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The Daily Roundup

Saudi Arabia cancels local debt issuance for fifth time in a row – Oman nears conclusion of investor roadshow - Majid Al Futtaim, Bank of Sharjah set IPTs – Argentina mutual fund AUMs swell – PEMEX claws back losses on oil price rise – CDBC issues US$1.15bn in international markets – Central Bank of India raises fresh Basel III debt – RUSAL plans fresh Panda bonds – Intesa sending mixed signals on Russia ambitions, Rosneft deal

Feb 28, 2017 // 6:13PM

Middle East & Turkey

Saudi Arabia's government has suspended a monthly issuance of domestic debt for the fifth time in a row, according to the Maaal news agency. Analysts suspect the move is a sign of improving liquidity as oil prices continue to rise.

Saudi Arabian Oil Co. (Aramco) will invest US$7bn in an oil-refining project being developed by Malaysia’s Petroliam Nasional Bhd, Bloomberg reported. The two national oil companies have finalized plans to develop and operate a crude oil refinery as part of the larger integrated oil and petrochemicals complex at Pengerang in the southern state of Johor, Najib.

The Sultanate of Oman is reportedly close to concluding its investor roadshow ahead of a US dollar bond issuance that could net the sovereign up to US$2.5bn, according to Reuters. The government could also look to issue a follow-on sukuk once the sale is concluded, much like it did last year. Oman needs to close a US$5.4bn hole in its 2017 budget.

The UAE's Majid Al Futtaim has set initial price guidance on its upcoming perpetual dollar bond issuance at the 5% area, with the book swelling to over US$1bn. Sale of the subordinated unsecured bond is being managed by Barclays, Emirates NBD Capital, Goldman Sachs, HSBC, National Bank of Abu Dhabi, and Standard Chartered Bank.

Bank of Sharjah has released IPTs of MS+250bp on a benchmark sized US dollar bond, which it plans to place before the end of Q1 this year. The 5-year bond is being managed by Bank ABC, Emirates NBD Capital, JP Morgan and National Bank of Abu Dhabi.

Kuwait's Warba Bank is looking to raise fresh capital through the sale of Additional Tier 1 instruments sometime in Q1, according to a filing with the Boursa Kuwait. The bank would be the third to raise fresh Tier 1 capital in the capital markets over the past few months.

The Government of Lebanon has reportedly hired banks in the run up to a potential Eurobond issuance, according to multiple sources and media reports. The sovereign is looking to refinance existing 2017 maturities and help finance the budget for the following year. The country, one of the most heavily indebted in the region, last tapped the international markets in 2015 and 2016.

Africa

The Nigerian banking sector is in for a tough year ahead as a continued recession looks likely to hammer their balance sheets, according to S&P. "Continued low oil prices, devaluation of the naira, a shortage of U.S. dollars, and the 2016 economic recession are battering banks' domestic balance sheets," S&P said in a recently published report, adding that the likelihood of severe banking system stress is increasing.

Nigeria’s economy shrank for a fourth consecutive quarter in the three months through December, and contracted for the whole year – the first time since 1991. GDP in Africa’s largest economy declined 1.3% in the same quarter last year, after shrinking 2.2% in the previous three months. Lower prices and exports of oil, Nigeria’s biggest export, cut government revenue by about half and reduced the foreign currency available to import refined fuel and factory inputs.

Americas

Assets under management by Argentina's mutual funds expanded to ARS371bn in January, representing an expansion of about 80% from the same period the previous year, according to the country's capital markets regulator. The month also saw record volumes of local market activity, with over ARS34bn in primary market issuance activity in the country.

Argentina's Agrofina SA successfully issued dual-currency local bonds, placing a ARS331mn 2-year Class V tranche at 4.94% and a US$4.38mn 2-year Class VI tranche at 7%.

Mexico's state-owned oil producer and one of the country's most frequent issuers PEMEX significantly narrowed its losses on the back of rising oil prices, it revealed this week. Full year losses totalled US$1.58bn, down from US$9.8bn a year earlier. Oil production at the company has steadily declined over the past 13 years.

Mexico has released a slew of economic data this week, reaffirming its relatively strong position as it heads into a tough year that could see its major trade relationship renegotiated. Mexico’s trade deficit reached US$3.29bn in January, higher than expected by analysts, but unemployment was stable through January at 3.59%.

