Chile’s central bank tightened its policy rate by 50bp to 4.00%, 25bp more than expected by the market. The bank cites uncertainty and market volatility caused by the natural disasters in Japan and the political turmoil in Arab countries. However, it points out that on the domestic front, demand and employment figures continue to evolve positively. “Clearly they are trying to pull down inflation expectations,” says Nomura. Goldman Sachs had warned of a possible 50bp hike, although it predicted a 25bp hike, as did most market participants. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” Goldman had said.
Category: Chile
Hike Expected for Chile Rate
Market consensus points to Chile’s central bank tightening its rate by 25bp, bringing it to 3.75% today. “Though the minutes from the February meeting – in addition to recent comments by central bank officials – suggest rising concerns about the inflation outlook, the central bank seems committed to continuing its tightening cycle at a gradual pace, most likely in 25bp increments,” says Morgan Stanley. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” according to Goldman Sachs.
Peru Approves Cencosud Bank
Peru’s banking regulator has allowed Chilean retailer Cencosud to expand its banking operations into that country. “We find this as positive as the company will be able to reduce the cost of funding,” says Celfin. BCI Estudios meanwhile, says that with this authorization, Cencosud has introduced all of its financial operations into Peru, where it had already introduced the Metro card, similar to the Jumbo card it has in Chile. These are credit cards that allow shopper to make purchases in all of the Cencosud’s stores.
Retail Sector Slows in Chile
Chile’s red-hot retail sector is beginning to slowdown from breakneck growth last year. “This year we should see same-store sales increase about 10% for the majority of Chilean retailers that operate department stores,” says Felix Lorenzo, portfolio manager and Chile country head at LarrainVial’s asset management unit. “This is a good rate of growth, but it is below that seen in 2010, when growth was around 15%-20%,” he adds. While stocks are also seen to be rising, the sequel to last year’s surge is not predicted to be a blockbuster. “In 2011, we should see sector stocks appreciate about 15% overall, in line with historical trends, but much mower than the 83% increase [seen in 2010],” Lorenzo explains. “These are actually decent investments over the long term, but they have had quite a run up in the past couple of years and are not cheap anymore,” says Nick Robinson, a Sao Paulo-based director with Aberdeen Asset Management’s EM team. The frothiness in the valuations of large cap retailers last year drew investor scrutiny of multiples. “Some retailers in Chile [are trading at] multiples of about 30 times earnings. Concosud is in that region and Falabella is not far behind that,” Robinson explains. “Normally, you don’t want to be paying more than 20-25 times earnings. That is the most we would pay for a retailer.”
Sudamericana de Vapores Plans Equity Raise
Compania Sudamericana de Vapores plans to increase its equity capital by up to $500m equivalent, it says, through the issue of new shares. The Chilean shipping company is scheduled to put the matter to a shareholder vote at a meeting April 8. The details and timing of the raise would then be determined by the company, it says.
Forum Issues CLP Bonds
Chilean car loan company Forum issued CLP20bn ($41m) in local bonds. The AA minus/AA+ notes were issued in a single tranche due in 2013. The first CLP issue of the year priced a 6.75% coupon at 99.01 to yield 7.19%, or 115bp over the BCP-13 benchmark. Demand was about the same as the amount offered, says a banker off the deal. Another banker off the deal believes Forum got a good price for the notes. “In normal conditions I would say a 100bp spread would have been fair, but what they got is still good considering inflationary pressures,” he says. Proceeds will go to working capital. Banchile lead the sale.
SWF Close: Peru Minister
Peru should begin the process of creating its planned sovereign wealth fund within the next few weeks, its finance minister says. Using Chile’s sovereign fund as an example, the fund will be created out of Peru’s existing $2bn stabilization fund, and make investments globally. “The idea is to use excess government funds that would be placed outside of Peru and serve as a contingency reserve for a downturn in the economy,” Finance Minister Ismael Benavides told reporters Friday in New York. Benavides says the government is constantly looking at the international bond markets for funding opportunities. It is looking at a transaction either before the new government takes office this year, he says, or working in conjunction with the incoming government in order to issue after it takes office. It is considering both global PES and USD, Benavides says.
Banco de Chile Preps Share Sale
Banco de Chile is preparing a 1.4bn share equity follow-on, according to documents filed with the SEC. Shareholders approved a total capital raise of up to 3.39bn shares in January. Marketing is set to begin on March 15, with pricing expected March 30. The filing names the bank’s Banchile Corredores unit and LarrainVial as bookrunners. Banco de Chile plans to use the proceeds for general corporate purposes, mainly growing its lending operations.
Salfacorp Shareholders Approve Capital Increase
Shareholders of Chilean construction company Salfacorp authorized the company to raise about $255m equivalent by issuing 75m shares in the local market, the company says. The amount of shares represents about 15.8% of the company’s equity. Proceeds from the capital increase will be used to finance Salfacorp’s expansion in Chile, Peru and Colombia. Salfacorp’s shares closed at CLP1,560, down 2.10%.
Watt’s to Register Bond Shelf
Chilean food company Watt’s says its board has authorized a bond shelf of up to UF6m ($274m). The company initially intends to issue up to UF2m in 2 tranches, one with a tenor of up to 10 years and the other with a tenor of up to 30 years. Proceeds of the A rated notes would go to pay down existing debt. A company spokesman says the deal will likely take place in April. A bank has not been hired yet. In September 2008, Watt’s priced $79m equivalent in 2015 bonds denominated in the UF inflation-linked unit, with a 3.90% coupon at 98.56 to yield 4.25%. Larrain Vial handled that sale.