LONDON, Jan 25 (IFR) - Asian credit markets ended the week
on a softer tone with traders showing concerns about the
strength of demand in the region. The Asia iTraxx IG index was
closing the week 1bp wider than where it started, around 108bp,
while bellwether Indonesia had given back earlier gains. The
sovereign's protection was closing the week unchanged from where
it started around 140bp. It traded as tight as 134bp earlier in
The overall investment-grade market was some 5bp-10bp wider
than the tights reached earlier this month, though most
benchmarks were closing the week around where they started. "The
market feels softer," said a trader in Singapore. "We had solid
trading every day in the United States but there was no follow
through in Asian hours, there seems to be some fatigue."
The general trend, however, has been for the stronger names
to outperform. In the investment-grade arena, Sun Hung Kai, for
instance, tightened a couple of basis points in the week. "HIgh
quality stuff is outperforming," the trader said.
Reliance Industries rallied almost 20bp in the week
following better than expected earnings. The bonds, however,
seemed to have found a resistance point at 180bp, and whenever
they touch that level they retrace. Yet, at the current 185bp
they are some 25bp tighter than where they started the week.
In the high-yield space Country Garden is among the few
examples of how investors are favouring better names. The
recently issued 2023s closed the week some 25ct stronger at
102.00-102.65. The new Hengdeli bond was also holding up, quoted
at 101.25/102.00 though at these levels traders were seeing
two-way flow and the selling pressure was mounting.
Otherwise, though, high-yield names came under pressure this
week. The newly-minted 2020 bonds by Fosun International were
among the underperformers in the session, closing on Friday
around 97.50, having touched as low as 97.00 in the morning. The
7-year benchmark was already weighed down by the deluge of
high-yield bonds but this morning Muddy Waters issued an update
on Focus Media, an old target of the short-seller. Since Fosun
has a stake in Focus, investors used the report as an excuse to
dump the new bonds.
Even though Fosun may have suffered a bit more than others,
few high-yield names escaped the new issue fatigue. Hopson
Development's five-year was closing the session quoted at
98.70/99.70, having priced at par two weeks ago. Shimao was
quoted at 97.75/98.50, some USD1 weaker in the week. "The
market is getting complicated," said one analyst.