ASIA CREDIT CLOSE: China property sells off; IG still well bid

Last Updated: Mon, Feb 24, 2014 09:50 hrs

SINGAPORE, Feb 24 (IFR) - A selloff in Chinese property stocks spilled over to credit markets and most of the names in the sector ended the session USD0.50-USD1.00 weaker in price terms.

The Shanghai Stock Exchange's property sub-index fell 5.44% today amid reports that some onshore banks were cutting credit lines to developers.

The fears of a liquidity squeeze involving the sector prompted investors to sell their bonds and even the likes of Country Garden ended the day weaker. The 2018 bonds of what is one of the largest developers in China closed quoted at 110.00, or about 50 cents weaker for the day.

Single-B property names were underperforming, but investors trying to sell some of the weaker players, such as Fantasia, were hard-pressed to find bids. More liquid Single B names, such as Kaisa Group, bore the brunt instead and the company's 2020s closed USD1 weaker in price terms quoted at 101.00.

The selloff in Chinese property stocks, the biggest component of the JP Morgan High-Yield Asian Credit Index, also dragged down other high-yield bonds, albeit not as far. According to one analyst, high-yield bonds from other parts of Asia ended the session roughly 15 cents to 25 cents weaker.

The selling pressure, however, was not felt on the investment-grade side. Indonesia's 2024s dropped about 50 cents in the morning, after the sovereign announced it was doing a non-deal roadshow, but they bounced back and closed the day about 15 cents higher in price quoted at 105.15/105.50. The longer end, however, still remained a bit heavy, closing the session some 15ct weaker in price terms, quoted at 104.25/104.75.

"Even the stuff that is weaker, though, is in high demand," said a trader in Singapore. "There is a lot of demand for cash bonds right now as supply has completely underwhelmed the market."

If Asian accounts were still keen on buying bonds, CDS was suffering a bit, partly as a result of fears that the Ukraine will default on its debt.

The trader said that he heard more people buying Chinese CDS as they hedged against a potential spike in spreads in case the Eastern European country missed its debt payments. "I don't see the relation between China and Ukraine, but some people are buying CDS here," said the trader.

The result was that China's five-year protection closed the session 2bp wider, quoted at 92bp/94bp, some 3bp wider in the day. That also pushed the Asia ex-Japan IG iTraxx index about 2bp wider to close at 137bp/138bp.


Hyundai Capital Services has mandated Bank of America Merrill Lynch, BNP Paribas, Citigroup and HSBC for a potential 144A/Reg S/ bond sale.

AIA Group has mandated Citigroup, Deutsche Bank, HSBC and Morgan Stanley for a similar potential issue.

The Republic of Indonesia has named Bank of America Merrill Lynch, Citigroup and Deutsche Bank to take it on a non-deal roadshow.

Sri Rejeki Isman has mandated Barclays for a potential USD350m bond.

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