Maybank GM Daily - 1 Jul 2014

FX

Global

      US stocks ended the last day of 2Q mixed with DJI at -0.2%, S&P flat and NASDAQ at +0.2%. UST 10-yr yields waffled around 2.53% overnight, keeping a lid on the greenback. The dollar underperformed against most other majors, ending June on a lackluster note. 

      This morning, Japan large Mfg tankan disappointed with a print of 12 vs. the consensus of 15 for 2Q, deteriorating from 17 in 1Q. The rest of the indices in the survey fared better but focus is still on the weak manufacturing headline.  USD/JPY edged higher in response and was last seen around 101.40. Elsewhere, RBA meets again this morning to decide on monetary policy. The central bank is not expected to move. With AUD last seen around 0.9420, investors would be watching for a dovish leanings in the statement. For so far, rhetoric has been balanced.

      China’s released PMI-mfg numbers for June this morning. Both prints did not disappoint as the official number came in at 51.0 while the HSBC version plays catch up at 50.7. Chinese stocks bounced into green before giving back all gains to flat. Initial Asia trades revealed mixed sentiments in the region with MYR leading the pack, albeit with a small 0.1% gain. KRW and SGD are the laggard. We expect regional currencies to be buoyed by decent risk appetite. There are also other data releases out of the Asia including Indonesia’s May trade and Jun inflation prints and Thailand’s CPI. Onshore markets in Thailand are away for Mid-year Holiday.

G7 Currencies

       DXY – Downside Risks. The dollar index dropped below the 79.920-support that we counted on and waffled around  79.80 as we write this morning. Intra-day chart shows bearish momentum with next support seen at 79.688. This index is still likely to trade with a downward tilt in the near-term with unexpected upticks to be guarded by 80.055.

      USD/JPY – Sideways.  USD/JPY edged higher this morning after the dollar recovered and the Nikkei rose. Even the outcome of the 2Q tankan survey was not JPY-negative with the pair is currently sighted around 101.41. Intraday MACD has flipped and is showing slight bullish momentum. We continue to expect rangy trades today with support still around 101.20 and barrier at 102.20. 2Q tankan survey is out on Tue and a good report could trigger more action in the pair. The 2Q tankan disappointed with business sentiments among large manufacturers moderating to +12 vs. +17 in 1Q and below market expectations of +15.  This was not surprising given the drag from the sales tax increase on consumption and the economy. It was not all bad news as the survey showed that large manufacturers were upping their capital spending compared to the previous quarter.

      AUD/USD – Sideways. AUD was again on the upmove overnight, taking advantage of the weakness in the greenback before softening to around 0.9420, ahead of the RBA rate decision. More nonchalance from the central bank on the lofty AUD levels could imply a greenlight for bulls to extend above the 0.9450. This level is still the key barrier to watch and failure to clear the level puts the next support at 0.9356 at risk.

      EUR/USD – Capped. EUR/USD bounced to a high of 1.3698, within striking distance of the 1.37-figure. Intra-day chart still shows upside momentum and next resistance is seen at 1.3730. The recovery in the EUR may not be favoured by the central bank and harsher jawboning from President Draghi during his post-meeting press conference on Thu. In the lead up to the event, current momentum suggests that risks are to the upside.

Regional FX

      The SGD NEER trades 0.46% above the implied mid-point of 1.2520 with the top end estimated at 1.2271 and the floor at 1.2770.

      USD/SGD – Bearish Risks. USD/SGD took out our support at 1.2472 on its way down yesterday. Pair is still on the slide this morning, hovering around 1.2463 at last sight. Intraday MACD is showing risks tilted to the downside today with the pair in oversold conditions currently. Support nearby is at 1.2451, and a break of this stronger support would expose the next around 1.2426. 1.2512 continues to be the hurdle to cross.

      AUD/SGD – Downticks.  AUD/SGD retreated this morning, helped by concurrent SGD strength and AUD weakness. Cross was last sighted around 1.1743 with risks still tilted to the downside. Immediate support is seen around 1.1730 ahead of 1.1680, while resistance remains around 1.1814. SGD/MYR – Waffling. The cross is waffling this morning, sighted around 2.5717 currently. With intraday MACD forest still hugging close to the zero line, little directional cues are expected today. We continue to look for the cross to remain within trading within the 2.5564-2.5800 range for now.

      USD/MYR – Heavy. USD/MYR drifted to around 3.2065 as we write this morning, weighed by the dollar retreat overnight. Price action suggests that bears are the dominant players now. MACD is also losing bullish momentum and may test support at 3.2042 next. BNM meets on 10 Jul and the next data of note is the trade numbers on Fri. Expect intra-week trades to remain within 3.2040-3.2360 in the absence of stronger cues though expectations of a rate hike are likely to weigh. 3.1940 is the next support to eye.

      USD/CNY was fixed lower at 6.1523 (-0.0005), vs. previous 6.1528 (+2.0% upper band limit: 6.2779; -2.0% lower band limit: 6.0317). CNY/MYR was fixed at 0.5187 (-0.0003). USD/CNY –Downside Risks. USD/CNY waffled around 6.2020 this morning, weighed by the lower fixing. Pair now counts on the next support at 6.1953. Pair is currently sighted around the 6.20-figure with daily MACD forest still tilted to the downside. Expect trades to remain biased to the downside with 6.1953 as a support to watch this week, ahead of the next 6.1860. Topsides guarded by 6.2135. China’s official June PMI-mfg came in around the estimated 51.0, allowing equity markets to take a breather today.  The HSBC version did not disappoint at 50.7, likely to lend sentiments even more support.  In other key news, China increases bank’s lending capacity by adjusting loan deposit ratio. Elsewhere, General Xu Caihou was ousted from Communist Party for graft.

