Emerging markets ends mixed; Vedanta prices $1.25 billion; KazMunayGas trades up

By Aaron Hochman-Zimmerman

New York, June 25 - Around the emerging markets and elsewhere investors were pleased with the decision by the Federal Open Market Committee to leave rates unchanged.

The Fed's decision to leave rates unchanged and its hawkish comments even "took a little focus away from the new issues," a trader said.

It was India's Vedanta Resources plc that lost some of the spotlight to the Fed as Vedanta priced $1.25 billion over two tranches.

Even in trading "the market didn't react the way we expected it to," the trader said in light of the Fed.

Emerging markets generally surrendered ground picked up in the morning to end generally flat.

JSC NC KazMunayGas led trading on the corporate side after pricing two new tranches on Tuesday for $3 billion.

Volatility sank on a modestly positive day for equities, falling 1.28 to 21.14, according to the VIX index. The index is a standard measure of market volatility.

As a sector, emerging markets stretched just 2 basis points wider to a spread of 271 bps, according to JPMorgan's EMBI+ index. The EMBI+ estimates the amount of extra yield investors will require to hold assets in emerging markets debt.

Vedanta, Asia moves primary

Vedanta Resources (Ba1/BB/BB+) drew the most water in the primary on Wednesday as it priced $1.25 billion at par over two tranches.

"There is a heavy supply calendar given we had the FOMC," a trader said.

The $500 million 51/2-year tranche carries a coupon of 8¾%.

The tranche was originally talked in the 8¼% area and was revised to the 8¾% area.

The $750 million 10-year tranche carries a coupon of 9½%.

The tranche was originally talked in the 9% area and was revised to the 9½% area.

Barclays, Citigroup, Deutsche Bank, JPMorgan and Morgan Stanley acted as bookrunners for the deal.

There is a make-whole call at Treasuries plus 50 bps.

Proceeds will be used for general corporate purposes and the refinancing of existing debt.

Vedanta is a London-based mining firm with most of its operations in India.

In trading the new tranches crept higher to 100.125 bid.

Also from Asia, South Korea's GS Caltex (Baa1/BBB+/) priced $300 million five-year senior unsecured bonds at 99.133 with a coupon of 7¼% and a spread of Treasuries plus 390 bps.

The deal priced at the wide end of the talk of between Treasuries plus 375 bps and 390 bps.

Barclays, Citigroup, Goldman Sachs and Merrill Lynch will act as bookrunners for the deal.

GS Caltex is a Seoul-based oil refiner.

Meanwhile, Singapore's Ezra Holdings Ltd. announced the creation of a S$500 million medium-term note program. United Overseas Bank and Barclays will manage the program.

The program allows for debt to be issued in various amounts, tenors and currencies.

Proceeds will be used for general corporate purposes.

Ezra is a Singapore-based energy services provider.

Asia loses early gains

Asian trading was strong with the early equity rally, a trader said, but "it leaked late in the afternoon," he said.

"Cash didn't really move that much today," he said.

"It'll be interesting to see how Asia reacts to the FOMC," he said.

In Indonesia, the federal government proposed a bill to the legislature that would tax more of the profits of regional governments gained in commodity trading, the Jakarta Post reported.

Governments will see taxes rise 0.5% to 15.5% on oil and 30.5% on gas trading.

The central government is in need of additional funds to soften the burden of energy subsidies, even though subsidies were recently scaled back, the report said.

Also, beginning in 2009, profit sharing with the oil producing regions will end if oil tops $156 per barrel.

The Indonesian sovereigns due 2017 added 0.5 point to 97.75 bid,

The Philippines' bonds added just 0.125 point to 124.25 bid.

In Pakistan, the government of prime minister Yousuf Raza Gilani said it will sue to allow former prime minister and current coalition ally Nawaz Sharif onto the ballot during this week's parliamentary by-elections, according to the BBC.

The government would also like elections postponed until Thursday, the report said.

However, Sharif's own party, the Pakistan Muslim League, refused to file an appeal with the current supreme court because they feel it is unconstitutional while staffed with justices appointed by president Pervez Musharraf.

The Pakistani sovereigns due 2017 were quoted at 76 bid.

Meanwhile in South Korea, chipmaker Magnachip Semiconductor's notes have taken a recent hit.

The 6 7/8% notes due 2011 gave up 3 points to 70.5 bid, 71.5 offered.

In recent sessions the 8% notes due 2014 have fallen to 43 bid, 45 offered from 50 bid, 52 offered.

Emerging Europe bounces

Emerging Europe improved with a positive start to equities in the United States and a jump in prices as Kazakhstan's government energy firm KazMunayGas began its first full day of trading.

The company priced $3 billion of bonds due 2013 on Tuesday. The bonds, which priced at 94.499, were seen at 100.05 bid, 100.2 offered, while the bonds due 2018, which priced at 99.196, were seen at 100.125 bid, 100.25 offered.

In Russia, the nuclear industry is ready to welcome foreign and domestic investment, said deputy prime minister Sergei Ivanov, according to the RIA Novosti News Agency.

"In addition to large-scale investment of state funds, we have grounds to count on substantial private investment. The Russian nuclear sector is now open to cooperation. Furthermore, not only with domestic businesses, but also with foreign investors," he said in the report.

He also offered Russia's willingness to help develop nuclear power in other countries.

The Russian government bonds due 2030 added 0.35 point to 112.5 bid, 113 offered.

Meanwhile in Ukraine, president Viktor Yushchenko was in Portugal to shore up support for his country's accession both into NATO and the European Union, the Itar-Tass News Agency reported.

When asked about the success of the talks regarding membership in both organizations Yushchenko said: "We always feel Portugal's support on this question," the report said.

For his part Portugese president Anibal Cavaco Silva asked about energy security.

Yushchenko assured that the Kiev government is working to build a diversified network of pipelines from various places in the Commonwealth of Independent States.

Turkey's eager legal eagle

In Turkey, chief prosecutor Abdurrahman Yalcinkaya has put another political party in his crosshairs.

A smaller target than the ruling AK Party, the Democratic Society Party (DTP) only holds 20 seats in parliament but is accused of having ties to the already outlawed Kurdistan Workers' Party (PKK).

Yalcinkaya told the constitutional court that the DTP refuses to renounce the PKK as a terrorist group and also is under the ultimate control of the PKK.

Prime minister Recep Tayyip Erdogan attempted to reach a compromise, asking the DTP to renounce the PKK but also warning that closing the party would only bolster the PKK's ranks.

LatAm mixed on rate decision

Keeping in step with equities, which drove the session, Latin America ended mixed to slightly lower while waiting to see the market's reaction to the FOMC decision and comments.

The day's movement is "all a reaction to the Fed," a strategist said.

Venezuela's 9¼% government bonds due 2027 held still at 94 bid, 94.5 offered.

In Brazil, the 7 1/8% bonds due 2037 lost 0.2 point to 112 bid, 112.4 offered, while the highly traded 11% bonds due 2040 were quoted at 132.45 bid.

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