Cheung Kong Holdings Ltd. and KWG Property Holding Ltd. are marketing dollar-denominated bonds with no maturity date in the busiest month for U.S. currency offerings from Hong Kong and Chinese developers on record.
Cheung Kong, the conglomerate controlled by Asia’s richest man Li Ka-shing, plans to sell perpetual notes at 5.375 percent to 5.5 percent, according to a person familiar with the matter who asked not to be identified because the terms aren’t set. KWG Property is marketing notes, which can be brought back by the company after 5 1/2 years, to yield 10.25 percent, another person said yesterday.
Real-estate companies from Hong Kong and China have sold $5 billion of securities in the U.S. currency this month after home prices in the world’s second-largest economy rose for the seventh-straight month in December. Emerging markets and high-yield bond funds both attracted more than $1.6 billion of inflows in the week to Jan. 9, according to EPFR Global.
“Prices and volumes have been going up and so we think in terms of the cash flows and other credit metrics we monitor, they’ll continue to improve,” Stephen Chang, head of Asian fixed-income at JF Asset Management Ltd., part of JPMorgan Asset Management Asia Inc., said yesterday in reference to the property sector. “There are more funds that are targeted to emerging-market high-yield or Asian high-yield and we still see very strong flows into that.”
Cheung Kong and KWG are selling perpetual bonds after Agile Property Holdings Ltd. raised $700 million from a sale of undated notes priced to yield 8.25 percent on Jan. 11, data compiled by Bloomberg show. Agile’s bonds were yielding 8.565 percent as of 4:18 p.m. in Hong Kong, according to BNP Paribas SA prices quoted on Bloomberg.
The cost of insuring sovereign and corporate bonds from non-payment in Asia outside Japan rose 2.9 basis points yesterday, the biggest one-day increase since Dec. 4, according to credit-default swap traders.
“The market is soft at present but investors are increasingly confident in the China macroeconomic story and on the back of a resolute performance by the property names in 2012,” said Owen Gallimore, head credit analyst at Australia & New Zealand Banking Group Ltd. in Singapore.
The coupon on Cheung Kong’s bonds will be fixed for life even if the notes, which can be bought back by the company after five years, aren’t called, the person familiar said.
Yuexiu Property Co. plans to sell five-year notes at 255 basis points to 260 basis points more than Treasuries and 10-year debt at a spread of 275 basis points to 280 basis points, a person familiar with the matter said today. Guangzhou R&F Properties Co. is offering seven-year bonds at about 8.75 percent through its unit Caifu Holdings Ltd., a person with knowledge of that sale said.
China should “gradually” establish a property taxation system which covers trading and ownership, Premier Wen Jiabao said during a visit to the finance ministry yesterday. Hong Kong meanwhile will have to curb demand for housing if people’s needs aren’t met, Chief Executive Leung Chun-ying told the city’s Legislative Council in his first policy address today.
Junk-rated borrowers, including developers, will probably boost issuance to as much as 25 percent of total dollar bond offerings in Asia outside of Japan this year, from 15 percent in 2012, Gallimore said.
PT Indika Energy Tbk, which is rated B+ by Fitch Ratings, is offering 10-year notes at a yield about 7 percent, another person with knowledge of the matter said. JG Summit Holdings Inc. is marketing 10-year notes at 4.375 percent to 4.5 percent, a separate person said.
Hengdeli Holdings Ltd. plans to meet investors in Asia from tomorrow about a possible dollar bond sale, while Hana Bank has scheduled meetings for next week to discuss a potential debt offering. PT Gajah Tunggal also hired banks to arrange a series of bond investor meetings from tomorrow and may consider a U.S. dollar bond thereafter, another person said.
The Markit iTraxx Asia index of credit-default swaps on 40 investment-grade borrowers outside Japan rose 2 basis points to 110 basis points as of 2:46 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.
The Markit iTraxx Japan index rose 3.5 basis points to 145.5 as of 3:22 p.m. in Tokyo, Citigroup Inc. prices show. The benchmark has ranged from 138.3 basis points to 148.1 basis points this year, according to data provider CMA.
The Markit iTraxx Australia index was little changed at 115 basis points as of 11:13 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge has declined 12.5 since Dec. 31, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.