Maybank GM Daily - 15 Aug 2014

FX

Global

Overnight markets remained calm, underpinned by Russian President Vladimir Putin’s assurance that the country would not want a “confrontation with the outside world”. US stock indices each ended around 0.4% higher. USTs were also bid as 10-year yields softened towards 2.40% by Asia morning.       Earlier on Thu, European markets shrugged off lower-than-expected growth numbers out of the Eurozone. There were mixed conjectures on how soon ECB would ease further. FX players were clearly not convinced as EUR even managed a peek above the 1.34-figure after US initial jobless claims edged higher to 311k compared to the previous 290K. EUR/USD was back to levels around 1.3360 this morning.       There are more data releases out of the US tonight including Empire manufacturing and industrial production. Consensuses of the data are softer than the previous numbers and may not be able to inspire USD bulls. Nikkei was last seen in small red, weighed by some profit-takers. Onshore markets in South Korea are closed for Liberation day.

      In so far, Asian strength seems to be led by the CNY and MYR bulls. Expect their respective buoyancy to be largely retained. Malaysia’s 2Q GDP will be closely watched at noon. Expectations of another strong figure have led the MYR higher throughout the week. Singapore’s retail sales are due shortly after. Philippines’ overseas remittances should be out anytime in the second half of the session

G7 Currencies

       DXY – Upside Risks.  The DXY index was back around 81.60 this morning, still supported by the intra-day ichimoku cloud which thins out ahead. Overnight session was another consolidative session within 81.40-81.70.  There is little momentum on the intra-day chart with room on both sides of the support at 81.46. That said, price action thus far has indicated a bullish bias and a break of the 81.7146-barrier exposes the 82-figure. Support is still seen around 81.35 ahead of 81.18. Empire manufacturing for Aug are due followed by Jul industrial production tonight.

       USD/JPY – USD/JPY – Supported. USD/JPY is back on the uptick after choppy trades overnight as safe-flows eased on easing global geopolitical tensions. Pair is currently sighted around 102.51 with risks slightly bullish as indicated by intraday momentum indicators. With our barrier at 102.46 breached, upside moves today could be capped by the next hurdle at around 102.68. An intraday ichimoku cloud lies below price action that could provide support for the pair today. Support remains around 102.20 today.

       AUD/USD – Tilting higher. AUD/USD bulls were deterred by the 0.9330-resistance overnight but this level is still at risk. 18-SMA has crossed above the 40-SMA overnight and signals more upmove to come. Momentum indicators suggest otherwise as MACD forest shows a deceleration of bullish momentum, in tandem with the RSI. Expect any upmpove above the 0.9330 to meet much resistance. 0.9360 is marked as the next bullish target. Support is seen around 0.9285.

       EUR/USD – Lacking momentum. EUR/USD made tighter swivels in overnight trade but is last seen around 1.3360, undeniably softer than where the pair started this week. Pair is still well within 1.3316-1.3430 range and European growth and inflation data were not sufficient to show a directional bias in prices. The 6-Aug low of 1.3333 is still a decent support for the pair ahead of the next at the 1.3316.

       EUR/SGD – Weighed towards 1.66. EUR/SGD slipped on a combination of heavy EUR and strong SGD. Last seen around 1.6650, this cross has broken the support around 1.6671 and tests the 1.6640-technical support next.  Next bearish target for this pair is still seen around 1.66-figure. Given a lack of momentum in the EUR, strength of the SGD could dominate for now.

Regional FX

      The SGD NEER trades 0.28% above the implied mid-point of 1.2497. The top end is estimated at 1.2247 and the floor at 1.2746.

       USD/SGD – Capped. USD/SGD hit an almost 2-week low of 1.2446 on improving risk appetite before rebounding overnight to around 1.2464 and is currently hovering around that region at last sight.  Intraday MACD forest continues to hug close to the zero line from below, suggesting rangy-trades are likely today. An intraday ichimoku cloud lies above price action today that could cap upside moves ahead. 1.2489 should guard topside today. Support is seen around 1.2442 (5 Aug low) and we need to see a break of this level for bearish extension to continue.

