China Turmoil Aligns With Greece to Stump Emerging BorrowersLyubov Pronina
Turbulence in global markets is pushing developing-nation debt sales into a freeze.
Brazil is delaying its international bond sale to the end of the quarter, a person familiar with the strategy said on Tuesday. Kazakhstan and the Iraqi region of Kurdistan have yet to tap markets after completing investor meetings last month, and the number of issuers forced to postpone offerings is poised to grow, according to Sergey Dergachev at Union Investment Privatfonds GmbH in Frankfurt.
With Gabon’s $500 million offering a month ago the most recent emerging-market sovereign issue, debt sales are drying up as investors endure the rout in Chinese equities and the deadlock over a bailout Greece that’s pushing the country closer to exiting the euro region. The turmoil has also raised questions about the timing of the Federal Reserve’s first interest-rate increase since 2006, a move that further threatens demand for assets from developing economies.
“There’s a confluence of risks worrying markets at the moment including the Greek impasse, the Fed and also worries about stock-market volatility in China,” Mark Baker, who helps oversee about $1.5 billion in emerging-market debt at Standard Life Investments Ltd. in London, said by e-mail on Wednesday. “Most issuers would like to wait for markets to stabilize, sentiment to improve and ultimately achieve better issue terms.”
Brazil will probably push back any international offering to the end of the third quarter as the Greek crisis adds instability to financial markets, said a government official familiar with the strategy who asked not to be named because talks aren’t public.
Authorities in Tanzania and Zambia also said they were watching market developments as they weigh prospects for raising capital.
“Issuing now makes a higher premium necessary as risk aversion is higher,” Michael Ganske, the head of emerging markets at Rogge Global Partners in London, said by e-mail. “In the current environment, to have a higher cash holding in order to have ammunition to pick up paper after a correction makes sense.”
Brazil’s $4.3 billion of January 2025 bond yielded 4.67 percent on Wednesday, compared with 4.44 percent at the end of May. The rate on Kazakhstan’s $1.5 billion of October 2024 notes climbed to a three-month high of 4.77 percent yesterday.
The central Asian nation completed investor meetings in London on June 29. It planned to raise more than $2 billion, Interfax cited Economy Minister Erbolat Dosayev as saying June 24. Gaukhar Akbasova, a spokeswoman for the Finance Ministry in Astana, declined to comment.
A delegation from the Kurdistan Regional Government, which oversees the semi-autonomous region of northern Iraq, met investors in London June 24-26. The KRG plans to issue bonds in the international markets under its own name, spokesman Safeen Dizayee said on the KRG website on Wednesday, without elaborating.
Tanzania’s central bank shelved plans to raise $600 million through a private placement, Joseph Masawe, head of economic research and policy at the Bank of Tanzania, said in a phone interview on Wednesday, citing the Greek debt crisis.
Zambia is also “keeping an eye on Greece” and other events in the global economy as the country considers selling debt, Finance Ministry spokesman Chileshe Kandeta said by phone on Wednesday, declining to comment on the timing of any Eurobond sale.
The average yield on emerging-market dollar debt climbed 30 basis points in June and was at 5.8 percent on Wednesday, within seven basis points of this year’s peak reached last month, according JPMorgan Chase & Co. indexes.
Issuers in Europe, the Middle East and Africa are under more scrutiny because of Greece, according to Dergachev, who helps oversee $13 billion of emerging-market debt as a senior money manager at Union Investment in Frankfurt.
Prime Minister Alexis Tsipras has until midnight Thursday to present his European colleagues with a plan that includes spending cuts, in exchange for a new European bailout.
“Clearly the delay in issuance is related to uncertainty in Greece and with it associated rates volatility,” he said.
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