Thursday, August 28, 2014

Maybank GM Daily - 28 Aug 2014

FX

Global

*      Another subdued night devoid of significant data releases gave EUR bears some reprieve. News that ECB might not ease further in its policy meeting lifted the EUR/USD from its 11-month low to around 1.3190 this morning. The bounce is modest and awaits further confirmation from perhaps German CPI, out later this session. The central bank had mentioned that no action would be taken so soon  unless inflation prints indicate a significant move towards deflation. Look for the data release as the main EUR swinger of the session.
*       Thereafter, focus should shift towards the latest estimate of 2Q US GDP in NY session. Within Asia, Philippine also releases its growth numbers and bullish expectations keep USD/PHP amid rate hike expectations.  There is also focus on Indonesia’s President-elect Joko Widodo who is expected to announce his cabinet line-up by early Oct. Elsewhere this morning, Australia releases its 2Q CAPEX report.
*       Almost all Asian currencies are on the climb and we expect little in the way of Asian bulls today. Any unexpected dips to remain shallow.

G7 Currencies

*       DXY – Correction. The DXY index may have traded lower on Wed but the index has not lost its buoyant tone, still underpinned by support around 82.35. Prices gained bearish momentum and a break of the support exposes the next technical support around the 82-figure, which coincides with the intra-day ichimoku cloud. Conditions are still a tad overbought and could slow further bids. Pullbacks are nonetheless likely tentative.  The second estimate of 2Q GDP is due today and could be watched for any bullish extension.
*       USD/JPY – Cautious. USD/JPY slipped below the 104-figure yesterday and has remained there even up to this morning on the back of peckish global equities. Pair was sighted around 103.85 currently with intraday MACD still showing mild bearish momentum. However, dips are likely to be shallow given that the risks are still to the upside as the 18-DMA continues to lie above the 40-DMA. Pair is likely to trade cautious today ahead of data out tomorrow (CPI, jobless rate and industrial output) and on the back of weakness in the equity market. Look for 103.43 to remain supportive today.
*       AUD/USD – Upticks Checked.  AUD/USD bounced above the 0.9330-barrier and hovered thereabouts, taking advantage of the dollar retreat overnight. Next barrier is seen at 0.9360 and bias is to the upside. RSI also indicates some room for upsides though limited. AUD bounced to a high of 0.9372 on 2Q CAPEX report with the headline surpassing expectations of +0.3%q/q with a print of +1.1%. Pair has since retreated towards 0.9360-barrier. We continue to expect upticks above this level to remain checked by selling interest. Support seen at 0.9330 for today while 0.9390 should cap upmove.
*       EUR/USDEyes German CPI. EUR bulls made multiple attempts at the 1.3208-barrier and last seen thereabouts still. Next resistance is seen around 1.3235-barrier ahead of the 1.33-figure. German CPI would be a key indicator to watch for further cue on ECB action on Sep. US 2Q GDP estimate thereafter should also be watched for dollar moves that could swing the EUR/USD. Support is still at 1.3160 and a softer German CPI could could take prices towards the next support around 1.3105 (Sep 2013 low).
*       EUR/SGD – Awaiting further cues. The cross tracked the EUR higher and steadied around 1.6460 this morning. This pair is still unable to shake off the bearish pressure and we see a move above the 1.6486-barrier required for further bullish extension. Barrier for today is seen at 1.6510. MACD forest on the 4-hourly chart flags a tentative upside bias in the cross but so far price moves signal that bids are still resisted. We await German CPI today for further cues followed by 2Q GDP out of the US. Next support is still at 1.6424 (recent low) ahead of the 1.6306.

