Merchants Land Markets Debut Bonds as China Returns Beat Asia

China Merchants Land Ltd., indirectly controlled by China Merchants Group Ltd., is marketing a debut sale of bonds as U.S. dollar-denominated notes sold by Chinese companies outperform Asian debt.

The developer, which last month changed its name from Tonic Industries Holdings Ltd., is considering pricing the five-year securities in the high 200 basis-point area more than Treasuries, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Dollar bonds sold by Chinese issuers have returned 1.07 percent this year versus a 1.41 percent loss for notes from issuers across Asia, JPMorgan Chase & Co. indexes show.

Investors channeled $1.24 billion into bond funds in the week to Nov. 27, posting their first back-to-back inflows since late May, according to EPFR Global China has since reported better-than-expected manufacturing data, helping the nation toward a 7.5 percent annual growth target set by the government. Dollar bonds from issuers in the world’s second-largest economy gained 25 percent last year, their best performance since 2009, JPMorgan indexes show.

“Demand’s still there so issuers want to come to the market,” said Louisa Lam, a credit analyst at HSBC Holdings Plc. “Sentiment over China is more positive compared with the whole of Asia, especially after they gave better manufacturing figures this week.”

Bond Pipeline

Moody’s Investors Service assigned China Merchants Land’s bonds a provisional A2 rating, its sixth-highest investment grade, in line with Industrial & Commercial Bank of China (Asia) Ltd., which is providing a standby letter of credit for the offering, the ratings company said in a note last week.

Agricultural Bank of China Ltd. raised $500 million via its Hong Kong branch yesterday, selling notes that mature in December 2018 at 150 basis points more than U.S. government debt, data compiled by Bloomberg show. A basis point is 0.01 percentage point.

Indian Railway Finance Corp., the funding unit of the nation’s state-owned rail network, is also considering raising funds via dollar bonds, asking banks to submit proposals by Dec. 9 to help arrange a sale of as much as $600 million of notes, according to a person familiar with the matter.

Korea National Oil Corp. hired Barclays Plc, Citigroup Inc., Deutsche Bank AG, HSBC, Korea Development Bank and UBS AG to arrange a series of fixed-income investor meetings in Asia, Europe and the U.S., starting next week, another person familiar with that matter said.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment rose today, according to traders of credit-default swaps.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 2 basis points to 135 basis points as of 8:54 a.m. in Singapore, Standard Chartered Plc. prices show. The gauge, which is rising for a third consecutive day, is on track to increase 4 basis points this week, according to data provider CMA.

The Markit iTraxx Australia index rose 2 basis points to 103 as of 11:45 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is advancing for a fifth consecutive day, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index increased 1 basis point to 79.75 basis points as of 9:59 a.m. in Tokyo, according to Citigroup prices. The gauge is poised for its highest close in a week, CMA data show.

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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