Gas Natural Mexico is today expected to price up to MXP4.5bn in a dual tranche deal, according to market participants. Guidance for a 4-year floating rate tranche is for TIIE+ 40bp-50bp, according to a report by Scotia Capital, while a 7-year fixed rate tranche is Mbonos+ 140bp+150bp. Mexican bond investors looking to diversify their exposure within the energy sector have expressed significant interest in the transaction from the subsidiary of Spain’s Gas Natural as a way to diversify their holdings. Proceeds will be used primarily for debt refinancing purposes. Banamex, BBVA Bancomer, HSBC, ING and Santander are managing the deal, rated AAA on a national scale.
Category: Economy & Policy
Posted inDaily Brief
Financiera Independencia Set for MXP Bond
Mexican microfinance lender Financiera Independencia is expected to price up to MXP1.5bn in 3-year bonds today, according to a banker on the deal. Guidance is TIIE+ 250bp-260bp, adds the banker. The proceeds will be used in part to repay an MXP784m bond expiring in June, with the remainder going towards increasing the bank’s lending portfolio and for working capital. The last time the bank came to the domestic market was in 2008, when it issued the bond that is maturing in June. In March 2010 it went to the dollar market, when it issued $200m in 10.0% 2015 bonds. Independencia is rated A on a national scale. Actinver is the sole bookrunner.
Posted inDaily Brief
LatAm FDI Grew Fastest in 2010
LatAm and the Caribbean saw the fastest growth in incoming FDI in 2010 of any global region at 40%, according to a study by Comision Economica para America Latina y el Caribe (CEPAL). LatAm and the Caribbean saw $112.6bn in FDI last year. Meanwhile, developed countries saw FDI fall by 7% from 2007 to 2010, according to the report. Cepal says it anticipates the region will continue to see FDI grow by an additional 15%-25% this year. Brazil was the largest single beneficiary last year, seeing FDI increase by 87%, reaching $48.5bn in 2010. Mexico was the second biggest recipient with $17.7bn, followed by Chile with $15.1bn, Peru ($7.3bn), Colombia ($6.8bn) and Argentina ($6.2bn). The US continues to be the largest investor in the region, according to the report, representing 17% of investment, followed by the Netherlands (13%), China (9%), Canada and Spain (both 4%).
Posted inDaily Brief
Bancoldex Issues Local Bonds
Colombian development bank Bancoldex sold COP117.65bn ($65.4m) in local. The issue was done in two series. A COP80bn 18-month piece pays 5.3% or 145bp over DTF and priced at 99.998, a COP95bn 21-month piece pays 5.33% or 148bp over DTF and priced at par. Total demand was COP167bn, according to the issuer. The notes are rated AAA on a local scale. Proceeds will be used for working capital. Bancoldex self-led the sale together with Profesionales de Bolsa, Ultrabursatiles and Corredores Asociados. Pension funds, insurance companies and trusts were the main investors.
Posted inDaily Brief
Chile Tightens Rate
Chile’s central bank increased its rate by 50bp to 5.00% yesterday, exceeding market expectations of a 25bp hike. According to Nomura, the central bank seeks to bring down inflation expectations without waiting for the effect of lower commodity prices. Celfin points out that the core inflation indexes are at the bottom of the central bank’s desired inflation range of 2%-4%.
Posted inDaily Brief
Peru Raises Interest Rate
Peru’s central bank raised its benchmark rate 25bp to 4.25% yesterday to the highest level in two years, in-line with market expectations. Goldman Sachs says it no longer expects the rate hiking cycle with end this month, but expects the central bank to continue raising rates by 25bp at each meeting until July.
Posted inDaily Brief
Chile Rate Hike Expected
Chile’s central bank is expected to raise its rate by 25bp to 4.75% at its meeting today. Goldman Sachs says that after recent hikes of 50bps, the central bank will likely moderate its rate of increases as inflation expectations have been falling. RBS says the central bank is likely to continue raising rates throughout the year, but will likely stop before reaching 6.00% by the end of the year, although this is expected by the market.
Posted inDaily Brief
EM Local Markets Expected to Surge
EM local markets are expected to grow by a minimum of 10%-15% per year over the next decade, according to JPMorgan’s local markets guide. The universe of EM local currency debt issued by sovereigns and corporates has tripled since 2002 to $7.0trn, according to the report. Strategic inflows into local currency government debt markets exceeded $47bn in 2010, 50% higher than the previous record of $29.8bn in 2007. Meanwhile, EM sovereign borrowing needs in the international capital markets stand at only $81bn this year, with LatAm expected to represent $16bn, against $57bn for EMEA countries. JPMorgan says EM local markets are unlikely to see a repeat of the record foreign buying that occurred in 2010, and expects foreign buying to drop to $107bn in 2011, down from $174bn in 2010. Inflation is expected to remain a top concern among EM economies, particularly in LatAm. Inflation-linked represent 75% of domestic debt stock in Chile, 32% in Colombia, and 28% in Brazil. JPMorgan says it expects the asset class to continue to grow as investors look for instruments that can retain value over the medium to long term.
Posted inDaily Brief
Indec Will Create New CPI
Indec, the Argentine government agency responsible for statistical data, says it plans to replace its consumer price index by 2013. Argentina is the only country in the G20 which does not receive the IMF’s Article 4 review of its economic statistics, and has not since 2006. Most economists believe the Indec to wildly underestimate the country’s rate of inflation, thought to be close to 25%. According to official government statistics, inflation is only running at 8%-10%. However, Indec says the new IPC will not be a true measure of inflation, since it will be only one metric that will need to be viewed alongside other numbers. The IMF completed a technical assistance mission to Argentina in April, at the conclusion of which it provided the government with a list of recommendations for the design and methodology of a new national CPI.
Posted inDaily Brief
LatAm Growth Driven by Domestic Consumption
LatAm GDP is expected to grow by 4.4% this year, largely driven by domestic consumption, according to a report by JPMorgan. This compares to 6.1% in 2010 and the expected EM growth average of 6.1% for 2011. Argentina, Chile and Peru will grow 6%-8%, says JPMorgan. Net exports are a drag on growth but retail sales are growing strongly in Brazil, Chile and Peru, with Colombia and Mexico catching up. While inflation is expected to rise, the bank expects this to be tackled with monetary policy, as fiscal stimulus is being phased out gradually. The report also outlines four main risks the region needs to monitor. This includes China’s growth, as LatAm’s terms of trade are heavily driven by commodity prices. Another risk is contagion from Europe, though the bank says that the strongest links are those with Spain, but that these are small overall. Geopolitics in the EMEA region could push up oil prices and in turn impact on inflation, and FX intervention should also be monitored, as policymakers will feel pressure to contain further appreciation.