Regional FX

*       The SGD NEER trades 0.19% above the implied mid-point of 1.2490 with the top end estimated at 1.2240 and the floor at 1.2739.
*       USD/SGD – Downside Risks. After bouncing higher towards 1.2481 overnight, the USD/SGD is on the slide this morning as risk appetite recovered. Pair is sighted around 1.2466 currently with risks now titled to the downside given the cross-over of the 18-DMA below the 40-DMA overnight. With our support at 1.2472 broken this morning, next support is now seen around 1.2435 (15 Aug low) should downside pressures be sustained. Topside is likely to be capped by above price action today at around 1.2481 ahead of 1.2500.
*       AUD/SGD – Supported. AUD/SGD took out our barrier at 1.1640 overnight, but continues to bounce higher this morning on the back of Australia 2Q capex print. Cross is hovering around 1.1668 currently as a result. On the back of a resurgent AUD, further upside is likely with immediate barrier at 1.1683 ahead of the next at 1.1718, while 1.1590 should remain supportive. SGD/MYR – Wobbly. SGD/MYR broke out below its recent tight trading range of 2.5280-2.5400 yesterday and is on the move towards the 2.5200-handle. Cross is sighted currently around 2.5220 with intraday MACD forest is hugging close to the zero line from below though RSI is indicating oversold conditions. Rangy trades are likely today with our former support at 2.5820 now turning resistance and new support around 2.5176.
*       USD/MYR – Bearish. USD/MYR broke below recent low of 3.1471 to waffle around 3.1460 this morning, weighed by Asian strength. Selling interest was spurred by foreign inflows into the domestic bond markets which were seen throughout the day. Our traders expect good interest in the auction on the 10yr retap GII524s today with real money involvement.  The FX move has exposed the next support around 3.1232. 1-month NDF also recovering from the overnight pullback, weighed by the dollar retreat s well. Next support is seen at 3.1277.
*       USD/CNY was fixed lower at 6.1638 (-0.0020), vs. previous 6.1658 (+2.0% upper band limit: 6.2896; -2.0% lower band limit: 6.0429). CNY/MYR was fixed at 0.5109 (-0.0017). USD/CNY – Weighed. Pair has retreated to around 6.1420, in line with most of the USD/AXJs. Bullish momentum has pared for this pair and risks are to the downside now, albeit within range 6.1292-6.1700. Interim support is seen around 6.1348. Targeted stimulus continues as PBOC lowered relending rates by 1 ppt for some rural banks in poor areas and granted CNY 20bn re-lending quota to boost rural credit on 27 Aug.
*       1-Year CNY NDFs – Bearish risk. The NDF waffled around 6.2220 for much of overnight trade and was still thereabouts in early Asia. This pair is capped by the ichimoku cloud, and next barrier is seen around 6.2307. Risks are still to the downside according to the 4-hourly chart. Pullbacks to meet support at 6.2126. USD/CNH – Rangy. USD/CNH was on the uptick this morning and hardly recovering from southbound drift seen overnight. Pair last printed 6.1443 and remained bias to the downside towards next support around 6.1426 ahead of the next at 6.1375. CNH trades at a discount to CNY now.
*       USD/IDR – Upticks. USD/IDR slipped below the 11700-handle yesterday and continues to trade below that level at around 11687 currently. Intraday MACD is showing increasing bearish momentum, albeit mild, though risks are still to the upside given that the 18-DMA lies above the 40-DMA. Meanwhile, foreign funds bought a net USD22.87mn in equities yesterday and added a net IDR1.84tn to their outstanding bond holdings on 25 and 26 Aug (latest data available). Continued improving risk appetite today should cap upside for the pair today. Month-end dollar demand should keep the pair supported ahead. Moreover, upside risks remain as there remains concerns about the president-elect’s cabinet choices, his ability to build a parliamentary majority and most importantly, his determination to deal with the problems facing the economy, particularly fuel price subsidies and nationalistic policies. Thus any downside could be limited for now with 11600 still providing support today. Topside remains guarded by 11750. The 1-month NDF is wobbling this morning, currently sighted around 11728 this morning. Intraday momentum indicators are still pointing to the downside, though risks have now flipped to the downside with the cross-over of the 18-DMA below the 40-DMA this morning. After two straight days of being fixed higher, the JISDOR was set lower at 11708 on Wed. The central bank expects full-year current account deficit (CAD) to come in around 3.2% of GDP or USD27bn, slightly lower than 2013’s 3.34% of GDP. As well, the central bank expects 3Q CAD to come in around USD8bn, and inflation forecasted around 3.7% y/y in Aug.
*       USD/PHPGapping Lower. USD/PHP gapped lower at the opening to 43.636 this morning and continues to edge lower to around 54.550 as 2Q14 GDP outperformed expectations. out this morning to around . Also helping is expectation of further risk appetite like yesterday where foreign funds purchased a net 27.3mn in equities. Intraday MACD is showing increasing mild bearish momentum, though RSI is indicating oversold conditions. With the pair now inching towards our support at 43.528, a firm break here would expose the next at 43.463 (76.4% Fibo retracement of the Jul-Aug upswing). Resistance today is seen around 44.750. The 1-month NDF slid lower this morning to around 43.610 after edging higher yesterday. Four-hourly MACD is still showing mild bearish momentum ahead, though RSI is indicating oversold conditions. 2Q14 GDP outperformed expectations, rising 6.4% y/y beating estimates of 6.1% and our economic team’s 6.3%.
*       USD/THB – Downside Risks. USD/THB is waffling this morning with the pair sliding lower currently to around 31.890. Momentum indicators continue to show little directional cues ahead, though the RSI is inching closer to oversold territory. Risks though have flipped to the downside yesterday with the negative cross-over of the 18-DMA and the 40-DMA. Meanwhile, continued foreign buying of Thai assets, like they did yesterday of a net THB0.42bn and THb0.29bn in equities and debt, should be supportive of the THB again. Two-way trades within 31.865-32.050 remains likely today, though with a downward tilt. We need to see a firm break in either direction for moves towards a wider trading range of 31.740-32.245.


