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ASIA CREDIT CLOSE: Asia real money shrugs off negative tone

TOKYO, Oct. 11 (IFR) - Asian credit was ending the day on a positive note in spite of overnight negative headlines from Europe, which sent equity markets into a tailspin. Stock indices in Asia dropped with the Hang Seng ending down 0.8% and the Nikkei 0.58% lower.

Yet, Asian credit spreads were steady - the Asia iTraxx IG 18 ended the day unchanged at 131bp, as did most the investment-grade CDS.

Demand from local investors were holding up dollar bonds from banks across the region, which tightened the spreads of Korean lenders some 2bp-3bp across the board and Thai institutions some 2bp narrower.

Singapore banks were mostly unchanged and the new UOB LT2 bonds closed the session quoted at 130bp/128bp.

Overall, volume was slim, though according to traders. "It was a fairly uneventful day," said a trader in Singapore.

Most of the activity that was there was seen on the high-yield side, where the continuous issuance of new bonds is being met by a wall of demand. Longfor 2016s moved lower initially after the China property company announced a new 7-year bond.

However, as books bulged - they were last heard over USD12bn - that was reversed. The outstanding paper ended the day around 109.50-110.50, some 50 cents stronger.

The demand for risk was coming from real money accounts, according to traders, since PB was taking profit in a few high-yield names. The strength of the institutional bid was enough to push prices on Asian junk bonds up by some 25 cents on average.

The new Sunac bonds, for one, gained another 25 cents on top of the USD1.5 they had risen yesterday. SMIC bonds issued last night rose more than USD1.5 as well, as real money topped undercut allocations and locals continued to buy a rare Philippine corporate bond.

The sole underperformer was China South City, which priced a USD125m 5-year bond with only USD200m in demand, allocating more than half the bonds to PBs.

Overallocated retail account that tried to sell could not find a bid and the bonds were quoted as low as 95.00, more than USD2 below reoffer. The bonds later recovered to 96.50 bid, over USD1 below reoffer where they were ending the day.

christopher.langner@thomsonreuters.com

Keywords: MARKETS ASIA DEBT/