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ASIA CREDIT CLOSE: Region ends the day where it started

Monday, 1 Oct 2012 | 5:12 AM ET

SINGAPORE, Oct. 1 (IFR) - Asian credit had a very uneventful session with virtually no trading at all and most indices ending the day unchanged. "The market never really opened," said a trader in Singapore. The Asia iTraxx ex-Japan IG index 18 did widen slightly in the morning as the few stock markets that were open dropped in the wake of negative economic headlines from China and Japan.

The index was quoted as wide as 138bp following the latest HSBC China September PMI reading of 47.9, just a touch better than the August reading of 47.5. The negative tone was reinforced by a Tankan report showing that manufacturers in Japan were pessimistic about business conditions in the quarter ending September.

However, the pessimistic tone soon subsided and the index retraced its losses ending the session unchanged in the 136bp area.

In spite of the move, traders in Singapore reported close-to-nil activity as a result of holidays in Australia, China, Hong Kong and South Korea. One trader in Singapore said he did not even see quotes on screens for most bonds and only a handful of brokers were showing quotes for the indices.

The quiet day provided traders a good chance to revisit their positions going into the final quarter of 2012. One prop trader said he was focusing mostly on technicals and was doing some research trying to figure out what the new issue pipeline looks like to get a sense of where to place his bets.

"Technicals are still pretty strong," he said, referring to still strong inflows into EM and high-yield bond funds and bond redemptions which have been providing funds with fresh cash every week to invest.

However, this trader sounded a cautious note. "Asia seems to be shrugging off the noise from Europe," he said. "The problem with that is the market does not move until it does, and then it is a big move," he added. Indeed, the uncertainties from the European crisis still loom large.

Spanish yields spiked last week again and riots are flaring up in Athens. Monetary union leaders are once again talking of key summits, three years into a debt crisis marked by numerous summits that provided temporary solutions which were quickly brushed away by the markets.

In the US, presidential elections are entering their final stretch and there seems to be little attention - at least from politicians - on the fiscal cliff, which could topple the world's largest economy into a recesion again.

However, in Asia, as long as there is money there will be bonds being printed. Aside from some of the transactions that are in the pipeline there is talk of more Thai banks issuing bonds -- though a sell-off in the bonds of Bangkok Bank and Siam Commercial Bank last week has not helped that proposition.

Indian corporates are still looking at the dollar market following a reduction of the tax over foreign-raised debt to 5% from 20% and especially after a recent fairly successful foray by NTPC. Indian Oil Corporation, in fact, announced today a roadshow via DBS Bank and Standard Chartered with eyes set on doing a Singapore dollar deal. More could come later in the week.

However, both traders and bankers will only have a clear sense of what can actually be done once trading resumes in earnest on Wednesday, when Hong Kong returns from holidays. Until then, it is all screen-jockeying.

Christopher.Langner@thomsonreuters.com

Keywords: MARKETS ASIA DEBT/