Singapore's Mapletree, CapitaMalls print notes amid tighter spreads, thin volumes for EM

By Christine Van Dusen

Atlanta, Aug. 17 - Two Singapore real estate companies printed notes on a Friday that saw light volumes, some profit-taking, tighter spreads and mostly positive risk sentiment.

In its new deal Singapore-based real estate investment trust Mapletree Commercial Trust priced a S$160 million issue of notes due 2020 with a coupon of 3.6% via DBS Bank, Citigroup, Oversea-Chinese Banking Corp. and United Overseas Bank.

Singapore-based shopping mall company CapitaMalls Asia Ltd. sold S$250 million 3.7% notes due 2022 at par to yield 3.7% with bookrunner DBS Group in a Regulation S deal.

Spreads, meanwhile, compressed by about 10 basis points over the week, and the tone - set before the summer doldrums began - remained mostly upbeat, according to a report from Commerzbank.

"EM bond flows continue their momentum and remain the most favored asset class," the report said.

But overall, trading was very thin on Friday.

"We expect this dullness to persist until the end of August," Commerzbank said. "But investors should not be disappointed. We are confident that when the main actors in the euro zone tragedy are back from their holidays they will play their part to keep markets volatile."

The pullback, particularly in long-dated paper, was welcomed by some traders.

"Net-net, it was a quiet session, but it's worth looking at moves on the long end," a London-based trader said. "I think it's healthy, this pull-back. We jumped higher and gapped up over the past month, so this pull-back was overdue. As with everything, it's timing."

For example, a week ago International Petroleum Investment Co. (IPIC)'s 2041 notes could be bought at 131.50. On Friday, the notes closed at 126.50 on the bid side.

Dubai corporates move lower

Notes from issuers in Dubai finished the week on good footing, a trader said.

"No real selling of sovereign paper, with corporates marked lower," he said.

Bahrain's 2020 and 2022 notes felt heavy, but the 2018 notes were in demand.

Some buyers were seen for Kuwait-based Kipco, while Dolphin Energy saw two-way action. Buyers also were noted for Egypt.

"I'm still of the view that September will be an interesting market, with pent-up supply hitting the market," he said.

Flattening ceases

In other trading, the massive flattening took a breather during the week, particularly for names from the Middle East, a London-based trader said.

IPIC's 2041 notes closed Friday at 126.50 bid, 127.50 offered versus the week before, when the notes ended at 131 bid, 132 offered.

Abu Dhabi National Energy Co. (TAQA)'s 2036 bonds didn't see as much selling pressure, given that "the bond's free float is lower and the deal is a lot older," he said.

Qatar's 2042 bonds closed on Friday at 122 bid, 123 offered versus 127.25 bid, 128.25 offered a week ago.

"There's a little bit of paper still around, it seems," he said.

Barclays: lower Qatar exposure

Qatar's 2018 notes traded Friday at par bid, 100.25 offered after Thursday's levels of 99.90 bid, 100.10 offered.

"We recommend reducing exposure to Qatar sovereign credit and downgrade our recommendation from overweight to underweight in our EM credit portfolio," Barclays said in a report. "While we remain comfortable with Qatar's credit fundamentals, we think that geopolitical tail risks in the region - as well as technical risks, such as heightened sensitivity of Qatar sovereign bonds to spikes in US Treasury yields - and the likelihood of further issuance warrant a more defensive stance."

South Africa trades down

South Africa's 2041 bonds closed at 130 bid, 131 offered, down five points on the week, after at least 34 people were killed and 78 wounded when police opened fire on striking workers at a platinum mine in Marikana.

Overall, the sovereign's bonds were 15 bps to 20 bps wider, while five-year credit default swaps closed wider, at 146 bid, 151 offered.

Access bonds could improve

Also from Africa, Nigeria's Access Bank plc finished off a solid week with a high print of 102.75, a trader said.

Meanwhile, paper from GTB Finance was scarce.

"I just don't see paper offered anymore, so anyone looking for Nigerian bank exposure will probably be forced to look at Access Bank," he said. "I still think Access might have a little more room to run."

African Export-Import Bank's 2016 notes remained popular. And the new notes from Angola put in a solid performance on Friday, trading between 104.25 and 104.50 on Friday after pricing at par.

VTB Capital was the bookrunner for the Regulation S transaction, a $1 billion issue of 7% notes due 2019.

"While the structure and actual transaction had many scratching their heads, a potential index inclusion for this bond will help even more, especially considering where the rest of sovereign Africa paper trades," he said.

Long-dated paper in focus

Long-dated paper remained in focus on Friday.

"So it's been an interesting week for the long end," a trader said. "These bonds jumped higher on the hunt for duration, many times gapping higher, but they were also exposed on the downside, especially with fewer and fewer traders happy having shorts on the bonds."

Barclays Capital is recommending that investors remain in 10-year bonds from India but move from 10-year to shorter-duration, five-year bonds from Malaysia.

"We think weaker data are likely to prompt receiving interest in India and China, where we expect policy support," the bank said in a report. "However, we acknowledge near-term risks of higher yields driven by moves in US Treasuries."

Barclays also suggests staying long on government bonds from Turkey.

Rally good for Latin America

The recent rally has done good things for Latin American credits, creating relative value opportunities, Barclays said in a report.

"In particular, the strong inflow into credit funds has increased the demand for bonds relative to CDS, pushing the basis higher," the report said. ]

Mexico's 10-year bonds present the best opportunity in the space, Barclays said.

"Despite increasing the size of the new 2022 bond by $559 million, the belly of the Mexican curve has outperformed, driven by robust demand for 'safe-haven' assets," the report said. "Within this context, we think Mexico CDS is cheap relative to low-beta bonds."

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