MIDDLE EAST & TURKEY
The Saudi Arabian government has suspended a monthly local bond sale for the fourth consecutive month. Analysts suspect broadly increasing oil prices have improved the sovereign's liquidity position, reducing the need to raise fresh capital from local investors. The government has previously said it plans to raise fresh capital from the international capital markets, possibly through the sale of sukuk.
The Government of Kuwait unveiled the country’s Vision 2035 and National Development Plan, branded as New Kuwait. The development plan is designed to transform Kuwait into a financial, cultural, and institutional leader in the region by 2035 through 164 strategic development programmes. It is based on five strategic directions and the seven pillars, which include public administration, the economy, infrastructure, healthcare and environment.
Turkey’s trade deficit hit US$5.6bn in December, in line with expectations. The figure marked a 10.3% drop from December 2015. Exports increased 9% to US$12.8bn last month compared with the same period a year ago, while imports were up 2.3% to $18.4bn.
Turkish equities and the lira seemed to respond favourably to the Fitch downgrade last week. Turkey’s Borsa Istanbul Banks Index added 5.29% by the end of trading Monday, while the lira jumped to 3.80 per US dollar. Turkish 10-year government bonds did widen slightly, however, but about 80bp. The moves on the currency could be a sign the Central Bank's "unorthodox" measures aimed at stemming the lira's fall are working.
Turkey's Aktif Bank, the country's largest privately-owned investment bank, has secured regulatory approval to sell a US$120mn sukuk in the international capital markets sometime this year. Although Islamic retail banking has become more popular in Turkey in recent years, sukuk - particularly those denominated in hard currency - are a rare occurrence in the country.
AFRICA
The Nigerian government has selected Goldman Sachs and Stanbic IBTC to help arrange the country's debut diaspora bond, which are bonds being sold exclusively to Nigerians abroad. It hasn't announced a final bond size, but reports suggest the country will look to raise between US$100mn and US$300mn from the sale. According to Reuters, the government will aim to place the diaspora bonds after it completes a US$1bn Eurobond issuance planned for March.
African National Congress (ANC) Secretary-General Gwede Mantashe has called on global rating agencies to stop meddling in South Africa's affairs. The move came as S&P expressed concerns over the current cabinet reschuffle in the country, and its possible impact on South Africa's credit rating - which already hangs precariously just above 'junk' status after narrowly avoiding a downgrade several tiems over the past year. “This cannot be accepted – we are not working for a rating agency, we are working for the country. The rating agency must rate on the work we do in the country," he told local press after a national executive committee meeting at the weekend.
Tunisia said it could issue a benchmark-sized sukuk this year as it looks to raise up to US$2.85bn in international markets, according to Reuters. The transaction would be in addition to the €1bn Eurobond the country plans to raise in February. Despite being one of the more impressive reformers in the wake of the 'Arab Spring', the country has struggled to rein in government spending in recent years, and will need to shore up additional financing to help plug its growing deficit.
The Lagos-Ibadan rail line project has secured US$1.275bn term loan from the Bank of China this week. The move comes as the Nigerian federal government released about NGN72bn in funding for the rail project, which will connect Lagos with Ibadan via a double-line standard rail line spanning 156km.
AMERICAS
Pharol SGPS, the largest shareholder of Brazilian telecoms group Oi, is to reject the proposed debt restructuring plan, including a recent proposal from hedge fund Elliot Management that would see about BRL9.2bn in capital injections in exchange for a majority share of the group. The move will see the Netherlands-based court arbitrating on the credit issued by an offshore financial vehicle based in the country delay a ruling on applications for conversion of the suspension of payments until later this week.
Brazilian President Michel Temer will propose legislation to lift restrictions on foreign ownership of airlines and agricultural land in Brazil as he strives to pull the economy out of a two-year recession, the Financial Times reported, quoting government sources. Temer's government plans to send Congress a bill allowing 100% foreign ownership of airlines, though investors will be obliged to help expand regional flight services, two sources said. The government will also propose a bill lifting a ban on foreign investors buying agricultural land in Brazil, with certain conditions in place.
A record high number of large Brazilian companies will seek protection from creditors in 2017, bankers and lawyers said on Monday. New bankruptcy filings from companies with annual revenue surpassing BRA50mn (US$16mn) are expected to top the 227 requests last year.
