EEMEA OPEN: Markets open on the front foot

January 31, 2012


Emerging markets credits have opened tighter this morning after yesterday’s correction. Credit prices have been supported by a decent overnight session in Asian equities. China’s shares, for example were up on news that the government plans to expand Shanghai’s capital markets.

The iTraxxSovX CEEMEA was in by 4bp at 08.20GMT, trading at 307.17-310.83. The EMBI+ was tighter by 7bp, trading at 363bp over.

If market conditions continue to be supportive then Sberbank could choose to issue its debut 144a transaction. The Russian bank completed a roadshow last Thursday and is thought to be waiting for the right window.

If it does go ahead with a deal today or later this week, Sberbank would be the first Russian borrower in the international markets this year.

Market players will be particularly interested in the level Sberbank prices its new deal. With Russia’s presidential election just over a month away, some sources query whether Sberbank would have to pay an additional political risk premium on top of a new issue premium.

Indications are that investor interest is high suggesting that Sberbank (A3/BBB-) may be able to get away with just a new issue premium. Sberbank may also benefit from the relative lack of supply from CEEMEA compared with Latin America. So far there have been 23 deals out of Latin America this year compared with 12 from CEEMEA. Barclays Capital, BNP Paribas, Citi and Troika Dialog are the appointed banks on the Sberbank mandate.

State Oil Company of Azerbaijan (Ba1/BB+/BBB-) continues its roadshow ahead of its potential debut bond. Deutsche Bank, Citi and RBS are joint lead managers.

In the Gulf, Dubai real estate developer Majid Al Futtaim (BBB/BBB) is in the market for a five-year sukuk. Profit rate guidance is 5.90%-5.95%.

Books for the benchmark-sized, Reg S transaction are expected to close shortly, and pricing to follow. The leads are Abu Dhabi Islamic Bank, Dubai Islamic Bank, HSBC, Standard Chartered.

Although there is nothing else official, bankers and their clients will be watching the markets closely to take advantage of any windows. Romania, for example, could seek to do its delayed debut 144a US dollar transaction soon.

The deal was held back last quarter because of poor market conditions and the brewing troubles in Hungary. But with the situation in Hungary calmer and the market rally likely to continue thanks to ultra-loose monetary policy from the ECB and US Federal Reserve, Romania could soon tap the markets, though a deal is unlikely this week.