Tuesday, 13 January 2009

Emerging Market Debt Sales: So Far, Investor Demand Remains Strong, Yields Accessible

The recent bout of emerging market bond sales by sovereign issuers and the South Korean Export-Import bank (Kexim) signaled that the borrowers took advantage of the window of opportunity of the first week of 2009. Good news: investors have become selective and are discriminating the good from the bad. Yields have been moderately higher, yet accessible and affordable for the borrowers (Check the table below.)

According to ING Bank and Barclays Capital, we are likely to see new issues from Indonesia, Vietnam and possibly South Korea. In Latin America, Peru and Chile are lining up for sales when the markets look more favourable. Given that, more than $8 billion of sovereign bonds may be offered by Latin companies this year (my estimate.) Barclays analysts write that ''naturally, high-beta credits, such as Argentina, Venezuela, Ukraine and Pakistan, are unlikely to face welcoming markets in the near term.´´ Those countries are likely to replace bond financing with spare fiscal resources, savings or multilateral loans, the shop says.

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