Maybank GM Daily - 23 Apr 2014

FX

Global

·         US existing home sales fell a tad more than expected in Mar by -0.2% m/m to 4.59 mn. Richmond Fed manufacturing index swung into strong positive of 7 from the previous -7. Equities gained overnight with DJI and S&P up +0.4% each by close. NASDAQ finished in the lead at +1.0%. Former Fed Chair Bernanke spoke at the Economic Club of Canada and assured that neither inflation nor deflation poses a big risk to the country.

·         Markets are likely to swing into full action today given flash HSBC PMI-mfg for Apr from China as well as Australia’s 1Q CPI out this morning. AUD players watched the latter for cues of when RBA would start lifting its cash target rate. The softer-than-expected print triggered reversed out bullish bets. More cues for antipodeans as RBNZ makes its rate decision tomorrow. Later today, BOE is schedule to release the Minutes from its April Meeting. In the meantime, President Obama arrives in Japan today to start his Asia tour.

·         More in Asia, Bank of Thailand deliberates on policy reference rate today. Majority expects the central bank to stand pat despite the extended political conflict at home. ADXY trades with a downside bias, cautious of what the day might bring. The China’s HSBC flash PMI-mfg came in at 48.3, in line with consensus but nonetheless suggests weakness. UST 10-year yields on the upward grind and could place pressure on bond markets in the region. Nonetheless, Nikkei still takes the cue from the US, up +0.9% at last sight. Tonight, US has new home sales due. Before that, Europe releases Apr’s barrage of PMI-mfg numbers.

G7 Currencies

·         DXY – Tilted Up. DXY slipped from its Tue highs, moving in tandem with the yields and was last sighted around 79.90. Support lies at 79.80 now and the greenback shows little momentum on either side. Intra-day trade could remain confined within 79.793-79.988. A break-out on either end could widen gyrations to 79.688-80.135.

·         USD/JPY – Trapped in Range. USD/JPY upticks were still guarded by the 102.68-barrier. While we do not rule out further upsides, momentum is still lacking. We expect pairing to remain capped by the 103.00. Support is found at 102.47. Japan’s Kuroda spoke this morning and reiterated that the central bank will make adjustments to shifts in the outlook.

·         AUD/USD – Bullish Bets Unwind. Pair was on the upmove throughout Tue, ahead of the CPI release (anytime at 0930 HKT).The pair met resistance at 0.9383. Investors were betting on a firm number that could force the central bank to hike earlier than expected. The downside surprise brought the pair to the 0.9319- support. A break here exposes the next at 0.9256. Australia’s CPI came in at a softer print of 0.6%m/m versus the previous 0.8%. Year on year, consumer prices quickened to 2.9% in 1Q from previous 2.7%, albeit missing the consensus of 3.2%.

·         EUR/USD – Downward tilt. Pair was choppy on Tue as gains to a high of 1.3825 were completely reversed out. Pricing around 1.3800 this morning, the 1.3790-support (15-Apr low) guards aggressive downside. Momentum indicators on the intra-day chart gives nothing away though recent price action suggests a downward tilt to continue. Barrier is now seen at 1.3825. Apr PMI-mfg numbers are due from the core economies and could dictate intra-day swings.

Regional FX

·         The SGD NEER trades 0.42% above the implied mid-point of 1.2613. The top end is estimated at 1.2362 and the floor at 1.2864.   USD/SGD – Bullish momentum.  The USD/SGD took out several barriers on its way up, and is currently hovering around 1.2564. Momentum continues to be bullish with the pair edging closer to overbought territory (with RSI printing 76). Price action today should see 1.2587 (50% Fibo retracement from the Oct-Jan upswing) as the next barrier, while 1.2530 should limit downsides.

·         Singapore’s CPI for Mar is on tap today and consensus is expecting inflation to rebound by 1.1% y/y as base effects that had helped to moderate Feb’s inflation to 0.4% wears off.

·         AUD/SGD – Overbought.  After taking out several of our barriers ahead of Aussie 1Q CPI, the cross plunged to 1.1709 after CPI came in lower than expected. After the sell-off in the AUD, risks are still to the upside though the cross is now out of overbought territory. Support nearby is around 1.1685 ahead of 1.1662 while 1.1801 should guard topside today.  SGD/MYR – Slight retracement.  After closing above the 2.6000-level at 2.6013 yesterday, the cross is retreating this morning on the back of MYR strength. Currently, the cross is hovering around 2.5997 with risks still tilted to the upside. Despite this temporary respite, a re-test of the 2.6000-level is possible today with immediate resistance around 2.6019 ahead of 2.6043. Downsides should be limited by 2.5936.

·         USD/MYR – Bullish Risks. Pair bounced above the 3.2587-barrier and hovered around 3.2650 as we write. Next hurdle is seen at 3.2714. Support at 3.2495 could slow offers. A failure to make a decisive move above the 3.2714 barrier could signal a pullback instore. 1-month NDF has been steady around 3.2730. Intra-day momentum indicators show slowing bullish momentum. Next resistance is seen at 3.2796. 1Malaysia Development reported its intention to liquidate $1.58bn of investments to fund the Tun Razak Exchange project.

·         USD/CNY was fixed lower at 6.1599 (-0.0011), vs. previous 6.1610 (+2.0% upper band limit: 6.2856; -2.0% lower band limit: 6.0391). CNY/MYR was fixed at 0.5269 (+0.0015).

