Logan Property advances deal; China, oil prices in focus; Otkritie, PrivatBank eyed

By Christine Van Dusen

Atlanta, Dec. 22 – China-based Logan Property Holdings Co. Ltd. advanced plans for a dollar-denominated issue of notes on a mostly quiet Thursday for emerging markets assets, as investors kept an eye on China and oil prices.

U.S. President-Elect Donald Trump’s decision to name Peter Navarro – a vocal critic of China – to lead the new White House National Trade Council could put a strain on relations between the two countries, market sources said.

“If Trump goes further on this road, it will make China-U.S. relations one of the main market drivers in 2017,” according to a report from Schildershoven Finance BV.

Meanwhile, investors were surprised to see that there has been a build-up in U.S. oil inventories, which negatively affected oil prices. International producers have hammered out an agreement to deal with their own glut.

“Inventory growth came as a result of increased imports and lower-than-expected demand during the past week,” the report said. “Nonetheless, we do not expect inventories to be stable in 2017. If the main producers comply with the deal, we will see much higher oil prices in 2017.”

In other news, S&P’s decision to place Russia-based Bank Otkritie Financial Corp. PJSC’s rating on watch could hurt the company’s eurobonds.

The CreditWatch placement reflects a view that the financial profile of Otkritie Holding, the ultimate parent of Bank Otkritie Financial, is likely to come under pressure due to the potential acquisition of insurance company PJSC Rosgosstrakh and a Russian diamond mining company for $1.45 billion, S&P said.

Demand for Otkritie could cool

All of these factors are likely to contribute to increased leverage at the level of Otkritie itself and deterioration of the consolidated risk-adjusted capital ratio for the whole group, the agency said.

“Bank Otkritie’s rating CreditWatch placement with negative implications may cool down investors’ appetite for the bank’s eurobonds,” Schildershoven said.

PrivatBank gets attention

Also on Thursday, investors were eyeing Russia-based PrivatBank, which was recently taken over by the government to avoid a failure.

“We assume that the PrivatBank nationalization may trigger its eurobond restructuring,” Schildershoven said.

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