ICBC Plans Bond Sale as Credit Risk Drops on China Data, Syria

Industrial & Commercial Bank of China (Asia) Ltd. is planning a dollar-denominated bond sale as borrowing costs drop to a two-week low and credit risk in the region eases.

The unit of world’s most profitable lender hired banks to arrange investor meetings in Singapore, Hong Kong and London from Sept. 4, according to a person familiar with the matter. Avic International Holding Corp., a unit of China’s biggest aerospace company, is considering a sale of U.S. currency notes, while Manila Electric Co., the Philippines’ biggest power retailer, may sell bonds after meeting fixed-income investors later this week, people familiar with those matters said, asking not to be identified because the details are private.

Bond risk declined after China said manufacturing rose to a 16-month high in August, tempering concern that followed two quarters of slowdown in the world’s No. 2 economy. U.S. President Barack Obama has delayed military strikes against Syria’s government by seeking congressional authorization.

“Sentiment’s better than last week because action on Syria is delayed,” said Ajay Manglunia, the head of fixed-income markets in Mumbai at Edelweiss Financial Services Ltd. However there are still growth concerns and other fears, even though China’s economy is stabilizing, he said.

China’s Purchasing Managers’ Index was at 51.0, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. A separate PMI gauge released today by HSBC Holdings Plc and Markit Economics rose to 50.1 last month from 47.7 in July, the biggest gain in three years and the first reading above 50 since April.

iTraxx Asia

Average yields on Asian dollar debt dropped 9 basis points to 5.61 percent on Aug. 30, the lowest level since Aug. 19, according to JPMorgan Chase & Co. indexes. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 162 basis points as of 8:59 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge rose 16.9 basis points last month, the most since June, according to data provider CMA.

A sale by ICBC or Avic International will kick start dollar offerings by Chinese issuers this month. Tencent Holdings Ltd., China’s biggest Internet company by market value, sold $300 million of 1.86 percent notes due September 2015 on Aug. 30.

The Markit iTraxx Australia index decreased 1 basis point to 124 as of 10:57 a.m. in Sydney, according to ANZ prices. The measure, which advanced 1.2 basis points last month, is poised for its lowest close since Aug. 26, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

Japan CDS

The Markit iTraxx Japan index declined 0.5 of a basis point to 94 basis points as of 9:36 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge is poised for its lowest close since Aug. 15, according to CMA.

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.