Chalco Markets Dollar Debt as Falling Costs Lure Chinese IssuersRachel Evans
Aluminum Corporation of China Ltd., the Hong Kong-listed unit of the nation’s largest producer of the metal, is marketing a sale of U.S. dollar-denominated bonds as Chinese companies lock-in yields near a four-month low.
The state-owned company, known as Chalco, plans to sell perpetual notes that can be called after five years at about 6.625 percent, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Haitong Securities Co., China’s second-biggest brokerage, and China Properties Group Ltd. are also offering securities in the U.S. currency, as is Sri Lanka’s DFCC Bank, separate people said.
Chinese companies pay an average 5.96 percent to sell dollar bonds, after yields dropped to the lowest level since June 19 last week, according to JPMorgan Chase & Co. indexes. Borrowers from the world’s second-largest economy and Hong Kong have sold $5.5 billion of notes this month, just $110 million less than issuance in September, the busiest month since May, data compiled by Bloomberg show.
“We have about a five- or six-week window between now and the end of the year and a lot of people will try to get transactions done during this period,” said Kaushik Rudra, global head of credit research in Singapore at Standard Chartered Plc. “Investors do have cash to put to work and, given liquidity in the market, they will have a preference to do it through the primary market.”
Chalco plans to sell notes through Chalco Hong Kong Investment Co. as soon as today, the person with knowledge of the details said.
Haitong Securities is marketing five-year notes at about 287.5 basis points more than similar-maturity Treasuries, while China Properties is offering more of its 13.5 percent bonds due October 2018 at about 100.5 cents on the dollar, separate people said. DFCC Bank meanwhile plans to sell five-year securities at about 9.625 percent, another person said.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 133.5 basis points as of 8:50 a.m. in Singapore, Westpac prices show. The benchmark is on track for its highest close since Oct. 16, CMA data show.
The Markit iTraxx Japan index increased 1.5 basis points to 85.8 as of 9:03 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which closed at a four-week low yesterday, is poised to drop 11.5 basis points this month, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Australia index advanced 2 to 106 basis points as of 11:01 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge, which has ranged from 96.1 to 149.5 this year, is headed for its third consecutive increase, set to pare its decrease this month to 19.2 basis points, according to data provider 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.