Maybank GM Daily - 29 Apr 2014

FX

Global

G7 Currencies

·         DXY – Range-bound. The greenback slipped to a low of 79.548, just a tick away from the 79.547-support before rebounding to levels around 79.680. Intra-day trades are likely to continue within 79.547-79.920 in the absence of clearer cues. FOMC awaited.

·         USD/JPY – Sideways. It is Showa Day and onshore traders are away. USD/JPY bids fizzled quickly enough overnight leaving the pair suspended around 102.50, still within the 101.66-103.00 range. Interim barrier is still the 102.68-mark. Barring risk events, pair could remain within this range for now especially with holiday-thinned trades today. The rest of the investors would probably rather stay on the sidelines ahead of BOJ on Wed. Apart from the central bank meeting, we watch Ukraine-Russia saga, China PMI-mfg (official) as well as US NFP for cues to this pair.

·         AUD/USD – Bearish risks. Pair slid to around 0.9240, closing in on the support at 0.9218. MACD on the intra-day chart suggests bearish risk as MACD forest pares to the zero-line. RSI shows near oversold conditions. A break of the 0.9218-support could trigger aggressive offers towards the next support at 0.9154.

·         EUR/USD – Range-bound. Pair bounced to touch the 1.3879-barrier before reversing lower to around 1.3856. Bullish momentum is gaining slightly and we continue to eye the 1.3879-barrier for more upsides. Next barrier is seen at 1.3914. The 1.3825-support to slow offers now. Recent “hawkish comments” by Draghi could continue to provide support for the pair, lifting the pair to mid-1.38 now. Wed’s inflation is a focus for the region ahead of FOMC.

Regional FX

·         The SGD NEER trades 0.38% above the implied mid-point of 1.2617. The top end is estimated at 1.2366 and the floor at 1.2869.   USD/SGD – Bearish tilt.  The USD/SGD is little changed currently, hovering around 1.2659. Risks are still tilted to the downside, though four-hourly MACD forest is showing dissipating bearish momentum. Ahead of the FOMC meeting, we expect the pair to remain in consolidative trade with 1.2530 guarding downside, while 1.2596 should curb topside.

·         AUD/SGD – Bearish. Cross breached the 1.1620-support level this morning and is currently hovering around 1.1606 on the back of AUD weakness. Risks are now tilted to the downside with RSI nearing oversold conditions. A sustained break of that support level would expose the next support at 1.1590 before 1.1573 (25 Mar low). 1.1660 is seen as resistance today.   SGD/MYR – Range-bound.  Cross is on the downtick this morning despite MYR around the key 2.6000-level. Intraday chart is showing little momentum in either direction, suggesting that cross could stay rangy today. Lacking fresh impetus today, we expect the cross hover within 2.5974-2.6066 range today.

·         USD/MYR – Risks Tilting Lower. Pair retreated from the 3.28-figure and hovered around 3.2685 this morning. MACD has pared its bullish momentum on the 4-hourly chart. 3.28 remains a good resistance in the interim. Dips to meet support at 3.2587, ahead of th next at 3.2495. The resilience of the MYR lured buying interests in the domestic bonds market on Mon and capped USD/MYR. The 1-month NDF was also in tight trades and last seen at 3.2755. MACD shows slight downside risks and we continue to expect the pair to settle within the current 3.2645-3.2835 range.

·         USD/CNY was fixed lower at 6.1556 (-0.0009), vs. previous 6.1565 (+2.0% upper band limit: 6.2812; -2.0% lower band limit: 6.0349). CNY/MYR was fixed at 0.5272 (-0.0001).

·         USD/CNY – Rangy. USD/CNY opened unchanged around 6.2524. MACD pared bullish momentum on the intra-day chart. Fixing is lower for the fifth consecutive session though fears of outflow and economic slowdown continued to keep the pairing supported. The 6.2305-mark is still the support to reckon for the pair after the interim at 6.2466. PBOC’s Yi Gang urged deeper reform of foreign exchange management (HKEJ). Elsewhere, majority of the Chinese provinces missed their growth targets even though most targets were lowered to curb debt and pollution. 1-Year CNY NDFs – Bearish Risks. Pair slumped on Mon and settled a touch above the 6.2475 support. MACD still shows strong bearish risks and we eye next support at 6.2405. Interim barrier at 6.2560.

·         USD/CNH – Rangy. USD/CNH drifted lower and could still remain within 6.2450-6.2636. Last seen around 6.2537, the onshore spot reference rate was fixed lower for the fifth consecutive session. 4-hourly chart shows slight bearish momentum. CNH is still trading at a discount to CNY.

·         USD/IDR – Consolidating. The USD/IDR is within reach of re-testing the key 11600-level again with the pair currently hovering around 11590 this morning. Concerns about political stability and the likely re-widening of the current account deficit in 1Q continue to dominate. As well, foreign funds have sold off equities for the second straight session with a net USD32.46mn sold yesterday. Ahead of FOMC, we expect the pair to remain in consolidative trade within 11500/11658 today. The 1-month NDF continued to trade above the 11600-level at 11625, though this was a downtick from yesterday’s close of 11630 with risks still tilted to the downside. The JISDOR was fixed below the 11600-level at 11568 for the first time in three sessions yesterday.

