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ASIA CREDIT CLOSE: New issues perform well despite week's heavy supply

Source : REUTERS
Last Updated: Fri, Oct 12, 2012 10:00 hrs

SINGAPORE, Oct 12 (IFR) - The positive tailwind created by last Friday's US employment data, which saw the unemployment rate fall to the lowest level (7.8%) seen during the Obama administration has retained momentum as we come into the close of the week.

The iTraxx series 17 index has pulled in 3bp to 127bp/129bp in a measure of the overall upbeat market sentiment which has allowed eight new issues to print this week from Asia.

The generally decent secondary market performance of the new issuance underlines the fact that even at apparently tight pricing there is a surfeit of cash meeting a relatively scant supply of new supply.

In stark evidence of this, yesterday's new USD400m 7 NC 4 Reg S for China property developer Longfor which came at par, is bid up at 101.375, with the cash available to be put to work via emerging market fund inflows illustrated by the hefty USD13bn book the deal pulled in.

"These are the best market conditions I have seen for Asia credit in over five years. It might well be a case of 'as good as it gets' as we face the prospect of an uncertain post US presidential election period and the fiscal cliff looming early next year, but for now the rising tide has lifted all boats, from high-grade to high-yield," said a DCM origination head at a bulge-bracket US investment bank.

Still, although high-yield appears to be back with a vengeance in the Asian primary market, there remains a degree of name discrimination. So the China South City due 2017s which priced on Wednesday at the puny USD125m mark are around 98 bid, or two points off reoffer, with few trading desks willing to make a tight two-way firm price on the deal.

Elsewhere however, recent issuance in the IG space is graphically illustrating the underlying strength of demand. So the new Citic Pacific 2023 are bid at 101.8 from a par reoffer, while unrated although implied high-grade SMIC 2019s are up at 101 bid from a par reoffer. Meanwhile the Syndicate Bank due 2018s are 2bp inside reoffer at a Treasuries plus 353bp bid.

It remains to be seen whether the market's pristine health can continue, with a regional syndicate head pointing to the upcoming risk of the Spanish regional elections on October 21 and the Moody's review of the country's credit rating as factors which could take the edge off sentiment in the short run.

jonathan.rogers@thomsonreuters.com



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