Cofco Prepares Bond Sale as Chinese Economy Shows Recovery SignsRachel Evans and Tanya Angerer
Cofco Corp., China’s largest grain trader, is meeting investors in London today about a possible U.S. dollar-denominated bond sale amid signs of an upswing in the world’s second-largest economy.
The company plans to issue notes through its Cofco Hong Kong Ltd. unit, a person familiar with the matter said last week, asking not to be identified because the details are private. Investment-grade bonds sold by Chinese issuers in the U.S. currency returned 1.53 percent in October, the most since July 2012, according to Bank of America Merrill Lynch indexes. Seoul-based Hana Bank is marketing a three-year note at about 135 basis points more than Treasuries, according to a person familiar with the matter.
China’s non-manufacturing Purchasing Managers’ Index rose to the highest level this year in October, a government report showed yesterday, adding to signs that its 2013 growth target will be achieved. At the same time, investors are returning to fixed-income products amid growing consensus that the U.S. Federal Reserve will delay cuts to record stimulus until next year. Tapering is unlikely before next summer, Goldman Sachs Group Inc.’s Chief Operating Officer Gary Cohn said in Singapore’s Business Times newspaper today.
“Tapering has really been the cause of all the market distraction,” said Steven Nicholls, London-based head of fixed-income product specialists at Aberdeen Asset Management Plc. “China is certainly a source of optimism and actually the production indices have again increased.”
China’s Communist Party leaders meet in Beijing from Nov. 9 for a policy-making summit, as signs of sustained strength may give President Xi Jinping and Premier Li Keqiang more confidence in tackling reforms. At the same time, excessive credit growth, rising local-government debt and weaker export momentum may cap a stronger recovery from a two-quarter slowdown.
Dalian Wanda Commercial Properties Co. is also meeting investors today and may offer a dollar-denominated bond, people familiar with the matter said on Oct. 31. It would be the first sale of notes in the currency for China’s largest commercial land developer, which is part of Dalian Wanda Group Corp. founded by the nation’s richest man Wang Jianlin, data compiled by Bloomberg show.
“There will be lots of deals coming in the next few weeks now that expectations for tapering have been postponed,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. “Financial institutions may dominate issuance.”
The cost of insuring corporate and sovereign bonds in Asia and Australia against non-payment rose today, according to traders of credit default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1 basis point to 134 basis points as of 8:30 a.m. in Hong Kong, Standard Chartered Plc prices show. The gauge has ranged between 99.5 and 177.8 this year, 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 rose by 0.5 basis points to 104.5 basis points as of 11:04 a.m. in Sydney, Westpac Banking Corp. prices show. The benchmark dropped about 20 basis points last month, according to data provider CMA.
Markets in Japan are shut for a public holiday.
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.