Emerging Market Credit Daily Roundup

Qatar CB to sells fresh debt with 3-10 year maturities – Saudi Arabia includes Dodd-Frank rules on securitisation in prospectus – Egyptian markets struggle in wake of attack – ZAR still struggling with volatility – Kenya could look to boost borrowing to repay maturities – Tunisia gets benchmark bond approval – Kaltex, Inbursa lead Mexican market activity – Argentina sees US$116bn in tax amnesty repatriation – CBRC issues new risk control guidelines – X5 Retail Group roadshowing debut rouble bond

Apr 10, 2017 // 3:20PM


Middle East

Qatar’s Central Bank is selling government bonds with maturities of three, five, seven and 10 years, according to Reuters.  The bonds will offer interest rates of 2.75% for the 3-year tranche, 3.35% for the 5-year, 4% for the 7-year, and 4.5% for the 10-year paper. The bids will begin on April 13 while allocations will be made on April 16.

Saudi Arabia has moved one step closer to finalising the sale of the sovereign's inaugural US dollar sukuk. The Kingdom has included a disclosure within the prospectus pertaining to the security's conformity to risk retention rules spelled out in Dodd-Frank legislation; it plans to repurchase up to 5% of the aggregate principle of the sukuk to conform to the rules, according to a report in Reuters.

Saudi Aramco's board will meet in China in May for the first time in seven years, Reuters announced, as the state-owned energy firm seeks to lure Chinese and Asian investors to its giant IPO. The board of directors would gather in Shanghai on May 10 to discuss the firm's business plans, investments and preparations to sell up to 5% of the oil giant in 2018, the sources said. The board, which gathers twice a year, often meets abroad but only once before had a meeting in China, in 2010.

Rating agency Fitch has obtained a license to operate in Saudi Arabia, the Capital Market Authority (CMA) said in a statement. Fitch is the second foreign credit agency allowed to operate in the country after Standard & Poor's got its license in 2016, as the Kingdom seeks to bolster its local capital markets.

Egyptian equities feel this weekend the most since late February after an explosion in the Nile Delta city of Tanta killed at least 21 people, and another in Alexandria that left 13 dead. The attacks and their market destabilising affects could not have come at a worse time for Egypt, which is still struggling to keep inflation south of 30%.

Abu Dhabi sovereign wealth fund Mubadala plans to raise up to US$1bn through the sale of a fresh dual-tranche dollar bond, according to report in Reuters. The bond is expected to carry tenors of 7 and 12 years. Mubadala, which is in the process of merging with International Petroleum Investment Company (IPIC), will look to start marketing the transaction as early as this week.

Oman is said to have hired banks ahead of a dollar denominated sukuk sale, according to a report in Bloomberg. The sovereign reportedly mandated Alizz Islamic Bank, Citi, Dubai Islamic Bank, JP Morgan, HSBC and Standard Chartered to lead the sale of the sukuk, which is said to be benchmark sized. Last month Sultanate of Oman sold US$5bn in bonds to international investors.

Damac Properties, the second largest developer of Dubai, has set initial price guidance for its planned five-year dollar sukuk around 6%. The unsecured Islamic bond will be of benchmark size, which usually means upwards US$500mn, and is expected to price Tuesday.

Turkish Deputy Prime Minister Mehmet Simsek said that a strong 'yes' vote in this Sunday's executive presidency referendum will lead to a strong improvement in the country's markets. "Turkey's long-term outlook will be enormously positive. Its reform program will speed up. Turkey's resistance to shocks will increase and the country will again see a six percent growth rate," he told TRT Haber, a news network. The Turkish Lira has been one of the worst performing EM currencies, second only to the South African rand – which has been rocked by political volatility.



The Johannesburg Securities Exchange is said to be investigating trades in certain securities in the hours before South Africa's Finance Minister Pravin Gordhan was recalled from international investor meetings, according to a report from BusinessDay. The investigation will look to identify whether a more thorough investigation by the Financial Services Board into potentially unlawful trades would be warranted.

