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Markets watchful ahead of key oil meet

(ATF) Financial markets have turned watchful ahead of a crucial meeting of oil producers and with the infection count of the global pandemic approaching the 1.5 million mark. The relentless spread of the coronavirus is of particular concern as epicentres in New York and the UK both recorded their highest daily death counts.

Korea’s Kospi benchmark is down 0.63%, Hong Kong’s Hang Seng index fell 0.88%, Australia’s S&P ASX 200 is down 0.52% but Japan’s Nikkei 225 is up 0.47%. Regionally, the MSCI Asia Pacific ex-Japan benchmark is down 0.63%.

Credit markets are firm with sovereign Credit Default Swaps (CDS) tighter by 2-5bps. The Asia IG Series 33 index moved in by 2 basis points at 138/141.

Brent futures added 2.3% and WTI crude rose 5.3% ahead of Thursday’s meeting.

“We maintain an overweight on Emerging Markets as an upside hedge, but within the asset class we upgrade India at the expense of Korea. The market has now cheapened meaningfully, and it is a key beneficiary of lower oil prices,” Oxford Economics said in a note.

Jumbo deal from Indonesia

Credit markets are also weaker with sovereign CDS wider by 2-5 bps and the Asia Investment Grade (IG) index Series 33 wider by 3 basis points at 136/139 bps. Still Shinhan Bank has braved the turbulent markets and is in the market with a 5-year FRN (details below) on the heels of the jumbo multi-tranche sovereign deal from Indonesia.

“It may be time to begin adding credit risk. It’s impossible to call a bottom to the recent rout, but given the dire expectations already priced into most corporate securities, yields are compelling. In the investment-grade market, new issues are coming to market at an especially attractive yield premium. That said, be selective; fundamentals matter,” said Scott DiMaggio and Gershon Distenfeld, co-heads of Fixed Income at AllianceBernstein.

“Trillions of dollars of fiscal stimulus and rock-bottom interest rates can help economies restart quickly from their government-imposed deep freeze. Indeed, with a record amount of cash sitting on the sidelines today, credit markets are more likely to snap back than to tentatively return to normalcy.”

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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