August 29, 2017 / 8:44 AM / 3 months ago

ASIA CREDIT CLOSE: Chinese HY gains despite North Korea missile

SINGAPORE, Aug 29 (IFR) - Chinese high-yield credits gained on the back of stronger bids for property names, shrugging off growing geopolitical tensions following another missile launch by North Korea this morning.

The missile flew over northern Japan, prompting Asian equities to tumble. Japanese stocks fell as much as 0.9% at one point before closing 0.5% lower.

Korean stocks dropped 1.6%, pulling down by 0.6% the MSCI’s broadest index of Asia Pacific shares ex-Japan.

The exception was Chinese stocks which were a touch higher by 0.09%.

“The high-yield market is strong with credits up a quarter to three-quarters of a point, driven by a rally in Chinese credits,” said one Hong Kong-based trader.

“The gains are strongest in Chinese properties after some property companies announced improved earnings.”

Evergrande’s bonds started to rise yesterday across the curve after the company pledged to slash debt by 2020 and to focus on profits rather than scale.

Its 2020s were seen at bids of 101.15, marginally up from yesterday’s 101.00, but the notes had rallied since August 11 when they were at 99.875. The 2022s were quoted at 103.75, up from yesterday’s 102.9.

Kaisa’s bonds were also performing well with the 2024s firmer at 103.32 from yesterday’s 102.9.

But not all Chinese bonds were doing well. Investment-grade China Great Wall’s bonds were 1bp-2bp wider with the 2020s at 136bp/133bp after pricing at 135bp over US Treasuries.

The 2022s were at 144.5bp./141.5bp, inside reoffer spread of 145bp while the 2027s were at 184bp/181bp, wider than the reoffer spread of 180bp.

Overall, high-grade credits were 1bp-2bp wider when the missile news emerged, but they gapped wider by 3bp-5bp in the afternoon amid rallying US Treasuries.

Hyundai Capital 2022s were steady at 134bp/129.5bp against reoffer at 135bp while the 2027s were at around reoffer spread of 155bp.

Asian credit spreads pulled out by around 2bp with the iTraxx Asia IG index at mid-spread of 79bp while the iTraxx Japan was flat at 44bp.

Reporting by Kit Yin Boey; Editing by Vincent Baby

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