Bonds from Indonesia's Indosat Palapa and State Bank of India gained on their Asian debuts on Friday, spurred by the firmer tone in broader financial markets and strong demand from investors. The Asia ex-Japan iTraxx investment-grade index narrowed 4 basis points (bps) to 118/122 as gains in equities spurred buying of the region's debt, traders said.
The index has tightened around 8 bps so far this week, on track for its third weekly decline. Indosat Palapa, a unit of Indonesia's second-largest telephone operator PT Indosat, sold a $650 million 10-year bond on Thursday at 7.375 percent, within its guidance. The debt traded at 104.375/104.625 cents on the dollar on Friday versus the issue price of 99.478, traders said.
The deal attracted $10.5 billion in orders, a source close to the deal said. Investors from Asia took 40 percent of total sales, the US 33 percent and Europe 27 percent. Fund and asset managers accounted for 70 percent and the rest went to banks, insurers and pension funds.
Indosat offered a yield pickup of about 200 bps against comparable Indonesian sovereign dollar bonds, traders said. "Indosat offers diversification, it's a well-known name and there is not much issue from the Indonesian telecommunications sector, which will benefit from the country's strong growth," a trader in Hong Kong said.
State Bank of India sold a $1 billion five-year bond at 290 bps over US Treasuries, within its guidance. The bond traded at 278 bps above US Treasuries on Friday, traders said." The deal attracted more than $4.5 billion in orders, a source said. US investors bought 55 percent of the total sales, Asia 28 percent and Europe 17 percent. Fund managers accounted for 63 percent of total sales, banks 24 percent and insurers and other investors took the rest.
Recent issues in Asia outside of Japan have enjoyed a warm reception in the primary and secondary markets as funds continued to flow into the region, attracted by its strong growth prospects. The latest data from fund tracker EPFR showed that emerging market bond funds received $948 million in the week ending July 21, its eighth straight week of inflows.
Asian shares rose on Friday, with the MSCI index of stocks in Asia-Pacific outside Japan up 1.4 percent as of 0415 GMT as strong earnigns from leading US multinationals tempered worries about a global economic slowdown.
Traders expect bond offerings from India's state-run IDBI Bank after a road show scheduled next week and China Resources Power Holding, which will end its three-day meeting with investors later on Friday. In the sovereign space, the iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region, narrowed 5 bps to 115/117, traders said.
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