Maybank GM Daily - 9 Sep 2014

FX

Global

      China’s weak imports in Aug rattled the markets overnight, generating fears of weaker demand for oil. This sent Brent crude below the USD100 level for the first time since Jun on excessive supply concerns. At the same time, the polls in the UK showing the separatist ahead for the first time, sending the GDP further southwards. Also not helping was speculation that investors were underestimating the pace of US rate increases after the San Francisco Fed released a study highlighting that face.

      Unsurprising then, investors sought refuge in the dollar, sending it above the 84.00-level. All of these helped the dollar advance pass the 84.00-level, though gains in UST were not sustained with 10Y yields ending higher by 1bp to 2.471% this morning. Led by energy counters, the DJIA slipped lower by 0.15% and the S&P by 0.31%, while the NASDAQ gained 0.2%.

      The biggest mover of the night was the GBP/USD, which had its biggest drop in 14 months, slipping towards the 1.6100-levels. EUR/USD and USD/JPY were also lower, not helped by data out that showed weaknesses. Reports of shelling by rebels in the eastern regions, though the cease-fire was still generally intact, raised some concerns among investors.

      The Asian calendar is pretty light today. Market instead likely to focus on Japan’s MPC minutes for the BOJ meeting on 7-0-8 Aug for hints of further easing. Also of interest today is Australia’s home loans and NAB business conditions.

G7 Currencies

      DXY – Supported. The dollar remains on the uptick, supported by concerns over the Scottish referendum and weaknesses in the eurozone and Japan. The index has zoomed pass the 83-level overnight and is approaching our barrier at 84.3680. A firm break of this level sees the index headed towards the next resistance level around 84.753 (9 Jul high).

      USD/JPY – Consolidation. USD/JPY took out our resistance at 105.70 overnight and continued northwards pass the 106-handle. The pair is correcting slightly this morning but should be short-lived. Pair is currently hovering around the 106-region, though it remains overstretched. After buoyant moves over the past few sessions, look for the pair to consolidate around the 106-region today. Topside should now be guarded by 106.55, while 105.70, our previous resistance, should provide support today.

      AUD/USD – Consolidation.  The AUD/USD dived below the 0.93-level yesterday, taking out several of our support levels. Pair is currently sighted around 0.9280 and is approaching the lower bound of 0.92-0.94. Pair is currently in oversold conditions. Look for consolidative trades today after yesterday’s massive downswing. 0.9260 should remains supportive today, while 0.9333 should guard topside today.

      EUR/USD – Stuck In Range. Despite moves lower below 1.29-handle overnight following weak data out of the eurozone, EUR/USD remains stuck in range as focus is now on the GBP. The pair continues to look a bit over-extended and some time for digestion is likely. With a relatively quiet data calendar, we look for the pair to trade within range between 1.2820/1.3040 today.

      EUR/SGD – Range-Bound. Since Thu’s downswing, the EUR/SGD has been in consolidative trade in tandem with the movement of the EUR/USD. Cross is currently edging lower on the back of relative SGD strength this morning with intraday momentum indicators still lacking any directional clarity. Pair should continue to trade range-bound within 1.6200-1.6306 for now. A break out in either direction could widen the trading range to 1.6087-1.6380.

Regional FX

      The SGD NEER trades 0.11% above the implied mid-point of 1.2599. We estimate the top end at 1.2347 and the floor at 1.2851.

      USD/SGD – Upside Bias. USD/SGD is back on the uptick after the jump in the dollar overnight. Pair was last sighted around 1.2590 within striking distance of the 1.26-figure. With several of our barriers taken out overnight, look for bids to be capped by 1.2599 today with a break exposing the next barrier at 1.2616. Retreats today should meet support around 1.2563.

      AUD/SGD – Range-Bound. After hovering above 1.1718 for the past few sessions, AUD/SGD slipped back below that level on the back of the relative weakness of the AUD, hovering around 1.1686 currently. Lacking directional cues for now, we look for the cross to trade within the 1.1640-1.1718 trading range today. SGD/MYR – Sideways. The SGD/MYR rebounded this morning on the back of MYR weakness. Cross is currently sighted around 2.5335 within a thick intraday ichimoku cloud. Trapped within the cloud currently, expect range-bound trading within 2.5282-2.5400 today.

