Hutchison Blows Out On Back Of Global Concerns
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Derivatives

Hutchison Blows Out On Back Of Global Concerns

Credit default-swap spreads on Asian names, such as Hong Kong-based conglomerate Hutchison Whampoa, widened last week on continuing investor concerns that Hong Kong would sink into a recession. "Hutchison moved out big time," said Bill Xie, credit derivatives trader at BNP Paribas in Hong Kong. Emmanuel Dianflon, Asian head of credit derivatives at BNP Paribas in Hong Kong, added that two-year protection on Hong Kong's Hutchison Whampoa widened to 160-180 basis points Thursday from 115-130bps in the last two weeks. Xie added that while demand for protection has remained strong, caution has pushed offers higher.

Sonia Lee, v.p. and Asian credit trader atCredit Lyonnais in Hong Kong, added that Hutchison's bonds and credit default swaps act as a proxy for Hong Kong sovereign debt because of the company's presence in the local economy. Lee attributes spread widening to investor concerns that Hong Kong's economy will go into recession.

But another credit analyst in Hong Kong thinks the reason Hutchison was singled out is because investors are concerned about the profitability of its third-generation telecom operation in Europe, which has required large capital outlays. "This means business in Europe [for telecoms] is not good." The analyst continued that Hutchison has licenses in Austria, Denmark, Sweden, Italy and the U.K. Standard & Poor's rates Hutchison single A.

Prices Of Two-Year Protection On Hutchison Whampoa

Source: J.P. Morgan Chase Charisma@chase.com

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