Investors avoid risk; EM suffers; Pakistan, Asia outperform; Chinese lender prices bonds

By Christine Van Dusen

Atlanta, Oct. 13 – Emerging markets assets saw their recent rally wrap up on Tuesday, with China’s softer import numbers and the European Central Bank’s wait-and-see mode inspiring investors to shun risk.

“EM credit has enjoyed a pretty resilient rally, but it looks like the party is over for now,” a London-based trader said.

Cash prices for many emerging markets bonds started Tuesday’s session about 25 cents to 50 cents lower, another trader said.

Bonds from Turkey opened weak, moving 10 basis points wider in the belly of the curve, he said, while Turkish banks and corporates softened after Saturday’s bomb blast in Ankara.

Trading of Latin American assets, meanwhile, was “timid” and “slow,” a New York-based trader said.

“Market participants are feeling out the market a bit here,” he said.

Brazil’s spreads widened as much as 25 bps and cash prices were down about a point on Tuesday, he said. Credit default swaps spreads for the sovereign moved to 450 bps from 410 bps, while Mexico’s widened to 156 bps from 145 bps.

And Venezuela-based PDVSA saw its bonds move down by 15 cents to 25 cents.

Trading of Brazil-based Petroleo Brasileiro SA and Vale SA were slow on Tuesday, with both credits pulling back from Friday, amid some slightly better selling, another trader said.

“No real direction to speak of,” he said. “Feels like a possible inflection point here, as the market looks for its next move.”

Latin America-focused Pacific Rubiales Energy Corp. lost some of last week’s gains, another trader said.

“Volumes on the lighter side today, with better sellers of Latin American paper throughout the afternoon,” he said.

Pakistan fairly firm

Pakistan’s bond curve was “holding fairly firm” on Tuesday, “even with weaker market backdrop,” another trader said. “Seeing flow stall here though, from better buying.”

Asian bonds were also firm on Tuesday, with investment-grade financial companies moving 1 bps to 3 bps tighter, a trader said.

“Financials are lagging the move in corporates,” he said. “China led the rally after reporting a smaller drop in exports and larger trade surplus.”

Korea’s banks were unchanged while India bond spreads were unchanged to a couple basis points tighter, he said.

China Construction sells notes

The final book for the notes China Construction Bank priced on Monday – RMB 1 billion 4.3% notes due 2017 that priced at par – drew a final book of RMB 5.5 billion from 72 accounts, a market source said.

CCB International, Standard Chartered and HSBC were the joint global coordinators for the Regulation S deal. BNP Paribas and UBS were the joint bookrunners and joint lead managers.

The proceeds will be used for general corporate purposes, according to a company filing.

About 99% of the orders came from Asia and 1% from Europe, with banks picking up 52%, fund managers 36% and private banks and corporates 12%.

On Tuesday morning the new notes were spotted at 100.20 bid, 100.40 offered.

© 2015 Prospect News.
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