Philippine, Indonesian bond spreads widen in region mart
Philippine, Indonesian bond spreads widen in region mart
HONG KONG (Dow Jones): Asian benchmark bonds were a mixed bag this week, with Philippine and Indonesian spreads widening on the back of negative domestic political developments while stronger credits stayed close to last week's level.
The potential acquittal of President Joseph Estrada sent Philippine bond prices through the floor, with many bondholders selling off their Philippine investments Wednesday.
The heavy selloff didn't continue though, as Philippine bonds stabilized at Wednesday's levels. Traders suggested that participants who are still invested in Philippine assets are likely used to the volatility by now. As a result, they are showing more patience with the bad news, an attitude that is helping to stabilize the market.
Investors and traders are now waiting for fresh news from Manila to decide which way to trade. But with many investment banks advising clients to stay away from the Philippine peso, Philippine stocks and bonds, the country's assets will likely remain weak in the near future.
For other investors, images of anti- and pro-Estrada protests in a climate that could become increasingly violent amid continued uncertainty whether Estrada will stay or go will likely keep them sidelined for some time.
The news from Indonesia isn't too good either.
For example, the potential delisting of Indonesia's Asia Pulp & Paper (PAP) U.S. American Depositary Receipts from the New York Stock Exchange is causing some stir for holders of APP's convertible bonds and Liquid Yield Option Notes, or LYONs.
APP's ADRs may lose their listing as they have traded below US$1.00 for 30 consecutive days.
APP has US$1.25 billion of outstanding LYONs, which are zero coupon convertible bonds, due in 2012 and US$500 million in convertible bonds due in 2003.
A delisting would allow bondholders to redeem their convertible bonds for cash within 60 days. "It is our view that APP would not be able to muster sufficient funds to meet these redemptions if and when they were to fall due," said BNP Paribas in a morning note.