Emerging markets push higher; Posco to market new deal; Turkey continues rebound

By Aaron Hochman-Zimmerman

New York, March 12 - Emerging markets continued to claw their way back from winter lows as the bear market showed signs of coming out of hibernation for another day.

Credits were up "across the board," a strategist said on Thursday. Nearly no one was left out.

Venezuela was helped by recovering oil demand, and Turkey added another 2 points to its benchmark bonds due 2030 at it continued its bounce after a grizzly 18-point drop in recent weeks.

The momentary clearing of the market weather saw the cautious eyes of new deals pop out from their hiding places.

South Korea's Posco will offer a dollar deal at the conclusion of next week's roadshow, sources said.

Also on the sovereign side, Israel may see what is available on Friday, the strategist said.

Meanwhile in the major markets, volatility steadily declined by 2.43 to 41.18, according to the VIX index. The index is a common measure of market volatility.

Asia 'very strong'

"It's been quite a move," a trader said about the equity markets, which left the Asian credit market "very strong."

Levels were better by 1 point to 1.5 points in cash terms and nearly 15 bps to 20 bps tighter on the CDS side, he said.

The strong trading may give way to new deals in short order, he said.

Investors saw "deal-related" selling in Korea Development Bank and the Export-Import Bank of Korea.

South Korea's Posco has a roadshow scheduled for next week, the trader said.

In early September 2008, the construction firm pulled a dollar-denominated offering.

Meanwhile in the Philippines, outflows of $198.7 million hit foreign portfolio investments in February, according to the central bank.

The losses come after an inflow of $221.4 million in January.

"Some reservations on the effectiveness of the U.S. economic stimulus package and concerns over the continued weakening of major economies have increased risk aversion among investors, causing a decline in inflows to emerging markets, including the Philippines," said bank governor Amando Tetangco in the statement.

The balance of January and February leaves a yearly inflow total of $22.6 million, down by 79% from the $105.9 million of inflows during the first two months of 2008.

The Philippine government bonds due 2030 were seen at 114 bid, 115 offered.

In Indonesia, about 237,500 workers have lost their jobs between October and March, the Jakarta Post reported on Thursday.

The figure "far exceeds" the government's estimates, the report said.

Still, only about 5% to 10% of that figure is comprised of permanent staff versus temporary and short-term labor.

The Indonesian bonds due 2014 were quoted at 102 bid, 102.5 offered, while the bonds due 2018 were quoted at 101.5 bid, 102.25 offered.

In Pakistan, police beat back protestors with batons as crowds demanded president Asif Ali Zardari return all of the judges fired by former president Pervez Musharraf.

Activists were also arrested in Karachi where a four-day march to the capital, Islamabad, began.

The Pakistani bonds due 2017 were spotted at 43 bid, 47 offered.

Posco on the road

Posco announced that will offer a dollar-denominated deal following a roadshow March 16 through March 18, according to a market source.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC and Merrill Lynch will act as joint bookrunners for the offering.

The bonds will feature a change-of-control put at 101%.

Proceeds will be used for capital expenditures and the purchase of raw materials.

Posco is a Seoul-based steelmaker and manufacturing firm.

LatAm 'active, strong'

Latin America was "fairly active" and "fairly strong," on Thursday, according to a strategist.

"There was some strength in the move" inspired by another big day of winning on Wall Street, he said.

Still, "we're going to need some confirmation" that the market can hold onto its recent gains and bring in fresh cash, he said.

The market has been helped by specific credits, which have been upgraded by some of the major investment houses, he said.

Argentina is one which has been given more consideration, he said.

The 8.28% Argentine discount bonds due 2033 were seen at 28 bid, 28.25 offered.

Elsewhere in the category, Venezuela floated on top of higher oil prices.

News of stronger-than-expected U.S. consumer numbers and an OPEC production cut pushed oil to trade as high as $47 per barrel.

The 9¼% Venezuelan government bonds due 2027 were quoted at 56.5 bid, 57 offered.

Also, as the real surged stronger, Brazil's bonds followed.

The real was seen trading at 2.343 to the dollar.

The 5 7/8% Brazilian sovereigns due 2019 were spotted at 102 bid, 102.5 offered.

Emerging Europe mixed

Emerging Europe traded "a bit mixed," with equities' continued success, a trader said.

"It generally feels better ... the benchmarks are all better," he said, but the market's overarching problems are far from over.

"Nothing changes," he said.

In Russia, 3 trillion rubles may be pulled from the reserve fund to cover budget gaps in 2009, prime minister Vladimir Putin said, according to reports.

"The anti-crisis measures taken by the government are touching 4.5% of the GDP and if [you] add the steps taken by the central bank to ensure liquidity, then it would add up to 12% of the GDP," he said during a tour of a Siberian coal mine.

The ruble was seen trading at 35.203 to the dollar.

The Russian government bonds due 2030 improved by 0.75 point to 91.25 bid, 91.5 offered.

Also in Russia, Moscow finally decided to excuse Ukraine from fines it would have owed for breaking the terms of their gas contracts, Putin said.

Kiev is "on the verge of bankruptcy" and "they have nothing to pay with," Putin said, according to the BBC.

Also in Ukraine, president Viktor Yushchenko told reporters that the country has satisfied all of the requirements to reopen talks with the International Monetary Fund, according to Yushchenko's official web site.

The IMF was wary of further investments in Ukraine, until the country could prove it had a plan to cover its debts.

"I gave 24 hours for preparation of the letter on Ukrainian side's intentions to be completed. And I hope that in this time the Ukrainian side will send this letter to the IMF mission," Yushchenko said.

The Ukrainian sovereigns due 2016 were better by 1 point to 35 bid, 38 offered.

In Turkey, economy minister Mehmet Simsek said that the government will not likely strike a deal with the IMF until after the local elections on March 29, according to reports.

Simsek's statement confirmed what many investors have believed as the back and forth between Ankara and the IMF progressed in recent weeks.

The Turkish sovereign bonds due 2030 tacked on another 2 points to 127 bid, 127.5 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.