EM ASIA DEBT-Asian bonds rally but eyes on new issue pipeline

HONG KONG, Oct 30 (Reuters) - Asian credits rallied on
Friday after the world's biggest economy pulled out of
recession which encouraged risk takers to pour money into Asian
bonds, currencies and stocks.

The United States, the destination for a large portion of
Asia's exports, economy had registered 3.5 percent annualised
growth in the third quarter, boosting prospects of more demand.

But still Asian bonds issued in G3 currencies are set to
end the month with marginal losses reversing some of
September's rise as a hefty new issue pipeline begins to test
investor nerves.

The Asia ex-Japan iTraxx investment-grade index
<0#ITAIGMPBMK=> tightened by 6 basis points to 106/110. It is
slightly higher than September's close of around 105 and higher
than the low of 95 bps struck mid-October.

Newly sold bonds showed divergent trends with the higher
grade issues showing some tightening in their spreads while the
junk rated bonds traded slightly weaker, an apparent flight to
relatively safer credits.

Bank of East Asia (0023.HK) which sold $500 million hybrid
tier-I bonds at par saw its bonds trade higher at 101 cents on
the dollar, while bonds from South Korea's Hyundai Capital
Services tightened to 354 bps over US Treasuries.

Hyundai sold 5-½ year dollar bonds at a spread of 369.4
bps over on Treasuries.

"Its been a bumpy month given the stock market volatility
and the new issue pipeline," said a trader in Singapore.

"Any rally from here and probably people will be looking to
get out. It is the year end effect and most people have made
money this year."

The primary market has been busy this month -- borrowers
were encouraged to implement expansion plans as an economic
recovery took hold and were also attracted to raising debt for
funding these projects in a low interest environment.

Issues of bonds denominated in dollar, euro and yen have
raised about $8.5 billion this month, compared with $47 billion
raised in the first nine months of the year, averaging a shade
over $5 billion each month.

Jiffriy Chandra, CIO for credit at Income Partners Asset
management, said bonds from those sectors which are seeing new
supplies will be susceptible to a correction as repricing takes
place with borrowers leaving some gains on the table for
investors.

Indonesia's PT Perusahaan Listrik Negara (PLN) plans to
sell benchmark-sized 10-year bonds at a yield of around 8
percent.

That hurt the prices of its existing 2019 bonds
ID044494876= which were sold in August. The bond yields rose
by 50 basis points from the earlier 7.3 percent.

Also in the pipeline is a potential offering from Chinese
property developer Agile Property (3383.HK) which is conducting
investor presentations.

For the latest bond issuance in Asia ex-Japan see
[EUB/ASIA]

For history on TRX Emerging Asia Index click on --
here
sp FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago

Korea Dev Bank 111.62* 107.35*

Hutchison 85/89 85.00*

PCCW-HKT 106.51* 110.00*

China 77/81 72.94*

Indonesia 186/195 167.94*

Korea 96/101 97.60*

Malaysia 91/953 89.94

Philippines 174/183 170.87*

~no bid or ask

*midspread

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(Reporting by Umesh Desai; Editing by Jan Dahinten)