.

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