January 27, 2014 / 8:57 AM / 4 years ago

ASIA CREDIT CLOSE: Asian equities, credits sink on safe-haven flight

SINGAPORE, Jan 27 (IFR) - There was a sea of red in both the equity and credit markets in Asia as investors sold off risky assets for safe-haven bids.

Stocks in Japan closed more than 2% lower, while those in China, Hong Kong and Singapore were trading more than 1% down.

The iTraxx Asia IG Index was about 2bp wider, recovering a touch from a 3bp widening in the morning. Indonesia’s 5-year CDS pushed out 5bp and the Philippines CDS were 3bp wider.

The cash bonds of the two sovereigns were also not faring well. Indonesia’s 2024s slumped to 101.40/101.70 from above 103 in the middle of last week, while the 2044s were at 99.70/100 from 102.5 last Wednesday.

The Philippines’ new 2024s were only slightly lower at 101.00/101.50, versus 102.00, but will face pressure if risk sentiment continues to deteriorate.

Investors continued to fret about the economic slowdown in China and an increased cutback in the US Federal Reserve’s accommodative policy. This comes at a time when a heavy issuance volume in the Asian US dollar market in January is again weighing on the markets.

Year to date, some USD19.5bn of bonds have been sold, just short of the USD22.6bn record issuance in January 2013. Last week alone, nine deals of a combined USD3.1bn were printed and one that broke the camel’s back was Wanda Properties’ 10-year issue, which priced 455bp over US Treasuries.

Those bonds have gapped out to as high as 490bp/480bp earlier this morning although they recovered to 482bp/472bp in late afternoon trade.

China cash bonds have widened between 3bp and 8bp. High-yield Chinese property paper was still weak after Wanda repriced the entire sector last Thursday. Cifi 2019s eased to 94.5/96.00, while China South City 2019s lost support to slip to 96.50/97.50 from 99.000 on Thursday evening.

The risk-averse sentiment sank Greentown’s new perpetual, which fell 4 points from reoffer at par to 96.00/97.00.

In contrast, high-grade Towngas’ new perpetual were faring better with quotes at 101.00/101.50, reflecting investors’ flight from risky assets.

Indeed, the bid for Korean bonds was fairly healthy with Korea National Oil 2019s attracting its share of bids. The bonds were quoted at 119bp/114bp over US Treasuries, while Kexim 2024s were at 114bp/109bp and KDB 2024s were at 114bp/109bp.


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