Eike Batista, the Brazilian former billionaire wanted by police since last Thursday in relation to a corruption investigation, turned himself in this week after arriving in Rio de Janeiro from New York. Part of a sweeping investigation into corruption at Petrobras, the state-owned oil company, the arrest of Mr Batista comes as Brazil’s supreme court is finalising testimony from 77 executives of Odebrecht, the construction company, that is expected to implicate a number of the country’s top politicians.
Grupo SEB do Brasil may seek an initial public offering following the repurchase of Pueri Domus, a learning systems division of Pearson, the company's CEO has said. SEB acquired the division along with two others for about US$500mn.
Fitch has upgraded Trinidad Cement Limited's (TCL) local and foreign currency Issuer Default Ratings (IDRs) to 'B+' from 'B-', citing CEMEX's increased ownership of the company.
The incoming head of the Bank for International Settlements (BIS) and current governor of the Mexican Central Bank Agustin Carstens said the world's major central banks need to return to orthodox monetary policies, particularly as global economies like the US and UK begin to pick up steam, in an interview with German press this week. Carstens also said he believes the Mexican peso is undervalued against the US dollar, with concerns over the country's trade prospects and remittance volumes growing as the Trump Administration in the US looks to reform the relationship between the two states.
Aeropuertos Argentina 2000 (AA2000) priced a US$400mn 10NC5 bond at 99.888% this week. The bonds carry a coupon of 6.875%, substantially tighter than initial price thoughts - which were around the 7.25% area, and generated upwards of US$2.5bn in orders from global investors. Proceeds from the transaction will be used to repay existing debt.
Peruvian state-owned mortgage bank Fondo Mivivienda is looking to hit the road next week ahead of a potential bond offering. Morgan Stanley and Scotiabank are leading the bond sale.
ASIA
The Bank of Japan (BoJ) kept its key policy rates and instruments unchanged Tuesday, with the bank continuing its unprecedented easing programme.
India's demonetisation is likely to delay a recovery in Indian banks' asset quality due to the impact on the country's informal economy, a recent report from Fitch suggests. Fitch had previously expected the stressed-asset ratio for Indian banks to increase to 12% in the financial year ending 31 March 2017, up from 11.4%, but the credit rating agency now says that ratio could climb much higher.
Analysts expect India to announce that it will turn to the capital markets to help plug a growing budget deficit in the country when Prime Minister Narendra Modi presents a new budget Wednesday this week. The country is expected to announce borrowings of up to Rs6.25tn (US$92bn) to plug the country's deficit. Spreads on India's 10-year government bonds have nearly halved over the past year, from UST+616bp to UST+393bp, falling to their lowest levels in nearly a decade.
Indonesia's Central Bank could see its monetary policy headroom come under pressure from rising inflation in the coming months, due to rising energy tariffs, the Bank's executive director of economic and monetary policy Juda Agung said this week. The bank is keen not to raise rates to soon after a year of successive cuts. In a related move, the Central Bank announced it will accept variable rates offered by participants of its local T-Bill auctions starting on 1 February, a move aimed at bringing down auction rates and improving monetary conditions.
RUSSIA, CIS & EUROPE
Demand for Russian gold producer Polyus’ 6-year dollar-denominated Eurobonds totalled around US$1.bn, Russian media reported quoting sources. The final yield guidance for the Eurobonds was set at 5.1–5.25% after the company held a road show on January 27 in Europe and the U.S.; Alfa Capital Markets, Gazprombank, J.P. Morgan, Renaissance Capital, Sberbank CIB and VTB Capital were appointed as the organizers of the series of meetings and the placement. Polyus’s previous placement of Eurobonds was done in October 2016, when the company sold US$500mn of 5-year Eurobonds with a yield of 4.7%.
Halyk Bank is doubling down on plans to acquire Kazkommertsbank, but the former's chief executive said that latter would have to trim its distressed assets before any sale could materialise.
International Bank of Azerbaijan's (IBA) capital quality has deteriorated significantly in recent months, according to a note from Fitch Ratings. The bank reported an AZN1.4bn net loss for 2016 and negative AZN700mn in equity during the same period. IBA's liquidity buffer stands at just AZN2.7bn.
Romanian paper products manufacturer Pehart Tec Grup secured a €24mn 3-year syndicated loan this week from local lenders: Banca Comerciala Romana, EximBank and Banca Transilvania. The loan, which was structured with an optional two-year extension, will be put towards production expansion and plant modernisation.
Unicredit Bank Czech Republic and Slovakia tapped the markets this week with a €250mn maturing in 2022 with a coupon of 0.75% and a yield of 0.8%. The notes were priced at 99.75%. UniCredit was the sole bookrunner on the deal.
