ICICI Bank’s plan to sell as much as $1 billion of debt has put local companies on course to raise a record amount of international bonds this month from investors seeking to profit from the nation’s expanding economy. The second-largest lender in India hired three banks to help it sell the dollar-denominated notes, three people familiar with the matter said on October 5.
ICICI’s 5.75 per cent note, due January 2012, yields 217 basis points (bps) more than treasuries, down from 333, or 3.33 percentage points, at the start of the year, according to prices from Royal Bank of Scotland.
ICICI and Reliance Industries Ltd are tapping demand for assets as near-zero interest rates in Japan and US drive investors to emerging markets. Credit-default swaps on ICICI’s debt fell to 218 bps on October 5, the lowest since May, after ballooning to an all-time high of 1,794 on October 27, 2008, as savers pulled money from the bank amid the global financial crisis. “The search for yield is on,” said Paul Adkins, the Asia-Pacific managing director for Highland Capital Management LP. “ICICI shouldn’t have been pressured the way it was two years ago. Its fundamentals are sound and India’s economy is growing.”
IMF raises forecast
Helped by consumer demand, India’s growth may be faster than previously forecast, the International Monetary Fund (IMF) said yesterday. The country’s economy will expand 9.7 per cent in 2010, the Washington-based lender said in its World Economic Outlook, more than the 9.4 per cent estimated in July. IMF kept its 2011 prediction for India’s growth at 8.4 per cent.
The average yield for Asian financial bonds is 4.35 per cent, compared to 3.67 per cent for the same type of debt globally, according to JPMorgan Chase & Co and Bank of America Merrill Lynch indexes.
Overseas investors have poured $10 billion into India’s corporate and government debt this year, more than the combined inflows during the previous eight years, data from the exchange board show. Holdings touched an all-time high of $17.8 billion on September 27. Inflows accelerated as the central bank raised borrowing costs five times this year, the most in Asia, boosting yields on local assets.
Faster inflows helped the rupee surge 5.22 per cent against the dollar in the past month, to 44.69 a dollar, the second-best performance among Asia’s 10-most traded currencies, trailing only the 5.24 per cent gain of the South Korean won.