Asia

China Development Bank Corp issued US$1.15bn in notes maturing in 2022. The notes were priced at par and carry a coupon of 3MLIBOR+70bp. Bank of China, Bank of Communications, BNP Paribas, CCB International, Credit Agricole CIB, HSBC, ICBC, Mizuho Financial Group, National Australia Bank (NAB), and Wing Lung managed the sale.

China Evergrande Group, one of the country's top homebuilders, creditors to approve amendments to its bond covenants that would allow it to issue more debt. It is proposing amendments to notes due in 2018 to 2020 that would allow it to raise an additional CNY4bn in bonds.

India’s economy is forecast to slow less than estimated as banks work to replace cash sucked out by the government following the demonetisation in November last year. According to the Statistics Ministry, GDP will grow 7.1% in the year through March after a 7.9% expansion the previous year. While that’s the slowest pace since 2014, it’s faster than the 6.8% median estimate in a Bloomberg survey.

State-owned Central Bank of India this week raised Rs500 crore in Basel III compliant Tier 2 bonds. The privately placed notes carry a tenor of 10 years and an interest rate of 8.62%.

Britain's Deputy High Commissioner to India Kumar Iyer has said the opportunity to ink new bilateral trade agreements after Brexit could see the two countries partner on develoing the Masala bond market. “We are keen to promote further issuance of masala bonds. Britain is ready to help India internationalise the rupee and mobilise the rupee funds from foreign markets,” Iyer said, according to local press reports, adding that the UK is ready to restructure its laws and agreements to meet this objective.

Indonesia's Finance Ministry sold IDR16.35tn (approx. US$1.23bn) of bonds at an auction on Tuesday, above the IDR15tn initially targeted. The notes were split into tranches maturing June 2017, March 2018, May 2022, May 2027, May 2036, and Feb 2044.

Russia, CIS and Europe

Intesa Sanpaolo has once again sent mixed signals to the market on its role in the Rosneft privatisation and its ambitions to grow its presence in Russia. Reuters reports the Italian lender is in talks with 14 banks to syndicate a €5.2bn loan it provided to fund the purchase of a 19.5% stake in Rosneft, acquired by Glencore and Qatar's sovereign wealth fund just one day after Intesa's country head Antonio Fallico told a forum in Sochi the bank was not syndicating the deal. Fallico also said the country would be open to acquiring a top-tier bank in Russia – which analysts tipped could be Sovkomflot, a statement the bank later denied.

Norilsk Nickel is looking to drum up support for a potential green bond issuance, but has struggled to identify projects that would qualify as 'green' according to the company's Vice-President Elena Bezdenezhnykh. She told Russian press that the company plans to invest more than RUB1tn (approx. US$17.18bn) in investment, including RUB250bn to environmental projects, by 2023.

Russian Railways (RZD) successfully placed RUB15bn in notes maturing in 2024 after securing more than RUB33bn in demand from investors. The bonds were sold at par and carry a coupon of 8.99%, slightly tighter than initial guidance. Gazprombank, JP Morgan, and VTB Capital managed the trade.

Russia's RUSAL is planning an CNY1bn 3-year Panda bond, according to a report from Bloomberg. International Capital Corp (CICC) is said to be managing the sale.

Ukraine's Central Bank Governor Valeriya Gontareva may resign imminently, according to local press reports. Gontareva has been instrumental in helping to stem the currency's slide during one of the toughest periods in the country's history, but the Central Bank is struggling to help the country avoid a full-blown banking crisis - with the country's largest lender nationalised in December and another large lender liquidated this month. The move could further delay how the Central Bank deals with the struggling lenders, and postpone the disbursement of a critical US$1bn from the IMF.

The price of oil should gravitate towards US$60 per barrel assuming an OPEC deal to cut output is respected, according to Gazprom Board Chairman Viktor Zubkov. "Calculations show that if OPEC countries abide by and do not violate the agreement on oil production limitations, then the oil price may even grow to US$60 per barrel. This should suit everyone because this is a normal price in such conditions," Zubkov said, as quoted by local news agency TASS. 

Poland's Central Bank said it could keep monetary policy loose for as long as two years if needed to boost growth, and could leave the benchmark interest rate at its current 1.50% for at least the next 12 months.

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