Hutchison, Tata Motors Debt Among Biggest Asia Brexit Losers

  • Possible ramifications ‘catastrophic’ for debt, Singhal writes
  • Motherson Sumi Systems among bonds to fall on Europe exposure

The damage to Asian bonds from Britain’s vote to leave the European Union has been largely limited to issuers with higher exposure to the U.K. and Europe.

Prices fell for debt of Tata Motors Ltd., which makes Range Rover cars, and Indian automobile component supplier Motherson Sumi Systems Ltd. Debentures sold by companies founded by Hong Kong’s richest man Li Ka-shing were also among the biggest losers as investors consider the political risks of Brexit, according to Nomura Holdings Inc.

“In the medium term, possible ramifications of this risk include referendums in other European economies on their European Union membership and a potential breakup of the euro,” Nomura analyst Gaurav Singhal wrote in the report on Monday. “We believe such an event would be catastrophic for credit markets and damaging for real economies globally.”

The yield premium on Hutchison Whampoa Ltd.’s $1 billion 6 percent perpetual notes over U.S. Treasuries widened 17 basis points on Friday and Monday, the biggest two-day increase in a month. Shares of CK Hutchison Holdings Ltd., created when Li merged his Hutchison and Cheung Kong units last year, have also plunged 11 percent to be one of the biggest losers among companies on Hong Kong’s benchmark stock index. Li operates Superdrug and Savers stores, ports and the Three phone service.

Tata Motors Ltd.’s 400 million pound 3.875 percent 2023 notes fell 4 cents on the dollar to 92.2 cents since Friday, according to Bloomberg-compiled prices. That’s the sharpest two-day drop for the bonds. Its Jaguar Land Rover unit derives 22 percent of its sales from the U.K. Motherson Sumi’s $300 million 4.875 percent 2021 notes declined 1.4 cents in the two-day period to 98.9 cents. Nearly 60 percent of its revenues come from Europe, the Nomura report said.

Asian high-yield corporate bonds overall showed stability with yields rising just one basis point on Friday and Monday, according to JPMorgan Chase & Co.’s indexes. The yield spread for investment-grade notes issued by Asian companies over Treasuries widened 7 basis points, the biggest two-day jump in four months, to 233. That’s still down from this year’s high of 259 on Feb. 11, when investors were worried over China’s yuan.

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