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ASIA CREDIT CLOSE: Softer market as investors make room for Alibaba
November 20, 2014 / 8:23 AM / 3 years ago

ASIA CREDIT CLOSE: Softer market as investors make room for Alibaba

SINGAPORE, NOV 20 (IFR) - The secondary market in Asia is a touch softer today as more investors put in more sell orders to make room for Alibaba’s expected jumbo offering of USD8bn.

The investment grade sector was about 3bp wider, led by selling on Chinese paper. Oil and gas companies such as CNOOC, CNPC and Sinopec all saw widening of about 3bp.

New issues such as Beijing Infrastructure, Bank of China’s sub debt and Bank of East Asia’s Tier 2 were all among the names taking a hit.

Chinese tech names such as Tencent and Baidu both widened by about 5bp in the morning.

“The selling is not restricted to Chinese tech paper. Investors are just taking profit from recent issues and making room for Alibaba,” a Singapore-based trader said.

Investors expect Alibaba to sell its paper without having to pay the “Chinese premium” typically required by US investors. The initial price thoughts were about 10bp-20bp wide to US peers such as Google and Amazon and 10bp-15bp tight to Chinese comps such as Baidu and Tencent, said a Singapore-based buyside analyst.

Traders expect the market to recover after Alibaba prints its bonds. “It’s likely investors will check if they still have cash left (after buying Alibaba) and go back to new issues,” the same trader said.

The three deals which priced last night, namely, NTPC, BOC Group Investment and SK E&S, all held off around reoffer levels, which was a relatively weak performance compared to 5bp-15bp tightening on the break for recent new issues.

NTPC widened to 207bp/208bp over Treasuries before recovering to the reoffer spread of 205bp.

The high yield sector resumed a soft tone. Cash prices were 0.25 to 0.375 points lower in the morning and recovered slightly in the afternoon.

Issues from commodity-related companies continued to be hammered due to sluggish oil prices. Oil drilling equipment maker Honghua Group’s bonds fell to 87/88 today compared to a 90-handle last Friday.

Berau Coal’s 2015s rebounded a few points to bid-58, said a second Singapore-based trader.

The company reported better-than-expected third quarter results last night with cash and cash equivalents standing at USD297.4m as at end of September.

Lianting.tu@thomsonreuters.com

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