The South African rand resumed its fall on Monday amid concerns about the economic direction of the country following the sacking of Finance Minister Gordhan. The currency reached its lowest intraday level since January 11, dropping down to ZAR13.92 per dollar. Investors into the South African sovereign bonds were spooked by the continued currency volatility, which manifested in a 9.5bp rise to 9.02% - highest since December.

South Africa is reportedly looking to push ahead with its planned ZAR1tn (US$72bn) nuclear programme, with tender auction for the projects set to take place in June, City Press newspaper reported on Sunday. The government assigned the state-run energy giant Eskom to procure an additional 9,600 megawatts of capacity, as part of the long-term plan to diversify the economy from oil and gas to nuclear power generation.

Miner Anglo American will sell its Eskom-linked thermal coal operations in South Africa for US$166mn, it announced on Monday, part of a strategic overhaul to cope with a slump in commodity prices. The mines, along with four closed collieries, have a supply agreement with Eskom under which South Africa's sole power utility paid for their running costs in exchange for fixed-price coal supply.

Kenya has signalled it could hit the market for fresh loans after a very successful syndication earlier this year in order to take out existing maturities. The sovereign has KES63.1bn in treasury notes and a US$750mn syndicated loan maturing this year, Principal Secretary Kamau Thugge said this week.

Kenya will sell two re-opened KES30bn (US$290.4mn) 10-year Treasury bonds this month, the Central Bank said on Sunday, adding that the final auction will take place on April 19.

Cameroon has secured a XOF89.4bn concessional loan and a preferential buyer credit agreement for XOF326.2bn from China's Eximbank for the second phase of the Kribi port construction project. The second stage of the project, due to be completed in 2020, includes the construction of a new access tunnel and container terminal.

Tunisia has approved the issuance of up to US$500mn in sovereign bonds, the country's Ministry of Finance said this week. The notes will be backed by a guarantee from the United States Agency for International Development (USAID). The country will be looking for around US$2.6bn in funding from international markets this year, the Ministry said.



Protests continued in Venezuela over the weekend following news that opposition leader Henrique Capriles was barred from running for office. Capriles was banned by the Supreme Court from pursuing office for 15 years due to "administrative irregularities" during his post as governor.

Mexican textiles giant Grupo Kaltex issued US$320mn in fresh notes Friday. The notes were priced at par to yield 8.875%. Barclays and Morgan Stanley were sole bookrunners on the sale.

Mexican lender Banco Inbursa issued international bonds for US$750mn maturing in 2027 with a 4.375% coupon. Bonds were sold at a price of 98.591% with an initial yield of 4.552%. Bank of America Merrill Lynch, Citigroup, Credit Suisse acted as bookrunners for the deal.

Argentina's tax amnesty has hauled in a record US$116.8bn in freshly declared assets, the country's Treasury said at the end of last week. That figure was well ahead of an internally targeted range of up to US$90bn. About 254,700 people and companies declared assets voluntarily over the past 8 months ending last week, with some 96% of those declarations made by individuals.

Argentina has secured a US$300mn loan from the World Bank to help finance development work in the Salado river basin. The work will help adapt the riverbed to minimize the impact from flooding on nearly 60 municipalities in the region.



The China Banking Regulatory Commission (CBRC) has issued guidelines on risk control for lenders, as authorities ramp up efforts to contain risks from a rapid build-up in debt. China's banks extended a record US$1.84trn of loans last year, despite concerns about the dangers of prolonged debt-fuelled stimulus.

Chinese residential property manager Fujian Start Group is looking to raise up to CNY600mn (approx. US$86.3mn) by issuing fresh bonds, according to a corporate disclosure. The company said the bonds are likely to carry a 3-year tenor. The news comes the same day another Chinese property developer, Zhonghong Holding, released plans to raise up to CNY500mn through the sale of new debt.

China Cinda Asset Management has secured approval from the China Banking and Regulatory Commission to issue up to RMB30bn (approx. US$4.3bn) in fresh bonds this year, it said this week.

