News
Bond investors bide their time
Bonds Fund managers wait for better entry window as Asian new issues underwhelmBY FRANCES YOONInvestors are cutting back
on their purchases of Asian
credit, after a flood of deals and
worries over interest rate rises
left a majority of new issues
under water.
Of the 10 high-yield bonds
priced in March, six were
trading below reoffer last week,
according to research from
Deutsche Bank.
Spreads on recent US dollar
investment-grade issues from
NTPC, UPL CORP, KOREA DEVELOPMENT
BANK and RIZAL COMMERCIAL BANKING
CORP have all widened since
pricing this month, according
to Tradeweb. Even a well-
supported Chinese bank issuer
like ICBC DUBAI saw its latest
floaters drop below par.
The REPUBLIC OF INDONESIA,
which was one of the top
performers in Asian credit last
year, has seen its first Green
sukuk slump three-quarters of a
point to yield 3.9%, according to
Tradeweb. The five-year notes
priced at par in February toyield 3.75%.
A deluge of US dollar notes
from Chinese issuers with
regulatory approvals expiring
at the end of March has
also weighed on secondary
performances.JP Morgan’s Asia Credit Index
is down 1.3% so far this year,
versus a 5.65% return last year,
when Asian credit delivered
some of the best returns in
global bond markets.
“We acknowledge that thepoor performances of recent
new issues is a bit concerning,”
said Harsh Agarwal, head
of Asian credit research at
Deutsche Bank. “Our bigger
concern is fund outflows,
though (and less so supply).”LTA blazes infra trail 06 KKR yen debut 06 ABC’s record recap 08
ICICI gives ground on valuation
Equities Investors stick with Indian finance sector, despite recent troublesBY S ANURADHATwo Indian financial
institutions are poised to
complete their listings later
this month even after volatile
market conditions and a
massive banking scandal
dented valuations in the sector.
ICICI Bank is looking to
raise Rs40bn (US$617m) from
the float of ICICI SECURITIES, its
broking unit, while IFC-backed
BANDHAN BANK is in the market
with a Rs45bn IPO.
The two are betting that
investors remain convincedabout the long-term prospects
of India’s financial sector,
despite news of a large-scale
fraud at Punjab National Bank.
The volatility that followed
the PNB scandal has forced
ICICI Securities to lower its
valuation target to Rs167bn,
or US$2.5bn, from US$3.5bn
under discussion at the start
of the year and around half
the US$5bn touted during
premarketing late last year.
As of March 14, the
benchmark S&P BSE Sensex
was down 0.9% year to date and
a steeper 1.3% since the start ofMarch. It rose 28% in 2017 and
was one of the best-performing
bourses in Asia.
“The current price is based
on market feedback. It must
have been a rude awakening
for the management,” said an
ECM banker away from the
IPO.
ICICI Bank originally planned
to sell 64.4m ICICI Securities
shares, according to the draft
prospectus, but is now offering
77.2m to meet its target of
raising more than US$500m
from the IPO. The shares on
offer represent a 24% stake. Thetop of the Rs519–Rs520 price
range implies a forward P/E
multiple of 26, lower than the
industry average of 30.
The sale is crucial for ICICI
Bank as it needs more capital
to provide for non-performing
loans. The bank’s provisioning
coverage ratio, the percentage
of bad loans to be provided for,
rose to 60.9% in the December
2017 quarter from 48% a year
earlier. An analyst at a Mumbai-
based broking house said the
ratio is expected to rise further
in the March quarter.
ICICI Bank’s net non-
performing asset ratio rose
to 4.2% in the nine months to
December 31, from 3.96% in the
same period of 2016.
Stricter provisioning norms