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Emerging Market Credit Daily Roundup

Emerging Market Credit Daily Roundup

Saudi Arabia buys up US Treasuries ahead of Trump visit – BADEA provides US$20mn loans to Côte d'Ivoire and Niger – Sibanye Gold taps shareholders for a US$1bn rights issue at 60% discount – Ghana looks to cut rates – Trump pushes ahead with NAFTA renegotiation – Brazil assets and bonds drop amid political turmoil – Indonesia gets investment grade boost from S&P – Uralkali sets coupon at 8.95%-9.20% for RUB10-15bn note

Middle East & Turkey

Saudi Arabia raised its holdings of U.S. Treasury bonds by billions of dollars ahead of President Donald Trump’s visit to the Middle East and planned economic talks at which Riyadh aims to obtain investment and technology from the United States. Saudi holdings of U.S. government bonds climbed to a one-year high of US$114.4bn in March from a low of US$89.4bn last September, the most recent data from the U.S. Treasury Department shows.

The Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of IDB Group, and JSC “Asia Alliance Bank” have entered into a joint strategic collaboration to finance SMEs in Uzbekistan. The signing ceremony between Khaled Al-Aboodi, CEO of ICD and Khakimov Umid, First Deputy Chairman of JSC “Asia Alliance Bank”, for the amount of US$12mn took place at in Jeddah, according to CPI Financial.

IMF projects Jordan’s real GDP to grow by 2.3% in 2017. According to Martin Cerisola, leader of the IMF team visiting Amman to start discussions on Jordan’s economic programme real GDP growth was 2% in 2016, 12-month inflation accelerated to 4.3% in March 2017 before receding to 3.5% in April, and the current account deficit rose to 9.3% of GDP in 2016. 7.

The Arab Bank for Economic Development in Africa (BADEA), signed loan agreements with the Republics of Côte d’Ivoire and Niger. Côte d'Ivoire received a Loan of US$20mn to help finance the rehabilitation of ""Cocody Bay"" project in the city of Abidjan. The Republic of Niger will receive US$20mn to contribute to the financing of Drinking Water Supply for Semi-Urban Centres project. Both loans are set to be repaid in 30 years, including a 10-year grace period, and will have an interest rate of 1% per annum.

Africa

Nigeria’s Central Bank will keep monetary policy tight as dollar shortages persist, Deputy Governor Joseph Nnanna told Bloomberg. Inflation slowed for a third month in April, but at 17.2% remains almost double the upper limit of the bank’s 65 to 9% target. “We are battling with liquidity as it were, so tight monetary policy will stay for now,” Nnanna said.

Malawi's economic growth is forecast at 7% this year from 5.1% in 2016, helped by a recovery in the agriculture sector, Finance Minister Goodall Gondwe said on Thursday. Gondwe told Reuters that regular rains have led to an improvement in maize output, following a drop in production during last year’s drought.

South Africa's Sibanye Gold will tap shareholders for funds at a discount of 60% in a US$1bn rights issue, the mining company announced on Thursday. Sibanye will use the rights issue to repay a portion of its US$2.65bn loan facility for the acquisition of U.S. platinum producer Stillwater. The company will offer new shares at 11.28 rand each on May 17, it said in a statement.

The IMF raised its expectation for economic growth in South Africa, saying that the end of the worst drought in more than a century will lift agricultural production, as will the positive dynamic in commodity prices. The Washington-based lender predicts growth of 1% for the African country in 2017, up from the 0.8% forecast in April. The consumer inflation rate is expected to fall below the 6% upper limit of the Central Bank’s target rate in the second half of this year.

Ghana’s new Central Bank governor Ernest Addison is likely to cut interest rates to an almost two-year low in his debut decision. Addison maybe choose to be more aggressive than his predecessors as the new government seeks to boost economic growth, which has slowed to record levels in 2016.

Americas

Donald Trump has launched the process of the North American Free Trade Agreement renegotiation with Canada and Mexico, as his administration notified Congress on Thursday that it planned to begin formal talks as soon as August. Robert Lighthizer, the new US trade representative, gave Congress the required 90-day notification of new trade talks. During his campaign Trump vowed to withdraw from the Treat, but, under increased pressure, has recently softened his stance. 