·         USD/PHP – Downside risks. The USD/PHP broke through our support at 44.492 this morning and is currently hovering around 44.475. Risks are now to the downside with intraday MACD indicating increasing bearish momentum and the pair inching closer to oversold conditions. Next support is still seen at 44.421 and a sustained break of that level would expose the stronger support at 44.368. Immediate resistance today is at 44.492 ahead of 44.555. 1-month NDF little changed this morning, hovering around 44.460 with risks still to the upside and the 1-month just out of oversold conditions. 

·         USD/THB – Rangy.  The USD/THB is again wobbling but continues to trade within familiar ranges. Currently hovering higher at 32.265, risks are tilted to the downside, though our intraday chart is indicating waning bearish momentum. Pair is likely to remain range-bound, supported by the protracted political crisis on the topside and weighed by continued foreign portfolio inflows (foreign funds purchased a net THB154.51mn and THB1.60bn of equities and government bonds yesterday). Price action should see the pair hover within 32.137/32.370 today.   Thailand’s exports fell by 3.12% y/y in Mar, disappointing market that was expecting just a 1.4% drop. Dragging exports lower were weak agricultural shipments, which fell 8.2% y/y. Mar imports fell by 14.19% y/y from Feb’s -16.62%. The trade balance rebounded to post a surplus of USD1.46bn vs. USD1.77bn deficit in Feb.

Rates

Malaysia

·         Yields on local government bonds ended a tad lower in a fairly active market. In the morning session, many remained on the sidelines ahead of the FOMC and US nonfarm payroll. In addition, a shorter trading week and rangebound MYR and US Treasuries added to the lack of trading interest. However, in the afternoon session, market saw fresh buying in response to strong MYR which strengthened to 3.2635 from 3.2700 at the opening. At market close, yields on 3 and 7-year benchmark MGS closed a tad lower at 3.39% and 3.93%.respectively. Meanwhile, WI was quoted at 3.70%-3.67% but with muted response.

·         The IRS market was quiet without trading ahead of the FOMC and US jobs data.  The IRS curve ended more or less unchanged.

·         In the PDS market, we see better buying with various names being traded even though it was confined to the belly of the curve. Khazanah 18 traded at MTM 3.97% whereas the 21 was done at 4.38%. Lower down the curve, we see FIs picking up some Gamuda 18 and 19 probably for own books at 4.55% and 4.60% respectively. Primary pipeline is somewhat dry at the moment hence the buying in the secondary market. However, once the new deals start to flow in, liquidity might dry up in the secondary market.

Indonesia

·         Our economist estimates that April CPI on monthly basis would experience a deflation of 0.07% compared to inflation of 0.08% in March CPI. On a yearly basis, April is estimate to reach 7.20% from 7.32% in March. Further, the deflation is explained caused by the presence of the harvest season in April 2014. As with previous years, every harvest season abundant supplies rice and make an impact on the drop of the commodity price. The fall in rice price would also led to the decline of other foods commodities. Meanwhile non-food commodity prices remain stable during April 2014. Moreover, our economist estimate the impact of electricity tariff hike for industry in April 2014 against the rising prices of goods would occur in upcoming month.

·         Indonesia bond market closed higher amid a quite market. Yield curve bull flattening with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.578% (-3.3bps), 7.872% (-8.7bps), 8.323% (-5.0bps) and 8.473% (-2.4bps) while 2-yr yield shifted down to 7.374% (-4.2bps). Trading volume at secondary market was relatively thin amounted Rp6,741 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0068 (20-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp2,122 bn with 77x transaction frequency and closed at 103.392 yielding 7.872% while FR0068 total trading volume was recorded amounted Rp1,255 bn with 51x transaction frequency and closed at 99.048 yielding 8.473%.

·         DMO to conduct conventional bond auction today with total indicative auctioned amounting Rp8 tn. Six series to be auctioned this week are SPN12140731 (3-mo), SPN12150501 (12-mo), FR0069 (5-yr), FR0071 (15-yr), FR0068 (20-yr) and FR0067 (30-yr). We see that upcoming conventional bond auction will remain receiving good demand and sees the indicative yield range for 3-mo SPN at 6.050% - 6.200%, 12-mo SPN at 6.650% - 6.800%, FR0069 at 7.500% - 7.650%, FR0071 at 8.200% – 8.350%, FR0068 at 8.340%  –  8.490% and FR0067 at 8.675% - 8.825%.

·         On the corporate bond segment, trading volume was noted thin as well amounting Rp423 bn (vs average per day trading volume of Rp750 bn). BBKP01SBCN1 (Shelf registration subordinate I Bank Bukopin Phase I Year 2012; Maturity date: 6 Mar 2019; Rating: idA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp116 bn and was last traded at par yielding 9.24835%.

Rgds,

Maybank FX Research

Global Markets

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