Maybank GM Daily - 25 Mar 2014

FX

Global

·         US Flash Markit PMI-mfg for Mar dragged equities into red with a print of 55.5, missing the average estimate of 56.5. Data release in the earlier part of Mon did not help as China’s flash PMI-mfg signalled further deterioration in the manufacturing sector while PMI-mfg numbers from the Euro Area was mixed. DJI was down -0.2%, S&P at -0.5% and NASDAQ at -1.2%.

·         Elsewhere, world leaders are gearing up to impose more measures against Russia. UK PM David Cameron announced that the G8 summit in Russia will not happen.

·         USTs were bid with 10-year yields drifting to around 2.7280% as we write. Dollar is also softer with EUR and AUD benefitting. USD/JPY was still stuck in tight range but we expect underlying caution to cap upsides.

·         Early USD/AXJs starters are trading on the backfoot after dollar softened overnight. Nikkei is down -0.8%, taking the cue from New York. We expect the rest of Asia to also trade in caution. Hence, dips are likely to be shallow. Mid day, RBA Deputy Governor Philip Lower speaks at the ASIC Annual Forum in Sydney and we expect modest jawboning on the AUD, given its current lofty price at 0.9140 against the USD.

·         The major release of the day is Germany’s IFO index, followed by US Mar consumer confidence and Feb home sales. In Asia, Philippine’s imports surged 21.8%y/y in Jan. Trade deficit widened more than expected to USD1.38bn in the month.

G7 Currencies

·         DXY – Tilting lower. The index touched a low fo 79.752 overnight before rebounding to around 79.930, once against testing the 79.920-support. 4-hourly chart shows increasing bearish momentum and a sustained break of the 79.920-support could expose the next support at 79.650. Topsides capped by 80.30. Underlying caution is attributable to overnight poor data and current standoff between Russia and the rest of G7.

·         USD/JPY – Congestion still.  Pair is still trapped within 102.10-102.70. Last seen around 102.20, risks are to the downside. A break of the lower bound exposes the lower bound at around 101.89.

·         AUD/USD – Rising bullish momentum. The pair has taken advantage of the overnight dollar slide to head higher, surpassing recent highs to print near 0.9150 as we write. There is a lack of data releases this week, lending bulls some courage to charge ahead.  Looking ahead at mid-day, RBA Philip Lowe is likely to jawbone but even that might not be able add much drag on the pair. 0.9174 is a barrier to respect while 0.9106 is likely to slow downticks.

·         EUR/USD – Bulls awakened. The pair spiked to a high of 1.3877 overnight on hopes of better growth prospects. IMF sees Italy’s GDP rising 0.6% in 2014 and 1.1% in 2015. Despite the spike, the pair has now softened to around 1.3835. MACD still shows increasing bullish momentum and intra-day Ichimoku chart above the pair is thinning. We think risks are to the upside for the pair. 1.3895 marks the first barrier while 1.3774 slows downsides.

Regional FX

·         The SGD NEER trades 0.12% below the implied mid-point of 1.2661 with the top end estimated at 1.2408 and the floor at 1.2915.   USD/SGD – Bearish Bias.  The USD/SGD plunge this morning, taking out our weekly support at 1.2716, partially retracing the upswing of 19 & 20 Mar. Intra-day chart is showing increasing bearish momentum with the pair currently in oversold territory.  Currently back inside the ichimoku cloud, the pair is hovering around 1.2677 at last sight and should be supported within the cloud at 1.2660.

·         Singapore’s consumer inflation rose by just 0.4% y/y, more moderated than the 0.9% expected by market and Feb’s 1.4%. The slower price increase was on the back of softer car prices that offset increases in healthcare, education and stationary costs. Core inflation rose 1.6% y/y in Feb, down from 2.2% in Jan. As a result of the deceleration in inflation in Jan-Feb, our economic team has revised down their 2014 inflation outlook to 2.3% from 3.5% previously.

·         AUD/SGD – Consolidation.  The cross breached the 1.1600-level but failed to stay above that level this morning. Last sighted around 1.1592, intraday chart is showing little momentum in either direction this morning. We expect the cross to remain in consolidative trades between 1.1525/1.1643 today.  SGD/MYR – Upticks.  The cross is once again back above the 2.6000-level this morning on the back of SGD strength. Currently hovering around 2.6011, intraday bullish momentum is picking up and the cross is now in just a tad below overbought conditions. We continue to expect bids to be repelled by 2.6023 today while offers should be limited by 2.5932.

·         USD/MYR – Gaining downsides. Pair slipped towards its 40-SMA on the 4-hourly chart today and steadied thereabouts in the morning. MACD indicates downside bias. We do not rule out further slides in the pair but RSI shows near oversold condition at 28 and dips are likely to meet buying interests. 3.2820 supports.

·         USD/CNY was fixed lower at 6.1426 (-0.0026), vs. previous 6.1452 (+2.0% upper band limit: 6.2680; -2.0% lower band limit: 6.0222). CNY/MYR was fixed at 0.5350 (+0.0004).

·         USD/CNY – Retracing. Spot slipped to trade around 6.1820 after the modestly lower fixing. Pair is now supported by the 6.1730-support. MACD tilts lower and further downsides may be seen. For the rest of the day, expect trades to remain under the 6.20-figure.

·         1-Year CNY NDFs – Downside Bias. The 1Y NDF slipped along with the spot prices and hovered around 6.20-figure as we write. The 18-SMA and 40-SMA is at the brink of a negative crossover while MACD continues to point south. Next support is seen at 6.1920 while upticks should meet resistance at 6.2120.

·         USD/CNH – Drifting Lower. Pair moves in tandem with the rest of its onshore peers with 6.1770 limiting downsides. Break of this level could expose the next at 6.1666. Bears holding steady momentum and 40-SMA at 6.1848 could deter unlikely bids.