Rates

Malaysia

*      In the local government bond market, foreign inflows were seen throughout the day with short-term bills and bonds up to the belly of the curve were taken 1-4bps lower. Market will see the 10y retap on GII 5/24 on Thursday. We a pretty good demand with onshore real money participation.
*       In the IRS market, rates declined by 1-6bps on the back of rally in bills and MGS. Heavy receiving interests were seen with IRS curve being brought lower and flatter. Any decent bids came out were sold down by the dealers. In contrast, 3M KLIBOR stayed firmly on its upward trajectory, climbing another 1bp to 3.70%. 2y IRS was traded at 3.83%, 4y at 3.98% and 5y at 4.03%.
*       The PDS market was better bid on some financial papers with Public Bank 2019 (senior) traded lower to 4.10% from 4.14%. Thin activity was seen on GG even though 2-way quotes were plentiful. Rantau 2019 traded to a low of 4.104% before closing back up to 4.12%. There was some bargain hunting down the curve with Kesturi 28 traded lower by 6bps and Sarawak Energy 2024 eased 4bps. Overall market sentiment remained on better buying underpinned by the bullish stance on the govies late in the afternoon.


Singapore

*      It was another quiet day in the SGS market with both IRS and SGS prices hovered within a tight range in light trading. As IRS inched lower to the year's low, SGS prices were marked high but capped by profit taking activities. The results of the 2y SGS benchmark auction came in at 0.51% cutoff with muted market reaction post auction.
*       Asian credit started off on a bid note with the new issues of ORIEAS 19 and 24 tightening almost 5-10bps from the break. We saw real money adding on risk when they could not get enough allocation from the primary book. Link REIT started off with a buying bias but profit taking set in and closed down back to print level. Some selling was seen on some HY papers like Evergrande and GZRFPR following worse than expected financials. However, the overall tone seemed to be on a buying bias. New book opened was only the Lend Lease Retail Investment which is looking to print a 7y SGD with price guidance around 3.4%.
Indonesia

*      Indonesia bond market closed lower yesterday amid Rupiah appreciation. There were minimum market sentiments moving the market yesterday. Our economist sees August CPI would creep down to 3.86% yoy from 4.53% yoy in July 2014 with prices of goods and services tend to decline and stabilized as the condition post Ramadan and Eid celebrations normalcy. July trade balance is expected to come in surplus of US$0.07 bn as a result of falling imports performance in the month of July which is caused by seasonal factors, namely the existence of a long holiday Eid celebration. Imports may fall to US$ 14.80 billion in July 2014 compared to US$ 15.72 billion in June 2014 while exports will decline to US$ 14.87 billion in July 2014 compared to June 2014, which reached US$ 15.42 billion. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.026% (+1.0bps), 8.293% (+2.1bps), 8.643% (+0.5bps) and 8.891% (-0.4bps) while 2-yr yield shifts down to 7.639% (-0.4bps). Trading volume was noted almost doubled amounting Rp18,466 bn from Rp9,514 tn with FR0068 (20-yr benchmark series) and VR0020 as the most tradable bond. FR0068 total trading volume amounted Rp4,666 bn with 185x transaction frequency and closed at 95.245 yielding 8.891% while VR0020 total trading volume amounted Rp2,084 bn with 8x.
*       Indonesia Debt Management Directorate General (DMO) release bond ownership data as of Aug 26th, 2014 which showed a significant purchase by foreigners as they have added Rp6.06 tn between Aug 19 – 22. The significant foreign inflows occurred during the conventional bond auction and aftermath. Since the purchase was done mostly through primary market, bond prices at the secondary market fail to surge. Foreign ownership now stood at its new peak at Rp430.18 tn (36.75% of total outstanding of government bond). During the conventional auction (Aug 19), banks bought Rp9.42 tn worth of government bond followed by foreigner amounting Rp2.56 tn, central bank and insurance amounting Rp1.35 tn and Rp1.12 tn respectively.
*       Corporate bond traded heavy amounting Rp678 bn (vs average per day (Jan – Jul) trading volume of Rp684 bn). PNBN04 (Bank Panin III Year 2009; Rating: idAA)) was the top actively traded corporate bond with total trading volume amounting Rp200 bn yielding 11.316%.


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