Indonesia benchmark bonds fare worst in Asian markets
Indonesia benchmark bonds fare worst in Asian markets
SINGAPORE (Dow Jones): Spreads on Asian benchmark bonds ended the week mostly wider as regional markets came under pressure from continued volatility on Wall Street and a host of local factors.
Spreads over comparable U.S. Treasurys widened by an average of about 20 basis points, with Indonesia's 7.75 percent 2006 issue getting hammered the hardest. Malaysian issues fared the best following an upbeat report on the country's first-quarter economic growth.
Malaysia's 8.75 percent bond dated 2009 outperformed other regional sovereigns, with the spread finishing the week seven basis points wider. State oil giant Petronas saw the spread on its 7.125 percent 2006 bond narrow by five basis points for the week.
Government data issued this week showed that the Malaysian economy expanded by a stronger-than-expected 11.7 percent in the first quarter, compared with a year earlier.
ABN Amro Bank boosted its estimate for Malaysian economic growth this year to 7.5 percent from 6.5 percent, and is bullish on the country's debt.
"With the strong growth story and Malaysia's sovereign rating being a prime candidate for a likely upgrade later this year, the significant widening of the spreads on the Malay '09 could provide opportunity for longer-term investors to begin their bargain hunting," ABN Amro analysts said in a research report.
The spread on Indonesia 2006 swelled by 65 basis points as investors exercised caution in the wake of almost-daily demonstrations against former President Suharto.
Hundreds of students clashed with police near Suharto's home Thursday, demanding that he be tried on allegations of corruption during his 32 years in power.
Civil unrest in the Philippines weighed on local markets. The spread on Philippines benchmark bond of 2008 widened by 38 basis points as the government showed no signs of gaining control over a Muslim separatist movement.
Investors apparently were unimpressed by the approval of a measure allowing greater supervision and increased foreign competition in the country's banking sector.
"While this is broadly positive for the sector, this move by itself is not sufficient to reverse currency market perceptions with respect to the Philippines," Raja Visweswaran, head of Asia securities research at Bank of America, said in a note to clients.
South Korea's bond prices slipped following news of liquidity troubles at one of Hyundai Group's affiliates.
The spread on the country's 8.75 percent 2003 issue widened by 38 basis points. Korea 2008 and Korea Development Bank 2004 fared better.
China's benchmark bond dated 2008 was helped by the U.S. House of Representatives' approval of a measure that would extend permanent normal trade relations to China.
The spread on the issue narrowed after the vote, but still finished the week 10 basis points wider.