IFR 08.24.2019

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Argentina goes back to the future 08 Aramco once more with feeling  Structured notes get funky 10


on recent new issues from the
likes of Occidental Petroleum
ANDû#63ûCOVEREDûMULTIPLEûTIMES
“If you look around the world,
US Treasuries are an outlier
compared to Europe and Asia,”
ONEûSYNDICATEûBANKERûSAID
“So if you put any spread on
top of that in a strong currency
like dollars that’s going to be a
VERYûSTRONGûDESTINATIONv


GRAB FOR YIELD
In the high-grade market,
accounts have been stretching
up the curve, seeking out lower
quality names and dipping
down the capital structure for
higher quality banks in their
GRABûFORûYIELD
The Federal Reserve’s rate cut
at the end of July should have
sparked foreign investor

demand, but the rally in
Treasuries was so deep that it
LARGELYûERASEDûANYûBENElTSûTOû
hedging costs, according to
MULTIPLEûANALYSTS
In a world of negative
YIELDINGûDEBT ûEVENûûYIELDINGû
US debt after hedging costs
PROVIDESûAûDIVERSIlCATIONû
BENElTûTOû!SIANûANDû%UROPEANû
INVESTORS û+IMBALLûNOTED
In just the last week US dollar to
euro hedging costs reached the
cheapest rate in nine months as
European markets rallied on the
prospect of central bank stimulus,
ACCORDINGûTOûAû*0û-ORGANûREPORT
$OLLARûBONDSûAREûOFFERINGûONû
AVERAGEûAûBPûPICKUPûOVERûEUROû
debt on a fully swapped basis
and a 63bp premium on the
long end, according to the
REPORT
“In our view, this offers some
attractive opportunities to position
for convergence by switching into
DOLLARûBONDS vûTHEûREPORTûSAID

“September could potentially
see a large volume of reverse
Yankee issuance given the relative
value at the long-end and Federal
Reserve rate cuts will ... bring in
MOREû!SIANûDEMANDv
All the volatility in the
markets should have blown out
credit spreads, but average
investment-grade bond spreads
ONLYûWIDENEDûBYûSOMEûBPû
since the start of August and
have already tightened in again
to Treasuries plus 126bp,
ACCORDINGûTOû)#%û"!-,ûDATA
“We’re in a new rate
environment,” said Jeff
-AC$ONALD ûHEADûOFûlXED
INCOMEû
strategies at Fiduciary Trust
#OMPANYû)NTERNATIONAL
“Even though spreads are
wider, your absolute coupon is
still an attractive cost of capital
and it’s going to bring those
issuers out even if they are
paying a little higher new issue

CONCESSIONv (^) „
for Hong Kong IPOs of a
COMBINEDû53BNû4HEYûAREû
TOPSPORTS (US$1bn), JS GLOBAL
LIFESTYLE (US$800m), HOME CREDIT
53BN ûCHINA FEIHE (US$1bn)
and SINOMABû53M 
4HEûlVEûAREûPLANNINGûTOûSTARTû
pre-marketing once they win
approval if market conditions
ALLOW ûSAIDûPEOPLEûCLOSEûTOûTHEûDEALS
“It is impossible to say there
are no worries about the IPO in
Hong Kong,” said a person close
to the Home Credit deal, referring
to the Sino-US trade war and the
UNRESTûINû(ONGû+ONG
“So far, the deal is still on track
FORû3EPTEMBERûORû/CTOBERû
Investors generally have positive
feedback towards the company as a
regulated player in the consumer
lNANCEûlELD vûTHEûPERSONûSAID
$ESPITEûTHEûVOLATILEûBACKDROP û
bankers on the deals said the
issuers will go ahead to pre-
market the transactions to
GAUGEûINVESTORSûINTEREST
“Investors are not totally turning
AWAYûFROMû(ONGû+ONGûDEALSûYETû
But with the protests going on, we
have to try extra hard to convince
international investors Hong Kong
is still a safe place to invest,” said
ONEûOFûTHEûBANKERS
“It’s really hard to tell whether
markets will get worse in the
NEXTûFEWûMONTHSû)SSUERSûTHATû
want to list this year will go ahead
to test the waters anyway but
they need to be prepared to lower
their valuation expectations,”
SAIDûANOTHERûBANKER
Logistics property developer ESR
CAYMAN, which pulled an IPO of
(+BNû53BN ûINûUNE ûISû
also considering bringing back a
SMALLERûDEALûASûEARLYûASû3EPTEMBERû
UK-based data centre operator
GLOBAL SWITCHûISûLOOKINGûTOûlLEûAû
listing application in September at
THEûEARLIESTûFORûAû53BNûmOAT
STAYING AWAY?
The unrest in Hong Kong has
also raised doubts over whether
mainland Chinese issuers would
still want to list in the city in the
FUTURE
An ECM banker said Chinese
issuers generally are hesitant to list
INû(ONGû+ONGûFORûTHEûTIMEûBEING
“Issuers tend to prefer either
the A-share market or the US
instead of Hong Kong because
they are concerned the recent
disorder may further bring
UNCERTAINTIES vûHEûSAID
Some other bankers, however,
believe the impact will prove
TEMPORARYûh)FûYOUûASKû#HINESEû
issuers at this point of time, they
may tell you they don’t want to list
INû(ONGû+ONGû7HENûTHEûPROTESTSû
end, they may give you a different
ANSWER vûSAIDûANOTHERû%#-ûBANKER
The disappointing aftermarket
performance of Hong Kong IPOs
is a bigger concern for Chinese
issuers when they consider
where to list, said the second
%#-ûBANKER
IPO performance in Hong
+ONGûHASûBEENûMIXEDûTHISûYEARû
Chinese brokerage Shenwan
Hongyuan and Chinese
drugmaker Hansoh
Pharmaceutical, the only two
companies that have raised
more than US$1bn in Hong
Kong this year, have seen their
shares move in different
DIRECTIONSû3HARESûINû3HENWANû
(ONGYUANûHAVEûFALLENûûSINCEû
listing in April while those in
(ANSOHû0HARMAûSURGEDûû
Source: Refinitiv SINCEûITSû
UNEûLISTING (^) „
24,
25,
26,
27,
28,
29,
30,
31,
April 1 May 1 June 1 July 1 August 1
HANG SENG SLUMPS ON UNREST
DAILY CLOSE, INDEX POINTS
Source: Refinitiv






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US YIELD CURVE GOES NEGATIVE
SPREAD BETWEEN 2s AND 10s

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