Southeast Asian debts go into tailspin

Southeast Asian debts go into tailspin

HONG KONG (Reuter): The last time Southeast Asia experienced a currency crisis, its debt markets went into a tailspin, caused by the retreat of U.S. investors.

That was then. This is now.

While some Asian issuers are sidelined, for others it is business as usual.

"You can't tar everything with the same brush," the vice president of a U.S. investment bank told Reuters.

Speculators have recently attacked the currencies of the Philippines, Indonesia and Malaysia and forced Thailand to float the baht, but those developments failed to wreak the havoc that in early 1995 followed the Mexican peso crisis.

After the January 1995 attack on Asian currencies, spreads on Asian debt paper soared to reflect what investors perceived as higher risk.

In one case, an issuer saw the spread on its 10-year paper rise from 270 basis points over comparable U.S. treasuries in November 1994 to 400 basis points in 1995 after the selloff.

Hong Kong blue chip Wharf (Holdings) Ltd's [0004.HK] 10-year bond widened from 140 basis points over U.S. Treasuries in November 1994 to 220 by March 1995.

But bankers said reaction has been far more muted this time. Yankees -- U.S. dollar bonds sold to American investors by non- U.S. issuers -- illustrate how foreign investors no longer assume that all Asian markets are identical.

"The (Asian) investment grade market broadly speaking is 10 to 15 basis points wider (for 10-year paper)," a syndicate manager with an Asian investment bank said.

"I would say the non-investment grade market is probably 15 to 35 basis points wider, (with) maybe a couple of examples that are 50 basis points wider," he said.

"Investors on the whole are not concerned," said the Hong Kong-based U.S. investment banker. "We've not seen mass selling."

Road King Infrastructure Ltd [1098.HK], a Hong Kong-owned toll road operator and China investor, is an example of how buoyant some issuers are.

Spreads on its US$140 million 10-year bond widened by just five basis points, despite its sub-investment grade rating. The company is rated BB by Standard and Poor's Corp.