       AUD/SGD – Two-Way Moves. AUD/SGD continues to within the 1.1590-1.1640 range in the past few sessions. Pair was last sighted around 1.1611 with 4-hourly MACD forest near the zero line, suggesting two-way trades are likely. With little directional cues for the day ahead, we continue to expect range-bound trades within 1.1590-1.1640 today. SGD/MYR – Choppy. SGD/MYR continues to trade choppy before settle back below the 2.5500-handle this morning, still weighed by relative strength of the MYR. Cross is currently sighted around 2.5464 with risks still mildly to the downside though the RSI is indicating near oversold conditions. With our support at 2.5480 taken out yesterday, support nearby is seen around 2.5447 before 2.5407 (31 Oct 13 low). Topside remains guarded by 2.5630.

       USD/MYR – On the Slide. USD/MYR slithered to around 3.1735 and we see support for the pair at around 3.1660 (Jul low).MYR is now underpinned by expectations of a decent number for 2Q GDP, out at noon. Bounces to meet resistance now at the 3.1848 ahead of 3.1970.  1-month NDF was also on the slide overnight and was last seen below 3.1800. This pair is already on the uptick as investors take profit ahead of the actual growth release at noon. The average forecast for 2Q GDP is now 5.8%y/y compared to 6.2% in the first quarter. Current account for the quarter is likely to narrow to MYR 11.4bn from previous MYR19.8bn.

       USD/CNY was fixed lower at 6.1538 (-0.0007), vs. previous 6.1545 (+2.0% upper band limit: 6.2794; -2.0% lower band limit: 6.0331). CNY/MYR was fixed at 0.5155 (-0.0021). USD/CNY – Heavy. Pair slipped below the 6.1533-support (50% Fibonacci retracement of the Jan-Apr rally). Intra-day moves are likely to remain heavy in tandem with regional strength and a lack of momentum on the dollar front. Next support is marked at 6.1437. 6.1644 should cap interim bounces. At home, a trial of Qualified Domestic Limited Partnership will be allowed in Qianhai zone in Shenzhen with an initial quota of USD1bn with the purpose of starting financial leasing companies (Shanghai Securities News). Local governments will encourage yuan settlement and yuan businesses in cross-border trades (BBG).

       1-Year CNY NDFs – Two-Way Risks. The NDF bulls slipped back to around 6.2320 this morning, under the intra-day ichimoku cloud. The MACD still shows only slight bearish momentum though price action shows that offers may meet buying interest. 18-SMA has crossed over 40-SMA. We think risks are on both sides with offers to meet support around 6.2290. Topsides are not capped by 6.2375-barrier. USD/CNH – Heavy. USD/CNH is bearish, weighed towards the next target at 6.1375, some distance away. Trend is still down for this pair. Bounces to meet barrier around 6.1591. CNH trades in line with CNY.

       USD/IDR – Two-Way Moves. AUD/SGD continues to within the 1.1590-1.1640 range in the past few sessions. Pair was last sighted around 1.1611 with 4-hourly MACD forest near the zero line, suggesting two-way trades are likely. With little directional cues for the day ahead, we continue to expect range-bound trades within 1.1590-1.1640 today. SGD/MYR – Choppy. SGD/MYR continues to trade choppy before settle back below the 2.5500-handle this morning, still weighed by relative strength of the MYR. Cross is currently sighted around 2.5464 with risks still mildly to the downside though the RSI is indicating near oversold conditions. With our support at 2.5480 taken out yesterday, support nearby is seen around 2.5447 before 2.5407 (31 Oct 13 low). Topside remains guarded by 2.5630.

       USD/IDR – Adrift. USD/IDR is on the uptick this morning as concerns about the gapping current account deficit continued to dominate. Pair is sighted currently around 11693 with intraday MACD showing waning bearish momentum. Foreign funds bought a net USD31.18mn in equities yesterday, and improving risk sentiments could see further purchases today that could support the IDR, capping its drift higher. The intraday ichimoku cloud, where the price action is currently, is thinning, though another cloud is forming ahead, which suggest the pair is likely to continue its drift ahead. We continue to expect rangy trades today within 11600-11750. The 1-month NDF remains elevated above the 11700-handle this morning amid choppy trades. 1-month is currently wobbling around 11753 with four-hourly MACD still showing mild bullish momentum. As expected, the JISDOR was fixed lower yesterday at 11667 after Wed’s fixing of 11683.

