Maybank GM Daily - 12 June 2014

FX

Global

      RBNZ hiked cash rate for the third time this year and retained a hawkish tone. Governor Wheeler was determined to rein in inflation expectations and for interest rate to normalize. NZD/USD spiked to a high of 0.8627 before easing off towards the 0.86-level as we write. Overnight trades were lackluster as bourses ended with modest losses. DJI was down -0.6%, S&P at -0.4% while NADAQ closed -0.1%. There was little to trade on and market players decided to lean on the side of caution amid tensions in Iraq.

      Japan’s machine orders fell less than expected by -9.1%m/m  in Apr, albeit still a downswing from the previous growth of 19.1%. Nikkei was down -0.8% at last sight, taking the cue from the West.

      Asian players still await Money Supply M2, aggregrate financing and new yuan loans data, out anytime within the week. Australia reported a fall of -4.8k in employment for May. Unemployment rate steadied at 5.8% and AUD fell in response. Onshore markets in Philippines are closed for Independence Day and the focus, in the meantime, is Bank Indonesia’s rate decision today and its statement that should follow after.

      Ringgit has been an outperformer this week, boosted by the robust trade numbers released last Fri as well as the decent export print from China. Most of regional currencies have gained against the greenback as well though caution in Asian bourses today could limit their strength, not helped the least by the fall in Australia’s employment. US is due to release its most significant data of the week – retail sales and markets would be closely watching this number for more confirmation of an economic rebound in the 2Q and a potential switch to hawkish bias from FOMC next week.

G7 Currencies

DXY –Sideways. The DXY index was unable to sustain moves beyond the 80.828-barrier and edged lower to around 80.755 into Asia. Moves were in tandem with UST 10-year yields and the 80.681-mark supported downsides. MACD has pared all bullish momentum on the 4-hourly chart and more downside risks seen for intra-day trade. Next major support is seen at 80.275 though we reckon dips towards 80.420 could be shallow given still soggy EUR. Upticks remain guarded by the 80.828-barrier.       USD/JPY – Bid. USD/JPY was dragged lower by equities both overseas and domestic, taking out our support at 102.20. Still, pair managed to stay afloat above the 102-level at around 102.03 currently. Weak core machine orders in Apr (down 9.1% m/m) are also likely to weigh on the pair. Intraday MACD forest remains flattish with risks now increasingly tilted to the downside. Given cautious sentiments ahead of the BOJ policy announcement tomorrow, bids are likely to be limited around 101.77 (2 Jun low), while offers are likely to be capped around 102.20.       AUD/USD – Downside risks. AUD/USD made a short-lived attempt past the 0.94-barrier before easing back to levels around 0.9380. The May labour report is key and reported a fall of 4.8K, well under the consensus of a 10K addition. The pairing made a sharp pullback towards 0.9350 before reversing higher to around 0.9380, near its opening value. Downside pressure is likely to push the pair towards the support at 0.9350.

      EUR/USD – Capped. EUR/USD remained heavy around 1.3540, reluctant to test the 1.3503-support.  Bearish momentum has reduced for this pair and there could some upside risks. Even so, we expect upticks to be limited by the 1.36-figure. Apr industrial production of the Euro-area is due today in late Asia along with France’s May CPI. Softer prints could egg EUR bears on towards 1.3503 (5-Jun low).

Regional FX

      The SGD NEER trades 0.64% above the implied mid-point of 1.2578. We estimate the top end at 1.2328 and the floor at 1.2828

      USD/SGD – Sideways. USD/SGD remained below the 1.25-figure, hovering around 1.2497 this morning. Our 4-hourly MACD chart continues to show little directional cue, though we continue to see upside risks of a move back towards 1.2540. In the interim, we expect the pair to move sideways with topside capped around 1.2516 and 1.2482 still providing support today. Private-sector economists in the MAS Jun quarterly survey expects the economy to grow by 3.8% in 2014 and inflation by 2.2%. For 2015, they expect growth of 3.9% and inflation of 2.5%. They also expect the USD/SGD to hit $1.27 at end-2014, unchanged from the Mar survey.

      AUD/SGD – Sliding.  AUD/SGD dipped this morning on the back of weak employment numbers. Cross is currently sighted around 1.1719 with momentum indicators have now flipped to show bearishness though the MACD forest is still hugging close to the zero line. Interim barrier remains at 1.1735 and stronger resistance is around 1.1766. Support is seen around 1.1695 before 1.1665 today. SGD/MYR – Upticks. Cross is on the uptick this morning, last sighted around 2.5696. Four-hourly MACD forest is currently hugging the zero line though this was a flip to the upside from yesterday’s bearish sentiments. We continue to look for 2.5721 to guard topside in the interim ahead of 2.5771, while support nearby is around 2.5665 before 2.5564.

      USD/MYR – Steady. USD/MYR gained a slight upside momentum as flagged by the MACD on the intra-day chart. Pair hovered around 3.2120 this morning, on the downtick weighed by the overnight dollar retreat. We still look for pair to retain a neutral tone within 3.1940-3.2170. 1-month NDF retreated from mid-week high to levels around 3.2160, albeit still keeping an upside momentum. Barrier at 3.2200 was kept intact but is at risk and next barrier is seen at 3.2282. Malaysia’s industrial production eased a tad to 4.2%y/y in Apr from the previous 4.3%. Our economic team noted that overall output growth at the start of 2Q 2014 was slightly lower than 4.9%y/y average in 1Q 2014 and implies possible moderation in real GDP from the 6.2%y/y growth in 1Q.

