China readies dollar bond return
Bonds Repeat of last year’s frenzy looks unlikely against weak market backdropBY CAROL CHAN, INA ZHOUThe PEOPLE’S REPUBLIC OF CHINA is
set to issue US$3bn of sovereign
bonds later this year, adding to
its sovereign curve after ending
a decade-long absence from the
dollar market last October.
Market participants expect
strong demand for the new
issue, but said a repeat of last
year’s frenzy looked unlikely
against the weak market
backdrop.
China’s US$2bn offering ninemonths ago was the country’s
first US dollar sovereign
offering since 2004. It priced at
a tiny spread over US Treasuries
and repriced the dollar curve
for state-owned Chinese banks
and corporate issuers.
“There is hard demand for
China’s US dollar sovereign
bonds, especially from Chinese
banks and index funds.
Moreover, the issue size is
relatively small compared to
the economy. I don’t see any
problem in terms of demand,”said a DCM banker who was
involved in last year’s deal.
The banker expects China
will not give too much
premium in terms of pricing
and will price close to the
secondary market curve of
its US dollar sovereign bonds
issued last year.
Angus Hui, head of Asian
credit and emerging market
credit at Schroders Investment
Management, also expects
demand will remain intact as
China’s US dollar sovereignbonds provide investors with
a relatively higher yield but
low volatility among other
emerging sovereign markets.STABLE SPREADS
“Credit risk differentiation is
becoming even more important
in risk-off environments.
With a solid sovereign rating
and small issue size, China’s
planned US dollar bond will
continue to be welcomed by
the market,” Hui said.
Last October, China issued
one of the tightest US dollar
sovereign bonds on record,
sealing its position as an
economic heavyweight in
global debt capital markets.Foreign funds cool on Malaysia
Bonds Sovereign CDS hits 14-month high after Mahathir revives talk of ringgit pegBY KIT YIN BOEY, DANIEL STANTONForeign investors are pulling
out funds from Malaysia and
hedging against widening credit
spreads, with uncertainty overgovernment policies driving
sovereign credit default swaps
to a one-year high.
The spike came as Prime
Minister Mahathir Mohamad
suggested that the governmentwas looking at certain options
to stem growing fiscal deficits
and protect the ringgit.
In an interview with
Singapore-based Channel
News Asia television last week,Mahathir said pegging the
ringgit was not necessary for
now, but would be considered
as an option if needed.
Mahathir pegged the ringgit to
the US dollar and introducedNews