China devalues currency again; some of EM widens, Lat-Am narrows; Ukraine turmoil continues

By Christine Van Dusen

Atlanta, Aug. 12 – Most emerging markets assets were wider on Wednesday morning, with investment-grade cash bonds from Asia moving out as much 10 basis points, after the central bank in China devalued its currency for the second day in a row.

The currency hasn’t been lowered this much over a two-day period in more than 20 years.

“We dived lower on the open,” a trader said. “Bid requests are filling our screens, from uncertainty over what the moves in China mean.”

Spreads are reaching the wides of December, when there was a liquidity crunch and concerns about global growth, another trader said.

“However, over the last few hours it feels like the storm is calming over China,” he said. “People are slowly digesting that the devalue is not necessarily a bad move and China is using it as another tool to support the economy.”

From Latin America, low-beta spreads moved tighter on the day as risk markets got a boost during the afternoon, a New York-based trader said.

Still, flows were light, he said.

Some investors on Wednesday were taking note of Fitch Ratings’ new upgrade of State Export-Import Bank of Ukraine’s (Ukreximbank) long-term foreign-currency issuer default rating to CCC from RD and senior unsecured debt rating to CCC from C.

Meanwhile, violence in the Donetsk region of Ukraine calmed a bit on Wednesday, but the situation remained tense, the report said.

© 2015 Prospect News.
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