HONG KONG, March 14 (IFR) - Asian credit spreads widened on Friday after Chinese economic indicators fell short of forecasts and investors waited for a Sunday referendum in Crimea.
The Asia ex-Japan IG iTraxx index was quoted 3bp wider from Thursday’s close at 134bp/137bp after data showed that China’s industrial output growth fell below expectations for the combined January/February period. Chinese retail sales also came in weaker than expected.
Spreads on high-grade Chinese debt also widened 3bp, while high-yield Chinese property bonds were hit harder with spreads widening 5bp-7bp. A new USD issue from Franshion Properties that priced mid-week got caught in the sell-off, falling to 99.50-99.75 on price terms after it priced at par.
Fears of a slowdown grew further after Premier Li Keqiang said on Thursday that China’s economy still faced severe challenges this year, dragging Asian benchmark stock indexes lower on Friday. The Nikkei closed 3.3% lower while the Hang Seng Index fell 1.1%.
Li further shook sentiment by saying some defaults of financial products would be hard to avoid. China’s 5-year CDS widened about 4bp to 96bp/99bp.
But Beijing Infrastructure’s USD500m 2019s, which priced yesterday, were last quoted at 209bp/206bp over Treasuries, tighter than its final pricing of 210bp. The operator of Beijing’s subway system added a novel clause to its keepwell agreement that pledged to provide more investor support.
Demand for stable credits also lifted Indonesia’s 2044s and the Philippines’ 2034s, which rose a quarter of a point in price terms on real money buying and short covering.
Investors underweight in Indonesia also bought the sovereign on speculation that state-owned Pertamina’s plans for a potential US dollar-denominated deal could come later than expected. Bankers said Pertamina floated an RFP last month.