ASIA CREDIT CLOSE: Unrated bonds hold up, China property paper slides

Tue May 6, 2014 5:46am EDT

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SINGAPORE, May 6 (IFR) - Asian credit softened in quiet trading today, as markets in Tokyo and Hong Kong were closed for holidays.

Equities in active markets were either flat or slightly down, dampened by the lower-than-expected PMI data that came out from China, indicating a continuing slowdown in Asia's biggest economy. The weaker tone spilled into the Asian credit spreads, with the iTraxx Asia IG index pushing out by 1bp to 125bp/126bp.

In cash bonds, negative news on China's real estate markets continued to put pressure on high-yield paper. Double B bonds were out some 25 to 50 cents, while Single B names widened 1 to 2 points.

"The curve between BB and B names is steepening, as selling is heavy on the Single B credits," said a high-yield trader. "I think the curve will continue to steepen but how much it will steepen will depend on how bad overall news will emerge over the next few days."

It was not just China property bonds that have been hurt. A suspension of trading in China Oriental's shares, since April 29, is also taking its toll on its bonds, which have dropped some USD1 to USD1.50 over that period.

Trading on the Hong Kong Stock Exchange was suspended becaue China Oriental did not have the minimum number of public shares required by the bourse.

In contrast, newly issued unrated bonds held up well. SM Global Power's 5.5-year perpetual bonds, which priced at par, were quoted at 101.00/101.75. There was balanced two-way flow in its trade with some profit-taking by real money accounts and some retail demand from both onshore and offshore buyers.

Tata Motors 2021s were firm at 101/102, despite some profit-taking activities seen yesterday.

kityin.boey@thomsonreuters.com

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