ASIA CREDIT CLOSE: Secondary rebound continues on real money buying

Wed Aug 13, 2014 5:59am EDT

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HONG KONG, Aug 13 (IFR) - Spreads continued to tighten in secondary trading today as real money investors in the region still believe there is value in the market at current levels even after two days of rallying.

Spreads on Asian bonds widened a severe 25bp last week amid geopolitical tensions, but they have narrowed 15bp so far this week, according to a trader.

Chinese state-owned enterprise names such as CNOOC and Sinopec experienced strong buying this morning. Spreads on the long-end tranches of both bonds were 2-3bp tighter today.

"Of course there are still concerns about Russian-Ukraine situation, but investors seem to have looked past that," a second trader said.

A Russian convey reportedly was on its way to eastern Ukraine last night on what Russia said was a humanitarian mission. NATO has warned Moscow not to use aid relief as a pretext for a military invasion.

Spreads on Shanghai Electric Group's 2019s continued to tighten and were indicated to yield 128bp over Treasuries, much tighter than its reoffer yield of 140bp over last Thursday.

The Asia ex-Japan iTraxx Index was about 0.5bp tighter today at 104.5bp/106bp. Indonesia CDS outperformed, tightening by 3bp while China CDS narrowed by 1bp.

The high-yield sector also saw a rally of about 0.5 to 0.75 point in cash prices. A few Single B names were popular with private banks such as Future Land, KWG Property and Logan Property Holdings.

Yingde Gas held a non-deal roadshow this afternoon in Hong Kong arranged by HSBC. The industrial gas provider has also prepared an electronic presentation on the Netroadshow website, in an unusual move that signals a deal is near.

The company has reported worse-than-expected interim earnings and is expected to have a funding gap of over CNY2bn (USD325m) this year, according to a sell-side analyst.

Yingde's USD425m 8.125% 2018s were quoted to yield 6.896%/6.491% in the secondary market.

Meanwhile, Berau Coal's outstanding bonds suffered a further sell-off after the company said yesterday it would postpone a bond offering intended to refinance its outstanding 2015s.

The existing 2015s dropped half a point today to be indicated at 102/102.5. Its 2017s saw a 1 point drop today to bring the total decline to 5-6 points this week. The paper was quoted at 93-94 this afternoon.

Lianting.tu@thomsonreuters.com

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