Maybank GM Daily - 2 Jul 2014

FX

Global

       Risk-on trade extended beyond Asian hours. Stocks closed higher even as manufacturing data underwhelmed. Jun ISM manufacturing printed 55.3 vs. previous 55.4 while the final release of Markit US Manufacturing PMI came in at 57.3 vs. 57.5. Investors did not take the reports too hard as DJI closed 0.8% higher, S&P at +0.7% and NASDQ at +1.1%.

       Earlier, the final Eurozone Market manufacturing missed consensus with a print of 51.8 for Jun. Unemployment rate steadied around 11.6% in May. EUR slipped a tad to trade around 1.3680 this morning.

       Data in focus today includes US factory orders and ADP employment change which could set the dollar tone ahead of NFP numbers on Thu. Asia has fewer releases today with only Singapore’s PMI of note. USD/JPY still on the upmove on buoyant risk sentiments. Early starters KRW and MYR strengthened against the greenback. Barring any surprises, regional currencies may retain much of its strength against the dollar in the session today though caution ahead of the ADP release could keep a check on bulls.

       Onshore markets in Thailand resume operations today. Expect the SETi to play catch up with the rest of the region.

G7 Currencies

       DXY – Upside Risks. Overnight risk-on mood failed to aid the greenback much which held steady around the 79.80-mark for much of Tue. Next support is still seen at 79.688. MACD is at the brink of a positive crossover and could mean some upside ahead. We still need to wait for a confirmation. Interim barrier is support-turned resistance level at 79.920 ahead of the next at 80.096. Tonight, we have ADP report along with factory orders. The private employment survey will be closely watched for any cues to NFP this Thu before the break for Independence Day or rather weekend. Consensus is a firmer 205K compared to the previous 179K.

       USD/JPY – Gradual Upticks.  USD/JPY continued on its uptick but remained below the 102-level with the pair hovering around 101.59. With intraday momentum indicators titled increasingly to the upside, immediate resistance is seen around 101.76 before 102.20. 101.20 continues to provide support.

       AUD/USD – Taking a breather. AUD bulls shifted into high gear after RBA delivered a rather uninspiring statement. The central bank was almost nonchalant about the rather lofty AUD during its meeting yesterday, allowing AUD bulls free rein. AUD/USD touched a high of 0.9505 before easing off to trade around 0.9490 this morning, ahead of May trade balance due 0930 (HKT). As we have stated in our recent note on AUD, dated 1 July, next bullish target for the pair is pencilled in at 0.9543. 0.9450 has turned into a viable support ahead of 0.9423. 

       EUR/USD – Capped. EUR/USD levelled off after reaching a high of 1.3700 though retained much of its buoyancy as it hovers around 1.3680. The 4-hourly chart shows that the pair has lost much of its near-term bullish momentum given its lack of progress. Support is now seen at 1.3670, close to the 18-SMA on the intra-day chart. Barrier remains at its recent high of 1.3700 ahead of 1.3730. No noteworthy data releases today.

Regional FX

       The SGD NEER trades 0.55% above the implied mid-point of 1.2529. We estimate the top end at 1.2279 and the floor at 1.2778.

       USD/SGD – Rangy. USD/SGD is little changed currently after hitting an overnight low of 1.2452 on the back of improving risk appetite. Pair is currently sighted around 1.2458 with little impetus in either direction though. We need to see a break at either end of the current trading range for directional cues. For now, pair should trade rangy within the familiar 1.2451-1.2512 trading range.

       AUD/SGD – Capped.  AUD/SGD closed above our 1.1814 hurdle yesterday but correcting this morning back towards that region at around 1.1817 at last sight. AUD weakness is driving the cross lower today, though intraday MACD is showing risks tilted to the upside still. Resistance is now seen around 1.1852, while support is likely around 1.1774 today. SGD/MYR – Lacking Directional Cues. The cross continues to waffle this morning given the lack of directional impetus in either direction. Cross is little changed this morning, sighted around 2.5721 currently. Lacking directional cues, we look for the cross to remain range-bound within 2.5665-2.5771.

       USD/MYR – Heavy. USD/MYR edged lower this morning and waffled around 3.2050 as we write. Pair tests the 3.2040-support as we write.  Risks are still to the downside with next support at 3.1940 eyed. 18-SMA and 40-SMA flags bearish risks, with the help of soggy dollar weighed on the pairing. Topsides capped by 3.2135. 1-month NDF is on the uptick around 3.2095, away from its earlier lows. That could suggest consolidation for both pairing albeit we fully expect the current heavy tone to remain.

       USD/CNY was fixed higher at 6.1549 (+0.0026), vs. previous 6.1523 (+2.0% upper band limit: 6.2805; -2.0% lower band limit: 6.0342). CNY/MYR was fixed at 0.5185 (-0.0002). USD/CNY –Rangy. USD/CNY bounced this morning to trade around 6.2090, guided by the higher fixing. Pair pares bearish momentum on the intra-day chart. Expect sideway trades today within 6.1953-6.2230 today. US Treasury Secretary Jacob J. Lew urged greater appreciation of the CNY and said that China has the ability to manage the real estate problems at home.

       1-Year CNY NDFs – Firmer. NDF bounced along with spot prices and was last seen around 6.2280, approaching the barrier at 6.2295. MACD on the 4-hourly chart shows upside risks at this point. Bids should be capped by 6.2350.

