Emerging debt-Asian bonds weaken, Shimao hit by downgrade

HONG KONG, July 25 (Reuters) - Asian bond spreads widened on Friday as weak global economic data and disappointing corporate earnings worldwide reinforced expectations for slowing growth at a time of surging inflation.

The iTRAXX Asia ex-Japan high-yield index ITAHY5UA=ICAP, a key measure of risk aversion, widened by 20 basis points (bps) to 540, while the equivalent investment-grade index ITAIG5UA=GFI widened 10 basis points to around 140.

Spreads in the region have been hit by intense volatility this month following the financial woes at U.S. mortgage lenders Fannie Mae FNM.N and Freddie Mac FRE.N, as well as the failure of U.S. lender IndyMac Bancorp IDMC.PK.

Still, the iTRAXX high-yield index remains well below the record above 650 hit in March, and below the monthly high of 580 hit on July 8.

"Credit markets have been outperforming equity markets. A big part of it is that people have already bought protection throughout earlier this year in anticipation that things would stay rough," said a Hong Kong-based trader.

"Everybody here knows things won't be getting any better any time soon, especially ahead of the summer," he added.

European and U.S. stock markets dropped on Thursday following a raft of negative news that included a drop in U.S. home sales, as well as worrisome earnings prospects at major global companies such as auto makers Ford Motor (F.N) and Daimler AG (DAIGn.DE).

Asian companies have not been immune to slowing profits, a headache for a region already dealing with surging inflation. South Korean chip maker Samsung Electronics (005930.KS) posted on Friday lower-than-expected quarterly profit. [ID:nSEO289087]

Sovereign spreads widened, with Malaysia's five-year credit default swaps MALAYS5UA=GFI, or insurance-like contracts that protect investors against defaults, out by 7 basis points to 107 ahead of the central bank policy meeting later in the day.

Malaysia's central bank is seen raising interest rates for the first time in over two years after inflation soared to a 27-year record in June. [ID:nKLR338179]

BOND SALES?

In the corporate space, Shimao Property Holdings (0813.HK) bonds fell about one point after Moody's on Thursday downgraded the property developer to junk, citing a weakening balance sheet, and doubts about how it will finance its maturing debt and capital spending. [ID:nWNA3188]

Moody's cut Shimao by one notch to Ba1 from its prior investment-grade rating of Baa3. Shimao's 2016 bonds KY027661386= dropped a point to 64 cents to the dollar, while its 2011 bonds 82454XAA4=RRPS fell by a similar amount to 71.

The volatility is raising the prospect that Aisan issuers will continue to hold off from selling new bonds, though some may try.

Hong Kong & China Gas (0003.HK) is due to meet investors in Asia on Friday, in a roadshow that will conclude on Wednesday after stops in London and the United States.

POSCO Engineering & Construction, a unit of South Korean steel maker POSCO (005490.KS) met investors in Singapore and Hong Kong this week as part of a non-deal bond roadshow as well.

FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago Korea Dev Bank ~/140 140/170 Hutchison ~/120 ~/140 PCCW-HKT ~/200 ~/200 China ~/56 ~/68 Indonesia 234/~ 270/~ Korea 86/92 114/119 Malaysia 95/~ 122/132 Philippines 217/~ ~/275

~no bid or ask spread For CDS prices double click on GFICDS

ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid spread

5-YEAR

------

DBS Bank 7.13 15-May-11 105.51 165

Malaysia 7.50 15-Jul-11 107.84 130

ICICI Bank 5.75 12-Jan-12 94.18 434

Petronas 7.00 22-May-12 107.77 140

Hutchison 6.50 13-Feb-13 101.07 288

Chartered Semi 6.25 4-Apr-13 96.66 375

Korea 4.25 1-Jun-13 97.14 157

United Overseas 4.50 2-Jul-13 94.96 233

PCCW-HKT 6.00 15-Jul-13 101.18 238

China 4.75 29-Oct-13 100.71 125

10-YEAR

-------

Hutchison 6.25 24-Jan-14 99.11 352

Korea 4.88 22-Sep-14 99.33 99

PCCW-HKT 5.25 20-Jul-15 88.11 346

Woori Bank 6.13 3-May-16 96.27 274

Penerbangan 5.63 15-Mar-16 105.51 78

Philippines 8.75 7-Oct-16 112.50 273

Indonesia 6.88 9-Mar-17 96.50 342

ICICI Bank 6.38 30-Apr-22 85.86 374

Petronas 7.88 22-May-22 120.10 174 (Reporting by Rafael Nam; Editing by Jacqueline Wong)