Emerging markets investors take cautious stance; Banco do Brasil, Pemex, KT set roadshows

By Christine Van Dusen

Atlanta, Jan. 5 - Emerging markets debt trading had a slow start Thursday as concern about the European economic situation - and, particularly, Hungary's struggles - kept investors cautious and issuers waiting on the sidelines.

"My take overall is that people really would prefer to be adding risk here, but the external environment just won't give them enough conviction, so we drift," a trader said. "Tuesday's rampant enthusiasm for risk has definitely been replaced with a more cautious approach."

Driving that, he said, were Hungary's troubles: an ailing currency, a crushing debt burden and trouble obtaining a bailout loan from the International Monetary Fund.

"The Middle East and North Africa are not immune to this new mood, with all the benchmarks 10 basis points wider," he said. "But don't worry too much - retail investors are still buying."

As the day went on, spreads continued to limp along, he said.

"To be fair, given how badly the euro currency and periphery bonds have been spanked today, we have actually done quite well," he said. "And Hungary even managed a 20 bps recovery."

In other trading on Thursday, Russia's 5% 2020 notes were seen at 102.50 bid, 103.25 offered after trading Tuesday at 103.25 bid, 104 offered.

In other trading from Russia, Gazprom's 5.999% 2021s were quoted at 99 bid, 99.75 offered versus 99.50 bid, 100.25 offered on Tuesday. And Vimpelcom's 7.504% 2022s were trading at 83.50 bid, 84.50 offered after Tuesday's level of 84.50 bid, 85.50 offered.

Also from Russia, Lukoil's 6.656% notes due 2022 were seen at 100.50 bid, 101.50 offered, flat to Tuesday's levels.

Turkey bonds suffer

Looking at Turkey, the sovereign's 5 1/8% 2022s were trading at 94 bid, 94.75 offered after trading Tuesday at 95.75 bid, 96.50 offered.

"Turkey cash is really feeling the pain, now trading at the lows of 2011 in cash price as a lack of confidence in the central bank combines with regional tensions," a trader said.

In other trading on Thursday, South Africa's 5 7/8% 2022s were seen at 113.25 bid, 114 offered following Tuesday's 115.50 bid, 116.25 bid.

Middle East in focus

From the Middle East, Qatar's 4½% 2022s were quoted at 103.35 bid, 103.85 offered after Tuesday's 103.88 bid, 104.62 offered. The notes priced on Nov. 29 at 98.951.

The 5 7/8% 2021s from Abu Dhabi National Energy Co. (TAQA) - which priced on Dec. 5 at 99.515 - traded Thursday at 104 bid, 104.75 offered versus Tuesday's 104.75 bid, 105.50 offered.

Abu Dhabi's International Petroleum Investment Co.'s 5½% 2022s were seen at 100.75 bid, 101.25 offered after trading Tuesday at 101.25 bid, 102.25 offered. The bonds priced on Oct. 28 at 99.743.

Meanwhile, Kazakhstan's BTA Bank - in focus for missing a coupon payment and facing the possibility of a second restructuring - was trading better on Thursday.

"But the rest of Kazakhstan is under pressure," a trader said.

LatAm corporates on road

In deal-related news on Thursday, Brazil-based lender Banco do Brasil SA mandated BB Securities, BNP Paribas, Citigroup, HSBC and Standard Chartered Bank to arrange a roadshow in Asia, the United States and Europe, a market source said.

The marketing trip will begin on Jan. 9, and a Rule 144A and Regulation S issue of perpetual dollar-denominated notes could follow.

And Mexico-based petrochemical company Petroleos Mexicanos SAB de CV has mandated Bank of America Merrill Lynch and HSBC for a roadshow from Jan. 9 to Jan. 24, a market source said.

The marketing trip will begin in Boston and Chicago and travel to the West Coast and New York before concluding in London.

KT taps bookrunners

South Korea-based telecommunications company KT Corp. has mandated Citigroup, Goldman Sachs and JPMorgan for a possible issue of dollar bonds, a market source said.

A roadshow for the Regulation S deal will take place the week of Jan. 9 in Hong Kong, Singapore and London.

Also from South Korea, lender Export-Import Bank of Korea (Kexim) priced a two-tranche $2.25 billion issue of notes due 2017 and 2022 on Wednesday, according to a company filing.

BNP Paribas, Citigroup, Deutsche Bank, HSBC, Bank of America Merrill Lynch and RBS were the bookrunners for the Securities and Exchange Commission-registered deal.

The deal included $1.25 billion 4% notes due Jan. 11, 2017 that priced at 99.807 and $1 billion 5% notes due April 11, 2022 that priced at 99.627.

The proceeds will be used for general operations, including extending foreign currency loans and for the repayment of maturing debt and other obligations.

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