ASIA CREDIT CLOSE: Kookmin sees lackluster trade but property names fly

Last Updated: Wed, Jan 09, 2013 09:10 hrs

SINGAPORE, Jan 9 (IFR) - Asian credit markets are humming along nicely with all eyes trained on a continual flow of announcements of new roadshows and deals.

Newly priced issues from China high-yield and Hong Kong property credits are outperforming credit spreads and that is drawing more similar names out.

Hysan Development and ICTSI have tightened guidance on their new deals, expected to price by the end of today, after reporting books that were multiple times oversubscribed. That kind of demand is also reflected in the secondary bond markets.

The two best performers have been Kaisa's 2020s that priced at par and have since climbed to 105.25/105 today, as well as Sun Hung Kai's 2023s which were quoted at 164/161bp versus the issue price of 180bp.

Country Garden's new 2023s were seen at 102.75/103.25 against its issue price at par, although Shimao 2020s are hovering at par, where the bonds were issued at.

But if the performance of Kookmin Bank's newly priced 2016s is any indication, buyers in the secondary markets are not just throwing money at anything.

Kookmin Bank priced the USD300m three-year deal at 105bp over US Treasuries yesterday, 20bp inside its initial guidance. The new notes are still at par, trading at 107bp/104bp, a reflection of how tight its pricing had been.

Even if new issuers took notes from that flat performance, they have probably thrown them out of the window as the new deals that are likely to price today have already compressed guidance sharply. Hysan has squeezed guidance by 20bp to 170bp and ICTSI by 37.5bp to 4.875%.

Despite that, the markets expect both deals to do well in the current risk-on environment. The question is how long can the rally run.

"This rally still has legs for another two months," said a credit analyst. "There is still enough juice in the markets and people do not want to be caught again, hence the reluctance for a sell-off. If there is any sell-off, it will be a very short-lived one."

Other analysts believe that the outperformance of bonds will be maintained at least until the end of January, driven by huge fund inflows in the last couple of months when issuance was quiet. EPFR data shows that EM bonds have seen inflows of USD52bn in the first 11 months of 2012.

With all attention focused on new bonds, Asian credit spreads have stayed flattish and lackluster at 103/105bp today, unchanged from yesterday, although it has widened from 101bp on Monday. Indonesia's CDS were indicated at 133bp while Philippines were at 97bp.

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