HONG KONG - Asian bond spreads widened on Thursday as investors worried about the rising cost of oil, but the focus was on a new offering, the first from the region in two months, which should give an indication of market appetite.

Oil hit a record high above $112 per barrel, darkening the outlook for the global economy in general and specifically for oil-importing Asia, as many countries in the region are already struggling with high inflation.

Korea Southern Power Co. Ltd. (KOSPO), a unit of electricity provider KEPCO, set guidance for its $300 million five-year bonds in a deal that could be priced in New York trading hours on Thursday.

It is the first benchmark-sized deal by an Asian issuer in the dollar bond market since Korea Midland Power Co. Ltd., another power-generating unit of KEPCO, sold $300 million on Feb. 1. Smaller sized issues were reported in mid-February.

"A lot of people are focusing on the Korea deal today. If it goes well and performs well in the secondary market, there will be quite a few transactions," said a Hong Kong-based trader.

The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, opened wider at 565/570 basis points (bps) compared with its previous close of 555/560 bps, before recovering to 558/559 bps.

One trader said most of the orders for the Korean deal came from US-based investors.

"Asian investors are still nervous and quite conservative, whereas there is quite a healthy pipeline of deals in the US and Europe. Corporate deals are still being done because risk appetite is better there."

In Europe, Deutsche Telekom and miner Anglo American raised 2.5 billion euros ($3.9 billion) on Wednesday as strong orders allowed both to tighten the spreads their respective transactions were offering.

The primary market there has seen a strong pick-up in issuance in recent weeks as a Federal Reserve-led rescue of investment bank Bear Stearns last month helped lift sentiment and drove credit spreads significantly tighter.

Dollar-denominated issuance from Asian issuers excluding Japan has dropped 47.6 percent to $5.8 billion so far this year compared to the same period of 2007, according to Thomson Financial.

Bonds from the Philippines, Asia’s most active offshore debt issuer outside of Japan, edged higher in price terms but spread widened as US Treasuries rallied overnight.