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Asian Bond Markets Update

The Asian bond markets witnessed quiet sessions throughout the week from 29 Apr 2013 to 3 May 2013. The Chinese property bond market was also quiet during the week, with no bond issuance in the primary market. This is not surprising given that the Chinese fixed income investors, institutional investors as well as retail investors were on three day long Labour Day holidays. Though liquidity was thin in the secondary markets during beginning of the week, the week ended with the China property high yield credits closing tighter. There were no rating actions in the China property sector, while Moody's upgraded Lippo Karawaci's ratings to Ba3 from B1 in the Indonesian property space.

Though there was no junk bond issuance by any of the Chinese real estate companies, one property company availed a loan facility. Yuzhou Properties signed a dual tranche 3 year term loan facility of HKD 521 million and USD 35 million with a group of lenders. The monthly average Chinese home price data, released by Soufun, showed that price rise trend continues. The sequential home price gain was 1% in April 2013. The tier-1 cities of Beijing and Shanghai witnessed home price increases of 3.11% MoM and 0.19% MoM respectively. On the macro front, the official China manufacturing Purchasing Managers' Index (PMI) data was disappointing. The reading for the month of April came in soft at 50.6, which is lower than 50.9 reported for the previous month.

Though property bond markets were quiet, there was some decent activity in other Asian bond markets. CNOOC came out with a huge bond issuance in the Investment Grade space. The company issued USD 4 billion in 4 tranches. It issued USD 750 million 1.125% 3 year maturity notes, USD 750 million 1.75% 5 year maturity notes, USD 2 billion 3.0% 10 year maturity notes and USD 500 million 4.25% 30 year maturity notes. In the high yield space, PT Bhakti Investama Tbk plans to conduct meetings with fixed income investors and may issue 5 year USD denominated notes. The proceeds from this issuance are likely to be used to refinance the USD 165 million bonds maturing in 2015 that are callable in Nov 2013.

Indonesian property companies PT Alam Sutera Realty Tbk and PT Kawasan Industri Jababeka Tbk released their earnings for the first quarter of 2013. Alam Sutera had issued 6.95% coupon bearing USD 235 million 7 year (non-callable for four years) maturity senior unsecured bonds in March 2013.

The newly issued high yield credits such as CIFI Holdings, Future Land, and Xinyuan Real Estate are offering high yields and look like investment opportunities to investors. However, it is recommended that investors should take advice from financial advisors who are well versed with the sector before investing in these risky assets.