Emerging debt-Asia rattled by earnings worry, refinancing risks

HONG KONG, Nov 11 (Reuters) - Asian risk premiums rose on
Tuesday amid renewed investor jitters about earnings prospects
and Fannie Mae's vulnerability to short-term debt refinancing
risk.

Spreads on insuring South Korea's sovereign debt, the
epicenter of the Asian banking crisis, widened after Fitch cut
its outlook on Asia's fourth largest economy to negative from
stable.

"The revision to Korea's outlook reflects concerns that the
de-leveraging of the banking system may contribute to an
erosion of the sovereign's external credit strengths," said
James McCormack, head of Asia sovereigns at Fitch.

He said the deterioration would be deeper if it were
accompanied by central bank interventions in the currency
market to support the exchange rate.

South Korean 5-year credit default swaps (CDS)
KOREA5UA=GFI -- insurance-like contracts that protect against
defaults and restructuring -- moved out to 310 basis points
(bps) from Monday's 280 bps.

Meanwhile, the broad market was weaker as investors worried
institutions like Fannie Mae, the largest provider of funding
for U.S. home mortgages, were increasingly depending on short
term debt to bankroll its business.

Fannie Mae's short-term borrowings rose to 33.7 percent of
debt outstanding as of September from 29.4 percent in December.

Risks of using more short-term debt issues include rising
interest rates and the possibility the company may not draw
enough demand to refinance maturing securities, the firm said.

In Asia, the Asia ex-Japan iTRAXX investment-grade index
<0#ITAIGMPBMK=>, a key measure of risk aversion, widened by 5-6
bps to 330/360 bps. It is still way below the record high of
just under 650 bps hit in late October.

The high yield benchmark <0#ITAHYMPBMK=> moved out by 10-15
bps to 980/1080 bps.

Investors are also worried about corporate earnings as the
economic downturn affects growth even as companies grappled to
understand the impact of China's 4 trillion yuan ($586 million)
government spending package.

China announced the plan on Sunday in a bid to boost
domestic demand and analysts are still trying to figure out how
it will affect its banking system.

Even so, its 5-year CDS CHINA5UA=GFI spreads widened by 5
bps to 125 bps.

Weighing down on investors' minds were additional concerns
about the earnings outlook for a raft of companies from General
Motors GM.N to Goldman Sachs (GS.N: Quote, Profile, Research) in a harsh economic
environment, which also hurt Wall Street overnight.

And although Fitch also lowered the outlook on Malaysia's
sovereign rating to stable from positive, its 5-year CDS
MALAYS5UA=GFI was unchanged at 210/220 bps.

"There are no concerns about Malaysia's external position.
It has never had an external problem," said a Hong Kong based
fund manager explaining the reason for the steady rates.

FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago
Korea Dev Bank 410/~ 415/~
Hutchison 270/320 425/~
PCCW-HKT 400/650 750/~
China ~/160 ~/160
Indonesia 550/700 ~/625
Korea ~/320 ~/300
Malaysia ~/235 ~/215
Philippines ~/415 ~/400
~ no bid or ask spread
For CDS prices double click on GFICDS
ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid
spread

5-YEAR

------

DBS Bank 7.13 15-May-11 93.08 781

Malaysia 7.50 15-Jul-11 104.70 308

ICICI Bank 5.75 12-Jan-12 68.93 167

Petronas 7.00 22-May-12 96.74 557

Hutchison 6.50 13-Feb-13 85.77 824

Chartered Semi 6.25 4-Apr-13 79.26 100

Korea 4.25 1-Jun-13 91.38 396

United Overseas 4.50 2-Jul-13 72.12 101

PCCW-HKT 6.00 15-Jul-13 101.18 323

China 4.75 29-Oct-13 99.67 232

10-YEAR

-------

Hutchison 6.25 24-Jan-14 74.76 651

Korea 4.88 22-Sep-14 86.43 404

PCCW-HKT 5.25 20-Jul-15 74.05 704

Woori Bank 6.13 3-May-16 79.00 651

Penerbangan 5.63 15-Mar-16 102.93 139

Philippines 8.75 7-Oct-16 97.00 553

Indonesia 6.88 9-Mar-17 74.00 811

ICICI Bank 6.38 30-Apr-22 53.36 1001

Petronas 7.88 22-May-22 95.25 471
(Reporting by Umesh Desai; Editing by Jan Dahinten)