China’s state-owned clearing house, the Shanghai Clearing House, is to link up with Canada’s TMX Group in order to advance cross-border investments and attract foreign funding to China’s budding bond market. According to the regulator’s statement, they will work with TMX over such aspects as linking securities registration and custody functions, in order to provide North American investors easier access to China's bond market, while the PBoC will work to further deregulate the local bond market.

China’s FX reserves edged up slightly in March, for second consecutive month, as the government continued to implement measures to stem capital outflows. Total FX reserves hit US$3.009.1tn last month, up from US$3.005.1tn and just below a forecast of US$3.01tn, according to the Chinese Central Bank. Prior to February China’s reserves had declined for eight straight months.

Franklin Templeton Investments put down another US$1bn on Indian sovereign bonds in less than a month, according to local press reports. A report in ETI suggests the contrarian emerging market fund picked up an extra Rs10,000 crore in Indian sovereign bonds with tenors ranging from three to six years, representing about a quarter of all Indian securities acquired by portfolio investors since January this year.

PT XL Axiata Tbk (EXCL) announced plans to raise up to UDR2.18tn through the issuance of ijarah sukuk. The Islamic bonds, to be issued under the company's IDR5tn medium term sukuk programme, will be used to refinance existing maturities and smooth out existing maturities. PT CIMB Sekuritas, PT DBS Vickers Sekuritas Indonesia, PT Indo Premier Sekuritas, PT Mandiri Sekuritas, and PT Maybank Kim Eng Securities are leading the sale.


Russia, CIS and Europe

The Russian rouble dropped more than 1% on Friday as a US airstrike on the Syrian government highlighted growing tensions between the Washington and Moscow. The rouble has been the best-performing currency in the world over the last 12 months, rallying more than 19% on as oil prices continued to recover and expectations of a rapprochement with the new US administration high, but its rally recently stumbled despite continued rise in oil prices.

Moscow has promised over US$1bn in loans for Belarus after last week's talks between the leaders of two countries, Belarusian Deputy Prime Minister Vladimir Semashko told local journalists on Sunday. Russia could also help Belarus tap into an additional US$600mn from the Eurasian Fund for Stabilization and Development, Semashko added. Last week, at a meeting in St Petersburg between Russian President Vladimir Putin and Belarussian leader Alexander Lukashenko, Russia agreed to refinance Belarus' debt while Belarus will pay back more than US$720mn in arrears for gas supplies.

Russian oil giant Rosneft in a confidential memo to the country’s Energy Ministry warned of the risks to sustainability of current OPEC-led oil production cuts, RBC news channel reported, citing a copy of the document as its source. According to the report, Rosneft vice-president Pavel Fedorov cited such risks as further rise of US shale production and the Saudi’s willingness to maintain a low oil price as key threats to a possible extension of the cuts.

X5 Retail Group, the largest consumer retail network in Russia, is planning to issue rouble-denominated Eurobonds, its debut foray into the debt capital markets, according to ING Research. The company mandated Goldman Sachs, UBS and VTB Capital to act as joint lead managers on the sale of bonds with maturities ranging from 3-5 years. The company is roadshowing this week and could place the bonds as early as April 17.

Ukrainian Central Bank Governor Valeria Gontareva confirmed reports of her resignation on Monday, saying she had sent a letter to the president asking to be relieved of her duties by May 10. Gontareva said there would be no changes to Central Bank policy in the near future and no other changes to the governing board, adding that she had proposed several names as possible successors.

The Czech koruna has continued its ascent on Monday, on the back of the Central Bank’s decision to lift its long-standing currency cap last week. The Czech National Bank imposed a limit on the koruna in in 2013 in an effort to stop a strong currency from causing deflation through lower import costs. According to the latest date, inflation has been climbing toward the top end of the CNB’s 1-3% target range.

Romania is out marketing a dual-tranche euro-denominated bond this week, according to the Ministry of Public Finance. The sovereign is marketing a new benchmark-sized 10-year bond and reopening its €1.25bn 2035s, which are currently yielding 3.65%. Barclays, Citigroup, Erste Group, ING and Societe Generale are managing the sale.

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