EM investors eye Ukraine, Belarus, others; Guangzhou R&F, Banco Continental on roadshows

By Christine Van Dusen

Atlanta, Aug. 20 - Ukraine, Belarus, Hungary and Croatia stood out as good bets for emerging markets investors on a neutral and low-volume Monday that saw China's Guangzhou R&F Properties Co. Ltd. and Peru's BBVA Banco Continental setting out on roadshows amid little other activity in the primary market.

The day was marked by "remarkably low volumes, which - even for allowing for the time of year and the Olympics - suggest that risk appetite remains very subdued," according to a report from Barclays Capital.

Still, the market felt a bit firmer on Monday, given that U.S. Treasuries were higher after last week's sell-off, a New York-based trader said.

"Spreads are a few basis points tighter and Treasuries are also higher, leaving the market feeling firmer, which we have not seen since Tuesday of last week," he said. "Today we see the usual light, summer volumes, and inquiry from clients is also light, with no particular direction so far."

Most of the day's flows were concentrated on names from Brazil, including Itau Unibanco, Petroleo Brasileiro SA (Petrobras), Vale SA and Construtora Norberto Odebrecht SA.

"Moody's downgrade of Marfrig Alimentos, from B1 to B2, has pushed that paper back to the low- to mid-70s, although there's no real selling to speak of so far," he said.

Some issuers are starting to test the waters for new deals. Chinese real estate company Guangzhou was marketing a Regulation S tap of its 10 7/8% dollar notes due 2016 with bookrunners Citigroup, Standard Chartered Bank and UBS.

Proceeds will be used to finance offshore expansion opportunities, for general corporate purposes and to fund the interest reserve account of the dollar notes, according to a company filing.

And Peruvian lender Banco Continental will be on a roadshow until Wednesday for an issue of global bonds via BBVA, Bank of America Merrill Lynch and Goldman Sachs.

The roadshow began in Santiago and Lima and will travel to Los Angeles, New York, Boston and London before concluding on Aug. 23 in Switzerland.

Ukraine, Belarus look good

In trading, Ukraine's 2013 notes and Belarus' 2018 notes emerged as solid investment opportunities, UFS said.

"The [latter] issue maturing in less than a year is traded with the yield of 7.1% per annum," UFS said. "We think that currently this issue is one of the most interesting in the market, in terms of risk and return ratio."

Belarus' 2018 notes have not performed as well as the sovereign's 2015 notes, which trade at the same yield as Ukrainian eurobonds.

"However, the spread between Belarus' 2018 and the Ukrainian yield curve is 100 bps," UFS said. "Such imbalance can disappear in the near future. Therefore we expect 3% to 3½% price growth in Belarus' '18s."

Bonds from Hungary and Croatia are also good bets, according to a report from Erste Group Research.

Russian corporates a buy

Looking to Russia, market sources were recommending that investors buy Vimpelcom's 2021 and 2018 notes as well as Evraz Group's 2017 and 2018 notes. Also in the buy category were VTB's perpetual bond and Russian Standard Bank's 2017 bonds.

"The [latter] eurobond has been placed with the premium of 50 bps to 70 bps to its fair level," UFS said. "Besides, the issue is traded at 9.3% per annum, which looks quite attractive for the duration of less than three years."

The most liquid bonds in the Russian banking sector come from Promsvyazbank, especially its 2014 and 2015 notes, UFS said.

Middle East in focus

From the Middle East, International Petroleum Investment Co. (IPIC) saw its 2015 notes trading at 103.12 bid, 103.87 offered on Monday after Friday's 103 bid, 103.75 offered.

The company's 2041s were trading Monday at 126.50 bid, 127.50 offered. On Friday, the bonds were at 127.25 bid, 128.75 offered.

Dubai-based DPWorld's 2017 notes - which traded Friday at 108 bid, 109 offered - were quoted Monday at 108.12 bid, 109.12 offered. The company's 2013 notes were seen at 103.62 bid, 104.62 offered on Friday and were unchanged early Monday.

Angola notes trade up

The recent $1 billion issue of 7% notes due 2019 from the Republic of Angola, which priced on Aug. 14 at par, was trading Monday at 104 bid, 104.75 offered. The notes closed at 103.87 bid, 104.62 offered.

VTB Capital was the bookrunner for the Regulation S deal.

Looking to South Africa, five-year credit default swaps hit 140 on Monday morning before closing at 143 bid, 148 offered.

"Longer-dated bonds are tighter by a couple on thin volumes," a trader said.

Investec still sees nibbles

Also from South Africa, corporate issuer Investec Ltd. remained in focus.

"All last week we saw more nibbling on Investec, even on Thursday and Friday with the rest of South Africa marked wider on domestic events," a London-based trader said, referring to deadly violence at a platinum mine in Marikana. "More small nibbling away on Investec."

The company's 2017 notes, which priced at 99.775 to yield Treasuries plus 310 bps, were seen at 97.25 bid, 98.25 offered on Monday.

© 2015 Prospect News.
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