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ASIA CREDIT CLOSE: New issues rally, despite soft market sentiment
April 3, 2014 / 9:22 AM / 4 years ago

ASIA CREDIT CLOSE: New issues rally, despite soft market sentiment

SINGAPORE, April 3 (IFR) - Market sentiment softened towards the end of today as investors started to discount the impact that a mini-stimulus programme unveiled in China would have on the economy.

China yesterday announced a package of measures to shore up the economy and create jobs to help meet the Beijing government’s 7.5% growth target for this year.

After an initial positive response, analysts have begun to assess that the programme will have less of an impact than expected to stimulate the Asia’s largest economy. That saw sentiment sink and Chinese stocks begin to slide.

Come late afternoon, Chinese shares had slipped 0.7%. China’s 5-year CDS crept 0.5bp wider, while the iTraxx IG Asia Index pushed out further to 125bp/128bp from 121bp/122bp in the morning.

“The markets in Asia are now driven by China headlines and data,” said one credit analyst. “While US data and headlines are still important, I think for this year, it will be China that will have more impact on the regional credit markets.”

In cash bonds, dominating activities were Sinopec’s jumbo USD5bn multi-tranche bond and Siam Commercial Bank’s USD750m bond priced yesterday.

The short-dated tranches outperformed the longer-dated ones in the secondary markets in the morning, tightening some 9bp, while the 5-year and 10-year pieces narrowed only 1bp-2bp.

In the late afternoon, the 3-year floating-rate note was at 72bp/62bp over Libor, inside reoffer spread of 78bp, the 3-year fixed-rate tranche was 5bp tighter from reoffer spread, the 5-year fixed was about 4bp wider, while the 10-year fixed was about 3bp wider.

Traders expect Sinopec bonds to trade better in the US trading sessions. US investors had piled into the deal, accounting for the bulk of each tranche, relative to Asian investors, which bought smaller portions.

“US investors are finding Sinopec bonds cheap, and they are seeing great value in picking up the bonds,” said the analyst. “They are more familiar with oil credits and the AA rated Sinopec is offering value over similarly rated oil companies in the US.”

Siam Commercial Bank’s rarity value supported its performance in the secondary markets. The 5-year bonds, priced at 180bp over US Treasuries, were rallying at 174bp/172bp.

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