·         USD/IDR – Downside Risks. The USD/IDR is once again on the slide on the back of broad dollar weakness. Yesterday, foreign funds bought a net USD23.5mn in equities and added IDR0.73tn to their outstanding bond holdings, weighing on the pair. The pair is currently hovering around 11353 with intraday momentum increasingly to the downside and the pair just off oversold conditions. Immediate support remains at 11340 and a breach of this would expose the next support at 11275. The spot continued to trade at a premium over the 1-month NDF with the 1-month currently hovering around 11393 with bearish momentum holding steady. The JISDOR was fixed lower below the 11400-level yesterday at 11384 from Fri’s fixing of 11431.

·         USD/PHP – Slight Bearishness.  The USD/PHP is currently edging lower this morning at 45.040 with risks still to the downside. We continue to expect 45.000-level to act as support today, though a sustained breach could see the pair headed lower towards 44.916, especially if the BSP surprises with a rate hike on Thu. 45.154 should cap upside today. Like the spot, the 1-month NDF is inching lower this morning but remained above the key 45.000-level at 45.140 with risks now to the downside.  Philippines’ imports rose by 21.8% y/y in Jan, up from the upwards revised 2.1% in Dec (previously -0.1%), beating consensus expectations of 8.5%. The increase was broad-based across its major commodity groups with electronics imports up by 11.1% y/y. The trade deficit widened as a result to USD1376m in Jan from USD813m (revised higher from USD695m previously) in Dec.

·         USD/THB – Range-bound. The USD/THB is wobbling this morning, hovering around 32.444 at last sight. Momentum remains bullish as indicated by our 4-hourly chart but is waning. Nevertheless, the protracted political crisis and the likelihood that there will be no government for months are likely to keep the pair elevated. Yesterday, foreign funds sold more in bonds than the equities they bought on a net basis with THB940.8mn in equities purchases vs. THB2.5bn in bonds sold. The pair is likely to trade range-bound today with 32.500 seen as barrier while 32.400 nearby should provide support before 32.375.

Rates

Malaysia

·         Local government bond market was lackluster after last week’s hawkish FOMC statement. Inflationary pressure pared gains from MGS. Yields remained unchanged from Friday, but local players were shedding bids lower. Trading activity has generally decreased with the 3-year benchmark being the most traded stock with about MYR365m volumes.

·         Onshore IRS market was quiet. 2-year once again traded at 3.55%, while 5-year at 3.93%. Belly rates (3-7 years) barely managed a 2-3bps move higher. While offshore rates roared ahead, the onshore/offshore spread in 5-year IRS has now widened to 18bps. Onshore dealers' reluctance to push the rates higher could be a reflection of the lack of deal flows. Similarly in govvies market, despite the global weakness in rates, MGS prices had been quoted lower (yields higher) without any meaningful volumes. 3M KLIBOR was unchanged at 3.32%.

·         PDS market participants remained on the sidelines. Little volume was seen in the market, with the most coming from the new Rantau 2029, which was traded to a low of 5.15% from its coupon at 5.20%. We hope to see more trading activities after the issuance of PTPTN.

Indonesia

·         Indonesia bond market closed lower with 10-yr and 20-yr benchmark series yield shifting upwards to 8.114% (5.7bps) and 8.643% (1.7bps) while 5-yr and 15-yr benchmark series yield shifted down to 7.734% (1.1bps) and 8.509% (1.9bps) respectively. On the other hand, 2-yr yield shifted up to 7.348% (5.3bps). Trading volume at secondary market was seen heavy amounting Rp11,044 bn (vs average per day trading volume of Rp7,602 bn). FR0069 (5-yr benchmark series) and FR0070 (10-yr benchmark series) was the most tradable bond during the day. FR0069 total trading volume amounting Rp3,166 bn with 40x transaction frequency and closed at 100.573 yielding 7.734% while FR0070 total trading volume amounting Rp3,132 bn with 60x transaction frequency and closed at 101.755 yielding 8.114%.

·         DMO to conduct final sukuk bond auction in first quarter of 2014 today with total indicative auctioned amounting Rp1.5 tn. Four series to be auctioned today are SPN-S12092014 (Coupon: discounted; Maturity: 12 September 2014), PBS003 (Coupon: 6.000%; Maturity: 15 January 2027), PBS005 (Coupon: 6.750%; Maturity: 15 April 2043) and PBS006 (Coupon: 8.250%; Maturity: 15 September 2020). We see that today’s sukuk bond auction will remain receiving good demand and sees the indicative yield for certain series as follows PBS003 (range: 8.700% – 8.800%), PBS005 (range: 8.830% – 8.930%) and PBS006 (range: 7.850% – 8.000%).

·         Indonesia Debt Management Directorate General (DMO) release bond ownership data as of March 21^st, 2014. Banks and foreigner was the biggest buyer during the final 1Q 14 conventional auctions amounting Rp6,480 bn and Rp2,510 bn respectively. Foreigner bought Rp6,260 bn during the period of 17 – 19 Mar mostly through secondary market while banks were noted as net buyer amounting Rp2,230 bn within the same period. Foreign ownership stood at Rp360.91 tn (33.66% of total outstanding of government bond).

·         On the corporate bond segment, trading volume was seen thin as well with total trading volume amounting Rp1,134 bn (vs average per day trading volume of Rp750 bn). BNGA02SB (Subordinate II Bank CIMB Niaga Year 2010; Maturity date: 23 Dec 20; Rating: AA(idn)) was the top actively traded corporate bond yesterday with total trading volume amounting Rp160 bn and was last traded at 99 yielding 11.062%.

Rgds,

Maybank FX Research

Global Markets

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