      1-Year CNY NDFs – Heavy. NDF retained its heavy tone on Mon and hovered around 6.2255 this morning.  MACD on the 4-hourly chart still shows bearish momentum. The 18-SMA and 40-SMA made a negative cross-over on Mon, adding to bearish signals. 6.2220 marks the next support ahead of the next at 6.2154. 6.2295 acts as a barrier to upticks.

      USD/CNH – Bearish. USD/CNH remains on the downward drift this morning in line with the lower USD/CNY mid-point fixing. Pair was last sighted around 6.2035 and next support is seen around 6.2019. We still hold our short USD/CNH call that we made on 11 Jun, with target seen at 6.1706. Both daily and intra-day signals are bearish though nearby support at 6.2019 is rather strong. Upticks to meet barrier at 6.2138.

      USD/IDR – Oversold. USD/IDR dipped to its lowest level since 2 Jun on the back of dollar weakness overnight, sighted around 11814 currently. Intraday MACD is showing increasing bullish momentum with the pair now in oversold conditions. Recent flows data showed foreign funds buying a net USD42.22mn in equities yesterday, while adding a net IDR1.9tn to their outstanding holding of bonds between 17-25 Jun. Still, the uncertain outcome of the 9 Jul presidential elections and the twin deficits are likely to keep upside pressure on the pair. With risks to the downside, support is seen around 11750 with a break likely to expose the next around 11658. 12000 should guard topside today. 1-month NDF fell to its lowest since 18 Jun to 11841 at last sight with intraday MACD now showing bearish momentum ahead. After spending a week above the 12000-level, the JISDOR was finally fixed lower below the 12000-level at 11969 yesterday. Jun CPI and May Trade data are on tap today. Market and our economic team are expecting headline inflation to moderate to 6.79% and 6.69% y/y respectively compared to May’s 7.32%. This moderation is largely due to base effects from last year’s fuel price hike. As for trade, market is looking for exports, imports and the trade balance to come in at -5.87% y/y, -5.3% y/y and -USD100mn respectively in May, while our economic team expects -3.16% y/y, -1.26% y/y and +USD180mn.

      USD/PHP – Bearish momentum. USD/PHP is edging close to our support at 43.528, dragged lower by sluggish dollar overnight. Currently the pair is sighted around 43.580 with intraday MACD showing increasing bearish momentum. A test of our support is possible today with a firm break extending bearish momentum. Next support is seen at 43.421. Resistance is likely around 43.831 today. The 1-month NDF remains on the downtick, edging lower to 43.580 currently with our four-hourly chart showing risks tilted to the downside.

      USD/THB – Closed for Public Holiday. Onshore markets are closed for the Mid-Year Holiday and re-opens tomorrow. USD/THB is edging lower this morning but still smack in the middle of its current trading range of 32.370-32.550. Support for the THB also came from foreign funds who bought a net THB2.40bn and THB20.89bn in equities and government debt yesterday. In the midst of a public holiday, we look for the pair to trade in its familiar range of 32.370/32.550 today.  Jun CPI is on tap today and market and our economic team are expecting inflation to rise 2.60% y/y, little change from May.

Rates

Malaysia

      Local government bond market started slow to the week with trades centered upon the belly of the curve. We noticed better buying throughout the day with a bulk trade of MYR240m done on a single ticket for the 10-year MGS 7/24. The bond ended 2bps lower from last done. The 5 and 7-year benchmark MGS 10/19 and 9/21 dipped 1-2bps from last done. Short-term September bills and bonds are still favoured by offshore names as it earns a favourable spread on an asset swap basis.

      The IRS market saw good receiving interest on lower global yields and stronger MGS sentiment. 1-year traded at 3.675% and 5-year traded at 4.02% The IRS curve ended the day flatter. 3M KLIBOR however went on the contrary adding another 1bp to 3.55% due to imminent rate hike expectation.

      The PDS market was quiet on the last day of June. Some deals were traded on belly of the curve. Bumitama 2019 was taken at 5.02%, while Prasarana 2019 changed hands at 4.04%. We expect market to stay sidelined until the next MPC meeting.

Singapore

      It was very quiet day in the SGD rates market with US Treasury almost unchanged since last Friday.  At market close, the SGS curve steepened as short-end yields ended slightly lower while long-dated SGS yields closed higher after being sold early in the session. Yields at the long end climbed about 1-2bps.

Indonesia

      IDR bonds market quiet in the morning session. Bid start to creeping up higher after Rupiah currency traded lower from 12000level to 11900level betting on weakening USD and prediction that May’s trade balance may return surplus. IDR bonds prices up around 25-50bps across the curved. 10Y yield lower 8bps from 8.22 to 8.14%. 20Y traded at 8.80% and 15Y traded at 8.63%. At closing yield was lower by 6/7/6/7 3bps for 5/10/15/20Y tenors. Furthermore, yield closed at 7.74/8.15/8.57/8.83% for 5Y/10Y/15Y and 20Y, respectively. 

      Indonesia Debt Management Directorate General (DMO) release bond ownership data as of June 25th, 2014. Banks as the largest buyer amounting Rp10.23 tn compared to the end of May. Meanwhile, foreign looks to buy about Rp 6.73 tn compared to the end of May. Foreign ownership stood at Rp403.89 tn (35.96% of total outstanding of government bond).

      Indonesia Debt Management Directorate General (DMO) Debt Management Office (DMO) to conduct sukuk bond auction with indicative target issuance of Rp1.5 tn on July 1, 2014 with three series to be auctioned which are SPN-S02012015-6mo, PBS006-7Y, and PBS005-30Y.