       USD/THB – Still Oversold. Since yesterday’s bearish engulfing move, USD/THB has been consolidating around 31.850-region. Pair is currently hovering around 31.848 with 4-hourly MACD still showing mildly bearish momentum, though RSI is indicating oversold conditions still. This was despite a dip in foreign purchases of Thai assets yesterday with a net THB0.58bn and THB1.12bn in equities and debt sold off. However, improving risk sentiments today could see a reversal with inflows supporting the THB. Price action though could be limited today after yesterday’s aggressive downmove and with the pair likely to remain in consolidative trades ahead within 31.800-31.900. We reckon further downsides could be limited as domestic political concerns remain and 2Q GDP on Mon is eyed, together with possible BoT intervention.

Rates

Malaysia

      Local government bond market saw the 7y MGS 9/21 auction today garnered a healthy BTC of 2.0x, but auction yield slightly tailed. The bond cheapened from the last WI done despite the 10y UST rallying overnight and a stronger MYR against the USD. Investors remained cautious and were looking to sell on rally. By the end of the day, yields generally traded higher as players wait for the GDP release on Friday noon, with some players expecting a better-than-expected print.

      In the IRS market, short ends were well supported with the higher 3M KLIBOR which climbed another 1bp to 3.62%. However, 5y and above IRS seemed capped by the depressed global rates and generally dovish outlook from central bankers talking down global growth. Basis levels are tight but looks set to stay with loose monetary policies externally providing ample liquidity to the market.

      In the PDS market, GG and AAA names were bidded across the tenors. Offers were little and 3-5bps lower. Riding on the positive sentiment, we understand there are several pipelines, including the PTPTN and MAHB (doing a road show soon).

Singapore

      SGS market rallied with yields from the 5y point onward generally lower by 4-6bps, likely driven by tepid signs of US economy growth as the overnight release of US retail sales data disappointed at 0.0% against market consensus of 0.2%. Lower UST yields during Asian trading hours lent support to the rally in SGS generally throughout the day.

      In the Asian credit market, PBs continued buy up Chinese property names. The new CCB Tier 2 was trading at 274/272 range after being priced at +275 overnight. We still see good two way deals for Malay and Thai names. G8 Education Singapore did a retap at the price of par (Coupon 4.75%) with final issue size at SGD85m.

Indonesia

      Indonesia bond market closed higher amid current account deficit widens and unchanged central bank reference rate. As expected, 2Q 14 current account widen to 4.27% of GDP or higher than our economist expectation of 4.08% of GDP while on a full year basis, central bank sees that CAD would reach around 2.95% of GDP or an improvement compared to current account balance. Meanwhile central bank halts its reference rate at 7.50% which was in line with our economist expectation. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.996% (-2.6bps), 8.219% (-2.9bps), 8.625% (-3.4bps) and 8.893% (-2.3bps) while 2-yr yield shifts down to 7.580% (-9.1bps). Trading volume remains thin amounting Rp5,037 bn from Rp6,717 tn with FR0068 (20-yr benchmark series) and FR0070 (10-yr benchmark series) as the most tradable bond. FR0068 total trading volume amounted Rp1,003 bn with 61x transaction frequency and closed at 95.227 yielding 8.893% while FR0070 total trading volume amounted Rp958 bn with 28x transaction frequency and closed at 101.011 yielding 8.893%.

      Corporate bond trading volume remains thin amounting Rp260 bn (vs average per day (Jan – Jun) trading volume of Rp677 bn). BSBR06 (Bank Nagari VI Year 2010 bond; Rating: _idA) was the top actively traded corporate bond with total trading volume amounting Rp35 bn yielding 9.8309%.