June 20, 2017 / 9:02 AM / 7 months ago

ASIA CREDIT CLOSE: Asian credits steady; new Road King perps rally

HONG KONG, June 20 (IFR) - Asian credits held steady on Tuesday, while the pipeline for new issues remained active.

“Trading was pretty quiet, although we continued to see some buying of Chinese asset-management companies’ 10-year bonds,” said a Hong Kong-based trader.

The Asia ex-Japan iTraxx investment-grade index was little changed at 83.5bp/85.25bp.

The bonds of Australian major banks largely showed little adverse impact of Moody’s one-notch downgrades to Aa3, with stable outlooks, of its ratings on the issuers.

The newly priced floating-rate notes of ICBC, Hong Kong branch, were hovering at reoffer, said the trader. The Chinese lender priced US$300m floaters of 3 years at 3-month Libor plus 77bp and US$400m notes of 5 years at Libor plus 87bp.

Road King Infrastructure’s newly US$300m 7.00% perpetuals, which were priced at par, traded up and were bid at a cash price of around 100.3 in the afternoon.

Noble Group’s 6% perpetual bonds, callable in 2019, plunged more than 5 points to a cash price of 10 bid. This was after the commodity trader said it would delay the payment of a coupon due on the perps.

The coupon is due on June 24, but payable on June 26, the next working day. Its 8.75% 2022s fell around 2 points to 35.5/37.5, according to Tradeweb.

Gome Electrical’s 5% 2020s were flat at 100.25, even though the company announced plans for a tap of up to US$100m of the issue.

David Tan, chief investment officer at Allianz Global Investors’ Asia Pacific fixed income, remains positive on Asia high-yield credits as these bonds continue to offer attractive returns, while default rates are low.

”With the unpredictability surrounding the Trump administration, we expect market volatility to escalate.

Against the uncertain backdrop, we believe an actively managed Asian fixed income portfolio can continue to offer decent yield pick-up with relatively lower volatility within the broader emerging market universe, supported by Asia’s improved fundamentals,” Tan said.

Reporting by Carol Chan; editing by Dharsan Singh

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