Friday, 20 March 2009

EMTA Says Emerging Market Bond Funds Had Outflows of $117 Million in Week Ended March 18

For the week ended March 18, emerging markets debt funds saw net investor outflows of $117 million, equivalent to 0.30 percent of assets under management (AUM) -- less than the $308 million net redemptions seen in the prior week, according to EMTA. Outflows were seen across all fund types. In total, market effects (namely an appreciation of emerging market currencies against the dollar) played a positive role by offsetting the outflows: the positive contribution of $195 million related to foreign exchange-related effects helped debt fund assets to grow by $719 million from the previous week, despite the negative investor outflow, according to ING Bank NV.

Israel Bond Pricing Sheet (From Last Night)

ISSUER: State of Israel
SIZE: $1.5 Billion
MATURITY: March 2019
YIELD: 5.190%
COUPON: 5.125%
TREASURY SPOT: UST 2.75% 02/15/19 Priced at 101-19+ to Yield 2.565%
SPREAD: Equivalent Treasury Yield +262.5 Basis Point Spread

IncaKolaNews Views on Recent Fed Measures and Impact on Carry Trade

El Incisivo Otto

Click on this link to read Mr. Otto Rock's posting on the effects of the recent Federal Reserve measures on inflows of dollars and the trend of Latin America currencies. Agree 100 percent on Brazil. Venezuela ... uhhmm, the cash situation they face seems more serious than we imagine. It's the proto-republic of mystery ...

I insist, put IKN on your radar.

S&P Downgrades Six Brazilian Homebuilders on Financial, Demand Concerns; Cut Follows Fitch's January Downgrade

Standard and Poor's cut the credit ratings of Brazil's No. 1 real estate company Cyrela Brazil Realty SA, its closest rival Gafisa SA and four other homebuilders on concern a prolonged decline in demand and financing sources as well as tougher refinancing conditions will lead to financial difficulties. In a report, analyst Reginaldo Takara said the rating actions ''reflect the difficulties being faced by the homebuilders to finance their working capital, the risks of a prolonged contracted sales slowdown, more uncertainties about the sale of the existing portfolio of projects and the trends for the industry in the medium term.´´

Cyrela, majority owned by billionaire Elie Horn, was cut one level to BB- from BB (S&P kept the rating on a stable outlook.) Gafisa, Brazil’s second-largest real estate company and one that has focused very much on high-end and commercial real estate megaprojects, was lowered to brA- from brA (there are ratings in the local scale) with a negative outlook. Gafisa, which has not issued notes abroad as far as I am concerned, has sold notes in the domestic markets. The move means that the situation for Gafisa might relatively be more challenging than for Cyrela. S&P also downgraded Rossi Residencial, MRV Engenharia e Participacoes, Tecnisa and KlabinSegall.

S&P is the second rating agency that downgrades the sector this year -- the first was Fitch, which on Jan. 21-22 reduced the ratings of six companies in the sector (
click here for link on the report we did at the time.) Check this posting too, we wrote it a few days after the Fitch downgrade -- in it, LatinFinance, the magazine and specialised newsletter, warns of the dangers the sector braces for amid the weakest Brazilian economy in decades.

The fourth quarter was the end of the world for some of these companies; Cyrela saw the value of projects tumble by 66 percent.
Leverage, therefore, will likely remain a factor of pressure for the industry in 2009 -- as prospect sales value falls, the weight of debt on cash usage turns bigger. Total debt excluding Housing Financial System (SFH) loans compared to the industry's Ebitda (a measure of debt-servicing capacity) was 3 times debt in September, compared with 2 in June 2008. It probably rose during the fourth quarter to somewhere close to 3.5 times. The increased use of cash to cover ''construction, advertising and operational costs´´ will affect the indicator even more. Liquidity position measured by cash to short term debt dropped to an average of 2 by December 2008, versus 3.4 in June.