·         USD/CNY – Rangy. USD/CNY started higher before slipping to around 6.2360 at last sight, guided by the lower fixing. 6.2305 has turned into a minor support for the pair ahead of the next at 6.2177. We think two-way action could continue within 6.2177-6.2424 with risks to the upside. China’s HSBC flash PMI-mfg came in at 48.3, matching the consensus. The print in contractionary region shows continued weakness in the economy.

·         1-Year CNY NDFs – Steady The 1Y NDF hovered around 6.2680 for the most part of Tue, still thereabouts this morning. Barrier at 6.2663 has been broken yesterday, exposing the next at 6.2855. For now, dips are likely to be slowed by 6.2647.

·         USD/CNH – Upside Risks. USD/CNH edged higher above the 6.2353 and remain on the upmove this morning, last sighted around 6.2394. Next barrier is some distance away at 6.2450. while 6.2353 has turned into a tentative support.

·         USD/IDR – Bullish. The USD/IDR closed above the 11500-barrier yesterday and continues its upswing this morning. The pair is currently hovering around 11556 and is in overbought territory with momentum increasing bullish as our four-hourly chart indicates. The Even foreign funds purchase of a net USD88.5mn in equities yesterday failed to stem the pair’s rise. With the key 11500-level breached, the next target eyed is now 11584. 11475 should be supportive today. The 1-month NDF continued on its climbed higher, edging just a tad off the 11600-level this morning at 11590 with momentum still bullish and the 1-month in overbought territory. The JISDOR was again fixed higher yesterday at 11486 from Mon’s 11430.

·         USD/PHP – Upside risks. The USD/PHP reminds on the grind higher with the pair trading around 44.580 currently. The pair is currently in overbought territory with risks to the upside. Continued foreign buying of equities like they did yesterday where a net USD60.4mn was purchased, should help to slow the grind higher. A sustained breach of 44.580-resistance should expose the next barrier at 44.640. Support is seen at 44.495 today. The 1-month NDF continued on its climb higher, last sighted around 44.620 this morning from yesterday’s close of 44.53 with risks still to the upside and in overbought territory. Philippines’ BSP deputy governor hinted that further action by the central bank before the next policy meeting would be data-dependent.

·         USD/THB – Upside risks.  USD/THB is inching higher this morning ahead of the BOT policy decision, not helped by the ongoing political saga. Last sighted around 32.380, risks remain to the upside and with the pair now in overbought conditions. Also foreign funds continued to unload government bonds, selling a net THB3.1bn yesterday, more than offsetting their purchase of a net THB1.9bn in equities, putting upward pressure on the pair. The breach of the 32.370-barrier exposes the next stronger barrier at 32.480.  Thailand’s central bank meets today to decide on monetary policy and our economic team expects no change to the policy rate today (at 2.00%) as does consensus. Meanwhile, the Commerce Minister warned that economy could grow by 1% or contract in 2014 should the political crisis extent into late this year. But should an election be held by Jul, he expects the economy to grow by 2% this year. His main concern is that an economic slowdown could lead to lower production and rising unemployment with signs already showing that companies have been reducing workers.

Rates

Malaysia

·         Yields on local bond market was pretty much changed despite the MYR weakened to 3.2675 from 3.2490-10 at previous close. Market has been in tight trading range while many were on the sidelines in the absence of market moving factors. In addition, the lack of offshore flows further added to market doldrums. However, support was seen as prices edged lower. At market close the 10-year MGS ended a tad lower at 4.08%.

·         The rates curve was fairly flat with only slight movement along the 5 to 7 years. Mild better receiving interest was seen although nothing traded. Higher USDMYR doesn’t seem to deter the stable MGS sentiments which probably contributed to stable IRS rates.

·         It was a relatively quiet day for MYR PDS market in comparison to strong primary issuances in the USD credit space. Trade focus remained on the high grades like Cagamas and Aman. Lackluster sentiment will likely persist.

Indonesia

·         Indonesia bond market closed lower on yesterday trading session. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.602% (+3.0bps), 8.046% (+10.2bps), 8.354% (+7.8bps) and 8.507% (+5.4bps) while 2-yr yield shifted up to 7.379% (2.9bps). Trading volume at secondary market was relatively heavy amounted Rp11,430 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0069 (5-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp2,768 bn with 65x transaction frequency and closed at 102.203 yielding 8.046%.while FR0069 total trading volume was recorded amounted Rp2,139 bn with 33x transaction frequency and closed at 101.112 yielding 7.602%.

·         Indonesian government held a series of auctions yesterday and received a total of Rp2.97 tn bids versus its target issuance of Rp1.5 tn or oversubscribed by 1.98x. However, only Rp0.98 tn bids were accepted for its 5-mo which was sold at a weighted average yield of 6.29915%, 13-yr PBS003 at 8.47969% while 30-yr PBS005 was sold at 8.90473%. Bid-to-cover ratio on yesterday’s auction came in at 1.00X - 5.04X. PBS006 (7-yr notes) bids were rejected during the sukuk auction yesterday. Till date Indonesian government has raised approx. Rp20.44 tn worth of debt through bond auction in 2Q 14 which represents 30.97% of the 2Q 2014 year target of Rp66 tn. Assuming that if Indonesia government issues Rp1.5 tn during every sukuk auction in 2Q 2014 then the Government needs to issue Rp7.91 tn per conventional auction (5 upcoming conventional auction in 1Q 2014) to meet their target of Rp66 tn.

·         On the corporate bond segment, trading volume was seen thin amounting Rp254 bn (vs average per day trading volume of Rp750 bn). BNII01SB (Subordinate I Bank BII Year 2011 bond; Maturity date: 19 May 2018; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp40 bn and was last traded at 100.1 yielding 10.7172%..

Rgds,

Maybank FX Research

Global Markets

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