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ASIA CREDIT CLOSE: New issues drive slim trading

SINGAPORE, Oct 8 (IFR) - Asian credit was fairly quiet todayas holidays in Japan and the United States drained liquidityfrom the market. The few trades that crossed the screens wererelated to new issues being announced. The outstanding 2021bonds of Citic Pacific were closing the session bid at 100.50,down 50ct in price terms, after the Hong Kong conglomerateannounced a new 10-year bond. The drop came even as the new RegS transaction by the company was heard having garnered more thanUSD3bn in demand. China South City's 2016 bonds were also downby about 35ct bid at 97.00 in the secondary as the Chinesedeveloper marketed a new 5-year bond with a yield of 14.25%area.

Apart from a few trades on the outstanding bonds of issuersmarketing new transactions, there was little to write homeabout. Traders marked up their spreadsheets in investment-gradeputting out the Asia ex-Japan iTraxx IG Index Series 18 at133bp, pricing in a 2bp tightening to account for a rally duringthe US trading session on Friday due to better than expectednonfarm payrolls. The index move was emulated on most of theinvestment-grade benchmarks but traders did not report muchtrading per se on the bonds. "It has been really quiet,"summarized a credit analyst in Singapore.

Not even the return of the Chinese market after a weeklongholiday accompanied by a positive economic number in the countrywas enough to prompt investors to action. The HSBC Services PMIfor September came out today at 54.3, higher than the lastreading at 52. Credit markets shrugged the news, though.

The positive data was not enough to turn equity investorsbullish either and the Hang Seng Index finished the day almost0.9% down as investors reacted to news that IPO approvals on themainland would pick-up again and earnings estimates continued tobe cut. News that the World Bank had cut its growth estimatesfor the region also hit stock markets, though credit markets didnot react to that headline.

Indeed, brokers have been saying that they expect most ofthe trading this week to be driven by the new issues. The onlybonds that have been seeing liquidity are those printed in thepast two weeks and most movements of older bonds is generallyprompted by fresh deals from the same issuers - as was the casetoday. Hence, secondary desks are closely monitoring thepipeline and the deal announcements to figure out how to trade.

Christopher.Langner@thomsonreuters.com

Keywords: MARKETS ASIA DEBT/