ASIA CREDIT CLOSE:Markets end the week on softer tone

Last Updated: Fri, Jan 25, 2013 09:30 hrs

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 week.

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.

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