       USD/CNH – Firmer. USD/CNH rose in tandem with the rest of USD/yuan, guided higher by the dollar upmove and higher fixing. Pair was last sighted around 6.2100 and next barrier is seen some distance away around 6.2193. MACD indicates bullish risks as well and RSI shows room for upsides. We still hold our short USD/CNH call that we made on 11 Jun, with target seen at 6.1706. Hong Kong returns from its one-day break after a huge turnout at the pro-democracy protests yesterday.

       USD/IDR – Downside Risks. USD/IDR is back on the slide this morning on the back of risk-on. Pair is currently sighted around 11853 with risks still titled to the downside. Recent flows data showed foreign funds buying equities for a second straight session with a net USD44.7mn purchased yesterday, but sold-off a net IDR0.3tn of their outstanding holding of bonds in 26-30 Jun. IDR though should continue to be weighed down by the uncertain outcome of the 9 Jul presidential elections and the twin deficits. Price action today should see 11750 limiting downsides while 12000 should cap. 1-month NDF rebounded from yesterday’s low of 11791 and is currently hovering around 11913 this morning with intraday MACD showing dissipating bearish momentum. After spending a week above the 12000-level, the JISDOR was fixed lower at 11798 yesterday vs. Mon’s fixing of 11969.

       USD/PHP – Upticks. USD/PHP is on the uptick this morning but continues to trade at the lower half of the 43.528-43.831 range. Pair is currently hovering around 43.650 underpinned by a firmer dollar this morning. Latest data showed foreign funds buying a net USD27.4mn in equities yesterday and further buying today could cap upside for the pair. With MACD still showing bearish momentum, upside is likely to be capped with 43.831 still guarding topside. Support is still seen around 43.528 today. The 1-month NDF is on the rebound this morning, inching higher to 43.670 at last sight with risks now tilting slightly to the upside.

       USD/THB – Wobbly. USD/THB is wobbly this morning after onshore markets re-opened after yesterday’s Mid-Year Holiday. Pair tested our support at 33.370 this morning before rebounding to around 32.400 currently. RSI is currently printing around 18 indicating oversold conditions.  Intraday MACD is showing little directional cues currently with the pair likely to trade range-bound today. Still, should we see a firm break of our support at 33.370 nearby, a move lower towards the next support around 32.310 is likely. 32.440 is seen as resistance today.

Rates

Malaysia

      Local government bond market rallied driven by flow buying activity across the curve with the long bonds seeing strong interest from foreign names. The 20-year MGS 4/33 gapped down 6bps from last done as market was left looking for offers by day end. The rest of the curve followed suit dipping 1-4bps from yesterday.

      The IRS market however did not share the positive sentiment in government bond market. Nothing was traded. But IRS rates have been relatively stable despite 3M KLIBOR has upped 5bps recently. 3M KLIBOR stayed unchanged for the day at 3.55%.

      The PDS market was on a better bid tone to search for bonds. GG was a bit more subdued in contrast with a range of names traded on the AAA and AA curves. Levels traded 1bp lower for AAA-rated Pluses but generally wrapped around MTM levels. Tenor of choice varied from the belly to the long dated 15 years. Next key market events are nonfarm payroll this Thursday and Malaysia MPC meeting next week.

Singapore

      The SGS market saw strong paying interests in the 10-year benchmark driving yield lower by 4bps and swap spread wider by 3bps.  Bids were held firm despite trading many rounds in the interbank market. The only issues that ended unchanged for the day were those maturing in 12 years and beyond.   At market close, the SGS curve was unchanged to 4-5bps easier, with the belly and medium term issues outperforming the long end tremendously. IRS levels shared similar tone and closed slightly lower by 1-2bps, despite the UST yields moved higher intraday.

Indonesia

      IDR Government Bond Market up today around 30-150 bps across the tenor as Indonesia’s economic data came with good result. June Inflation came with 6.70% (consensus 6.79%) and trade balance positive USD70 million (consensus minus USD100 million) from a USD1.96bn, deficit in April. The yield was down to 7.76% for 5Y, 8.08% for 10Y, 8.52% for 15Y and 8.69% for 20Y. Furthermore, yield closed at 7.74/8.07/8.54/8.69% for 5Y/10Y/15Y and 20Y respectively. 

      Indonesian government held a series of sukuk auctions today and received a total of Rp1.96 tn bids versus its target issuance of Rp1.50 tn or oversubscribed by 1.31x. However, only Rp1.16 tn bids were accepted for its 6-mo and 30-yr bond. The 6-mo SPN-S02012015 was sold at a weighted average yield of 6.19% and 30-yr PBS005 was sold at 9.22%. Meanwhile, PBS006-7yr series was rejected in the sukuk auction today. Bid-to-cover ratio on today’s auction came in at 1.30X – 1.78X.

      On the Indonesia economic front, Inflation in June 2014 creeps up to 0.43% (m-t-m) from 0.16% (m-t-m) in previous month. However, yearly inflation falls to 6.70% (y-o-y) from 7.32% (y-o-y) in a month earlier (in line with our projection). The easing yearly inflationary pressure is caused by the impact of the fuel price hike last year coming to an end this month. Meanwhile, Indonesia’s trade balance in May 2014 return surplus of USD 70 million compared with a deficit of USD 1,963 million in one month earlier. Exports in May stood at USD 14,825 million, rising by 3.73% (m-t-m), but still declining by 8.11% (y-o-y). The total imports dropped to USD 14,755 million, fell by 9.23% (m-t-m), from USD 16,255 million in one month earlier.