      USD/CNY was fixed higher at 6.1516 (+0.0010), vs. previous 6.1506 (+2.0% upper band limit: 6.2771; -2.0% lower band limit: 6.0310). CNY/MYR was fixed at 0.5175 (+0.0000). USD/CNY – Range-bound. USD/CNY hovered around 6.2290, supported by the maginally higher fixing, though still keeping a bearish momentum. Expect two-way trades within 6.2230-6.2335. China’s Premier Li Keqiang said that the country reached 60% of its jobs target for the year within Jan-May. The State Council also announced in a statement that the government would continue to cushion the economic slowdown by lowering taxes, higher public investment to develop the Yangtze River as well as increasing credit to exporters.

      1-Year CNY NDFs – Supported. The 1Y NDF hovered around 6.2150, buoyed by the fixing this morning. Momentum has become bullish though we expect bids to meet resistance at the 6.2256-barrier. Sideway trades to likely dominate within 6.2020-6.2256 today.

      USD/CNH – Supported. USD/CNH eased from its Wed highs back towards the 6.2209-support and is back on the uptick today, along with the rest of USD/yuans. Pair is keeping a bullish momentum and we see barrier at 6.2281 CNH now trades at a premium to CNY.

      USD/IDR – USD/IDR – Inching Lower. USD/IDR remains on the uptick, creeping slightly higher to around 11815 this morning ahead of BI policy meeting later today. Despite support from foreign investors, who bought a net USD5.52mn in equities yesterday, IDR failed to find support. Momentum though remains bearish with support still seen at 11750. Immediate barrier remains at 11831 ahead of 11893. The 1-month remained elevated, hovering around 11853 this morning with momentum slightly bullish according to our 4-hourly chart. The JISDOR was fixed slightly lower yesterday at 11803 from Tue’s 11806. The BI meets later today to decide on monetary policy and market and our economic team is expecting the central bank to hold pat its reference rate at 7.50%. This is even though growth is sluggish as inflation has begun to creep higher and the current account deficit is expected to widen. Meanwhile, FinMin commented that there are no plans to raise fuel prices in the current government’s remaining term. Instead, it will cut energy subsidy costs by cutting the volume of this year’s subsidized fuel use (to 46 kiloliters from 48m kiloliters previously) and raise power tariffs (expected in Jul).

      USD/PHP – Closed For Holiday. Onshore markets are closed today for Independence Day celebration. Markets will re-open tomorrow. With on shore markets closed, focus will be on the 1-month NDF, which is currently on the slide. 1-month is currently hovering around 43.830 though risks are still tilted to the upside.

      USD/THB – Rangy. USD/THB continues to trade in familiar rangers within 32.440/32.550 currently. Pair is currently sighted around 32.496 with intraday MACD forest indicating flattish momentum though risks remained bias to the upside. Foreign investors remained cautious, selling a net THB173.2mn in equities yesterday but buying a net THB5.05bn in bonds. We look for the pair to remain trading range-bound with topside still guarded by 32.550 ahead of 32.670, while interim support is seen at 32.440 before 32.355.

Rates

Malaysia

      Local government bonds market was rather quiet and listless in the absence of market moving factors. Yields ended almost unchanged. However, the 20-year benchmark MGS ended a tad higher at 4.55%. WI GII 3/21 was quoted at 3.125%-3.095% compared to 3.12%-3.08% at previous session but nothing was traded.

      The IRS market was quiet with no trades reported. 5-year was quoted at 4.07/06 but nothing was done. 3M KLIBOR remained stable at 3.51%.

      In the PDS market, players remained on the sidelines. Volume is thin in line with the govvies market. In contrast, there seem to be more action on the non MYR credit market with the same perpetual papers in the SGD market were picked up by high net worth clients, namely Genting and DBS.

Singapore

      SGS yields shifted generally higher across the curve extending the steeping stance. Elevated UST yields during Asian likely had exerted pressure on the domestic rates market. It seems that market expectation is slowly favouring curve steeping at this point. At market close, the SGS curve ended 1-4bps higher.

Indonesia

      Indonesia bond market closed lower ahead of Central Bank RDG meeting which will be held today. All nineteen economist includes our house economist believe that the monetary policy will be unchanged with BI rate remaining unchanged at 7.50%, deposit facility rate at 5.75% and lending facility rate at 7.50%. Indonesia parliament commission on the other hand approves governments proposal to cut oil lifting to 818K bpd from 870K bpd and approves for raising electricity subsidy to Rp86.84 tn this year vs initial allocation of Rp71.36 tn while allowing government to gradually increase power tariff. The revision in couple of key indicator in 2014 Indonesia budget as we know resulted in an additional of additional of bond supply in 2Q 2014. Central have in a seminar yesterday hopes to manage Current Account deficit at around 3% of GDP this year and sees trade balance would be under pressure in 2^nd and 3^rd quarter. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.705% (+1.3bps), 8.038% (+1.5bps), 8.497% (+1.4bps) and 8.665% (+1.0bps) while 2-yr yield shifted up to 7.334% (-0.3bps). Trading volume at secondary market remains heavy amounting Rp17,030 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 Rp3,616 bn with 114x transaction frequency and closed at 102.231 yielding 8.038% while FR0069 total trading volume amounted Rp2,954 bn with 74x transaction frequency and closed at 100.661 yielding 7.705%.

      On the corporate bond segment, trading volume remains stable at Rp588 bn yesterday (vs average per day trading volume of Rp750 bn). STTP01BCN1 (Shelf registration I Siantar Top Phase I Year 2014; B serial bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounting Rp354 bn and was last traded at par yielding 11.3966%.