Bonds from Chinese developer and toll road operator Road King Infrastructure rose on their Asian debut on Wednesday, while Korea Finance Corp may price debt later in the day. Issuers are taking advantage of spreads hovering near their narrowest levels in a month. US economic data, including stronger retail sales, has boosted optimism that the recovery in Asia's top export market remains on track.
The broad Asia ex-Japan iTraxx investment-grade index held steady at 116/117 basis points (bps), tracking equities markets which were also steady as the dollar rose off the back off Bank of Japan currency intervention to weaken the yen. The investment-grade Markit iTraxx Europe index was little changed at 103.6 bps.
Road King's 5-year dollar bond was traded at 100.50 cents on the dollar, up from its issue price of par. The $350 million issue - $50 million more than planned - drew $2.2 billion in orders, a source close to the deal said. "This credit gives investors the rare combination of taking part in the upside potential of the China property market under tested management, plus the added comfort of steady cash flows from its toll road business," a Singapore-based banker said.
Traders said they saw follow-up buying on Road King from investors who were not able to buy into the initial sale. Road King priced the bond on Tuesday at 9.50 percent, the lower end of its final guidance of up to 9.625 percent. Investors from Asia took 84 percent of the initial sale. Asset and fund managers bought 59 percent of total sales, banks 38 percent and other investors took the rest. Korea Hydro & Nuclear Power (KHNP) 5-year bond snapped three days of gains as investors took profit in expectation of more bond supply in the pipeline from South Korea.
The bond was traded 4 bps wider against US Treasuries at 165 bps, traders said, but still in from its issue price of 185 bps last Thursday. Korea Finance plans to issue 6-year debt at around 195 bps over US Treasuries later in the day, a source close to the deal said. Korea Gas Corp and Korea Electric Power Co are also expected to issue dollar debt.
Two South Korean companies, Korea Development Bank and Korea Hydro & Nuclear Power Co, have issued dollar bonds this month, raising a combined $1.4 billion. The two deals drew nearly $9 billion in orders from investors, reflecting continued high demand for high-yielding Asian credits. The iTraxx SovX Asia Pacific index, which tracks the 5-year sovereign credit default swaps of 10 countries in the region, was flat at 112 bps, traders said.
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