Gajah Tunggal Offers Dollar Debt Curbing China’s Bond Dominance

PT Gajah Tunggal is talking to investors about a sale of five-year dollar-denominated bonds, moderating Chinese dominance of regional issuance in the U.S. currency this week.

Gajah Tunggal, an Indonesian tire maker, is considering pricing the notes in the mid-8 percent area, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Cosco Pacific Ltd., a Hong Kong-listed container terminal operator, and Chinese developers Future Land Development Holdings Ltd. and Mingfa Group International Co. are also marketing notes, separate people said.

Chinese issuers have sold 58 percent of the $2.95 billion of bonds offered by issuers from the Asia-Pacific region this week, according to data compiled by Bloomberg. Yields on Asian notes fell 1.4 basis points to 4.08 percent yesterday, 14 basis points more than a record low of 3.94 percent reached at the end of November, according to JPMorgan Chase & Co. indexes.

“The pace of issuance will remain solid for the next two weeks, but then quieten down a bit heading into Chinese New Year,” said Mark Reade, a Hong Kong-based credit desk analyst at Credit Agricole SA. The city’s markets are closed for the holidays from Feb. 11 to Feb. 13 while markets in China are shut the five business days that week.

Secondary Trade

Cosco Pacific is marketing 10-year debt at a spread of about 285 basis points more than Treasuries, a person familiar with the matter said. The company, which is selling its notes through unit Cosco Pacific Finance (2013) Company Ltd., last issued dollar securities in September 2003 when it raised $300 million selling 5.875 percent notes due October, Bloomberg data show.

Future Land, a Shanghai-based developer active in the Yangtze River delta, plans to sell its five-year notes at about 10.25 percent, a person familiar with the matter said. Mingfa, a real-estate company that focuses on shopping malls, will pay about 13.25 percent for similar-maturity debt, another person with knowledge of that sale said.

Fosun International Ltd., based in Shanghai, was the only company in Asia to sell dollar notes yesterday, raising $400 million through seven-year 6.875 percent securities, according to data compiled by Bloomberg. The bonds, which priced at par, rose as high as 100.4 cents on the dollar as of 9:45 a.m. in Hong Kong, prices quoted by BNP Paribas SA show.

DBA Telecommunication (Asia) Holdings Ltd. remains in the market with a five-year bond it is offering to investors at a yield of about 12 percent, a person familiar with that matter said today.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 108 basis points as of 8:48 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark has ranged from 102.8 to 110.1 this year, according to data provider CMA.

The Markit iTraxx Australia index increased one basis point to 115.5 basis points as of 10:40 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge is set for its highest close since Jan. 16, CMA prices show.

The Markit iTraxx Japan index was also little changed at 141 basis points as of 9:20 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure has ranged from 137.9 basis points to 148.1 this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private 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.

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