SINGAPORE, July 23 (IFR) - Asian financial markets made
gains today on firmer sentiment, thanks to encouraging overnight
US economic data on the inflation front, and yesterday's
better-than-expected China MNI business sentiment index.
Credit markets shrugged off geopolitical tensions in the
Middle East and Ukraine, with the iTraxx Asia IG Index pulling
in 2bp and high-grade cash bonds tightening about 2bp-3bp.
The IG index was at 100bp/102bp and China's 5-year CDS came
in 3bp as confidence of business leaders in the economy rose
sharply to 58.2 in July from 55.0 in June.
"The market tone is good, well actually, it is better," said
a Singapore-based trader. "We are seeing more demand on the
China stuff, and most of it on the 10-year paper."
Private banks and retail buyers were in the markets covering
positions, while real money accounts were largely absent.
Chinese 10-year investment-grade bonds, such as the 2024s
from China Grid and those from property firms, tightened about
2bp-3bp on good demand. The 5-year Chinese paper not only saw
less trade, but also tightened nominally about 2bp.
China Huarong's outstanding 2019s outperformed in the market
as the bonds narrowed 5bp today to 225bp, although on the widest
trade, the paper had tightened some 8bp.
The bonds rallied on news that the company is tying up a
USD2bn stake sale to a group, including Malaysian sovereign
wealth fund Khazanah Nasional, Goldman Sachs Group and Warburg
The potentially strong shareholders will boost confidence in
the state-owned "bad bank", tasked with handling bad assets from
China's top four state lenders.
Investors are getting into the Huarong issue on anticipation
that the bonds will tighten further. Huarong's 2019s are trading
at a 20bp spread wider to Cinda Asset Management's 2019s, which
looks cheap as analysts and traders expect the spread
differential should only be about 10bp-15bp.
"I believe there is room for Huarong bonds to tighten a
further 5bp, given the positive news of the new shareholders,"
said another trader.