Asian debt spreads widened on Monday on investor concern about global economic prospects, while bonds from Hong Kong developers were steady even after the government adopted more measures to cool the real estate market. The Asia ex-Japan iTraxx investment-grade index jumped 3 basis points (bps) to 125, traders said, although still tighter than this year's high of 172 bps posted in late May, when investors sold risky assets on fears about a sovereign debt crisis in Europe.
The investment-grade Markit iTraxx Europe index widened to 113.94 bps from 112.5 bps on late Friday in London. Reflecting investor aversion to risk, Asian shares also fell. The MSCI share index for Asia excluding Japan shed almost 1 percent as of 0350 GMT. "Weak growth prospects globally, choppy and soft equities, that's damping sentiment on credits," said Brayan Lai, credit analyst at Credit Agricole CIB.
Japan's economy slowed sharply in the second quarter and is seen weakening further, adding to signs that the global economic recovery is losing steam after recent downbeat data from the United States and slower growth in China. Bonds from Hong Kong developers were holding up well after the government on Friday announced new measures to curb fast rising property prices, traders said. But their shares were trading lower this morning.
New World Development Co Ltd's bond due in 2020 was little changed at 355/360 bps over US Treasuries, while rival Henderson Land Development Co Ltd's debt due in 2019 was also flat, traders said.
"I don't really see it as affecting their credits in a major way, but possibly more so on the equity front," Lai said. "Most of the Hong Kong credits are quite solid investment grade names, unless you are talking about three to four years of extraordinary measures from the government, then I don't really see it as a major effect for the moment."
Bonds from Philippine conglomerate Alliance Global Group Inc, sold last week, were also steady versus their Friday closing levels at 101.375/101.635 cents on the dollar, Manila-based traders said.
But they were slightly lower from a high of 102.25 posted in early session on Friday, when they debuted in Asia. AGI's $500 million deal attracted more than $3.7 billion in orders, a source said. AGI is engaged in food and property and owns Megaworld Corp, one of the top local developers.
On the sovereign front, South Korea's five-year credit default swaps (CDS) widened 2 bps to 112, tracking the broader market, traders said, as investors set aside a report that government has no plans to further issue sovereign debt in foreign currencies.
The iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region including Korea, widened 2 bps, traders said.
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