ASIA CREDIT CLOSE: New issues drop more, lend little hope for primary

Last Updated: Tue, Feb 05, 2013 09:50 hrs

HONG KONG, Feb 5 (IFR) - Asian credit markets continued to widen on Tuesday as new issues performed poorly and undermined the confidence for other issuers looking at the primary market in February, after record volumes in January.

Bid offer spreads were wide in typical illiquid market conditions and primary was inactive. The iTraxx IG index added another 2bp today and is looking to close out at 118bp/119bp. The five-year CDS of Indonesia and Philippines was also ending some 2bp wider respectively at 150bp and 110bp.

Trading had actually started the day in a more optimistic note compared to the previous few sessions. That, however, soon faded due to the lack of liquidity in the secondary market, traders said. "There was a bit of an attempt to bounce but the selling pressure was too strong," said one trader in Singapore.

Indonesia's 2021 bonds, for instance, rose about USD1 in price terms to 108.75 but failed to gain further. In spite of the paper gain, though, the spread on cash bonds of Indonesia ended unchanged.

Chinese property names were underperformers and selling continued mainly in new issues. Recently printed Single B bonds were down around USD2 in price while Double Bs were down about USD1 on average. Evergrande, Guangzhou R&F and Country Garden were among the losers.

It was not just the recent heavy supply that contributed to the gloom in that sector but the company performance also played a role. Glorious Property 15s (B3/B), for instance, were at 100/101. The bonds weakened after the developer reported contract sales of CNY10.9bn for FY2012, down 18% year-on-year. This figure is also 16% below its full-year sales target of CNY13bn.

Agile property perpetuals were trading at 90/91, weaker than yesterday's 92 level.

Non-Chinese property high yield names like Gajah Tunggal and Hengdeli 18s held up and both were quoted at around 99/100 but there weren't many trades in these.

The negative move came in the wake of bad headlines from Europe and an overnight session that saw the S&P 500 index drop 1.15%. Besides the uncertainty in the Euro zone, accounts were also squaring off positions ahead of Lunar New Year break, as Chinese markets will be shut all of next week while Hong Kong will be shut for from Monday through Wednesday.

This was also the third consecutive session when no new deal was announced and syndicate desks reckoned this week would be a quiet one. Traders said there were two potential new issues that could have come to the market this week after they completed roadshows recently -- Thai lender Krung Thai Bank and China State Construction -- but the weak market backdrop has postponed these deals until after the Lunar New Year.;

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