Mexico's Central Bank raised its benchmark interest rate by 25bp to 6.75%, hiking for the third time this year to prevent inflation from getting out of control. The Bank of Mexico (Banxico) has now raised its rate by 375bp since the U.S. Federal Reserve began normalizing its policy stance in December 2015, by 100 points this year and by 150 points since the election of Donald Trump as U.S. president.

Peru's current account deficit narrowed to 1.9% of GDP in the first quarter, compared with 5.5% in the same period last year, the Central Bank said on Thursday. The Central Bank said in March it is planning for a current account deficit of 2.6% of GDP this year.

The Central Bank of Argentina announced a new set of norms that will make it easier for companies to purchase dollars, in an effort to curb excessive regulation in the currency exchange market, La Nacion reported.

The Brazilian real led a fragile rebound in emerging market currencies on Friday after the asset class was hit hard by political turmoil in the US and Brazil earlier this week. News that President Michel Temer had been caught up in a bribery scandal sent shares, bond prices and the currency in a downward spiral on Thursday.

Asia

S&P Global Ratings raised Indonesia’s credit rating to investment grade, paving the way for more fund inflows into Southeast Asia’s largest economy. Stocks surged to a record high and the rupiah advanced. The sovereign rating was lifted to BBB- from BB+ with a stable outlook, S&P said on Friday, citing improvements in the budget.

Indonesia's Central Bank left its benchmark 7-day reverse repurchase rate (RR) at 4.75%, as expected, and confirmed that it expects the country's economy to grow between 5.0 and 5.4% this year, supported by stronger exports and investments along with "tenacious consumption.

State Bank of India, the country’s largest lender by assets, more than doubled its fourth-quarter profits, on the back of a fall in bad-loan provisions. Net income climbed to INR28.1bn (US$430mn), or 3.55 rupees a share, in the three months ended March 31 from INR12.6bn a year earlier, the Mumbai-based lender said in an exchange filing on Friday, according to Bloomberg.

Paytm, the Indian digital payments and ecommerce group, has raised US$1.4bn in capital from the Japanese telecoms group and technology investor Softbank, marking the lender’s single largest investment in India to date. The Japanese bank is working to revive its India strategy after its biggest previous venture, the ecommerce group Snapdeal, ran into trouble.

Five Indian banks have lined up to sell up to US$3bn in overseas bonds in the next two months as they look to take advantage of the favourable interest rates. State Bank of India, ICICI Bank, Axis Banks, Bank of Baroda and Canara Banks are the lenders that already announced they will tap the international markets in the next few weeks. The fund raising, if it materialises, will be the highest by Indian financial institutions in four years.

Chinese company, Amber Treasure Ventures issued a US$500mn international bond maturing in 2020 with a 3% coupon. Notes were sold at a price of 100%, with Bank of China, CITIC Securities International and China Huarong Asset Management managing the deal.

Russia, CIS & Europe

The Wannacry cyberattack compromised several Russian banks' systems in some isolated cases, the Russian Central Bank admitted on Friday, having previously denied the attack had any impact on the country’s banking system. According to the CBR’s statement, the consequences of the attack had been dealt with quickly, but it provided no further details. Russia's largest bank Sberbank said late last week it had been attacked by the ransomware bug, which it claimed did not get into the bank’s systems.

Russian fertilizer producer Uralkali has set a coupon guidance for a RUB10–15bn local currency 3-year bond issue at 8.95–9.20% annually, the company said in a statement on Friday. The guidance corresponds to a 9.15–9.41% annual yield to maturity. The technical placement of the bonds is preliminarily scheduled for May 31, with VTB Capital, Sberbank CIB and Rosbank acting as organizers.

Russia’s Otkritie Holding has approved terms of its upcoming RUB35bn 15-year local currency exchange bond, which will be part of the company’s 50-year issuance program worth up to RUB250bn, Interfax reported Friday.

 

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