      USD/MYR – Supported. USD/MYR jumped to a high of 3.1920 this morning, underpinned by a firmer tone in the dollar. The pair is currently hovering around 3.189. Lacking directional cues for now and with the dollar still bias to the upside, look for the pair to remain supported today. A thick intraday ichimoku cloud has formed below that could limit downsides for now. Support nearby is seen around 3.1823 – top of the intraday ichimoku cloud. Immediate resistance is likely around 3.1922 ahead of the next technical resistance at 3.2032. month. Expect bids to remain checked by expectations of a rate hike still.

      USD/CNY was fixed lower at 6.1520 (-0.0187), vs. previous 6.1707 (+2.0% upper band limit: 6.2776; -2.0% lower band limit: 6.0314). CNY/MYR was fixed at 0.5174 (-0.0003). USD/CNY – Edging Lower. Onshore markets re-opened after the long weekend for the Mid-Autumn Festival. The USD/CNY slipped to 6.1328, edging closer to the lower end of its current trading range. This is not surprising given that the CNY was fixed lower this morning. Still, we expect the pair to remain well-behaved and trade within its current 6.1292-6.1570 today.

      1-Year CNY NDFs – Downwards Bias. The NDF continued to trade choppy. The 1-month is sighted lower around 6.2250 this morning with directional clues still lacking. We continue to look for side-way trades within 6.2204-6.2350 today with the risk tilted towards the downside. USD/CNH – Rangy. USD/CNH is on the slide this morning in tandem with the NDFs and is sighted around 6.1368 currently. Though the dollar is firmer today, which could limit dips, the lower CNY fixing this morning could pressure the pair lower today. The tussle between the two though should keep the pair rangy within 6.1320-6.1524 today. CNH trades at a discount to CNY.

      USD/IDR – Bouncing Higher. USD/IDR is bouncing higher again today, pushed higher by a resurgence in the dollar. Pair is currently sighted around 11758 with intraday MACD showing waning bearish momentum. Further upside for the pair is likely given 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. However, the search for higher returns has seen foreign funds continuing their buying spree, purchasing a net USD47.74mn in equities yesterday, and adding a net IDR7.73tn to their outstanding debt holdings last week. With dollar still bias to the upside, bids are likely to be met by resistance around 11800 today ahead of the stronger barrier at 11840, while 11640 should continue to provide support. The 1-month is back on the uptick today, climbing to 11822 currently with intraday MACD showing dissipating bearish momentum. The JISDOR was fixed lower at 11722 yesterday from 11770 on Fri.

      USD/PHP – Capped. USD/PHP hit a high of 43.901 this morning before easing back to 43.690. A thick intraday ichimoku cloud looms above, which could cap upside today. Still, with a firmer dollar tone, upside is likely with topside checked by 43.875, while downsides are likely to be limited by 43.528. The 1-month NDF is inching higher this morning to 43.700, amid choppy trades, though RSI is indicating a move closer to overbought conditions.

      USD/THB – Upticks. USD/THB took out our resistance at 32.050 on its climb higher overnight. Pair continued to advance this morning to around 32.100 underpinned by continued dollar strength. However, pair is looking a tad overstretched at this point. Foreign appetite for Thai assets was mixed yesterday with foreign funds buying a net THB1.44bn in equities but selling a net THB0.20bn debt. Immediate resistance today is seen around 32.140 ahead of the next barrier at 32.185.  

Rates

Malaysia

      Local government bond market started the week in lacklustre mode with the curve largely unchanged from previous session close. Trades revolved mostly on the front ends with yields unchanged from last. This week players will look to the next auction which is a 30y MGS retap. Current outstanding is at MYR2.5b. Levels currently are within the 4.67/62% range with a last done at 4.65%.

      IRS market had an uneventful day with no trades reported. Levels were quoted higher at the front ends. 3m KLIBOR inched up another 1bp to 3.73%.

      The PDS market remained muted probably investors preferred to the stay on the sidelines ahead of the MPC meeting on the 18th of September. Overall, bid-ask spreads on long GGs were quite wide. On the shorter end of the yield curve, AAA papers saw bidding interest but few offers were seen. Lower down the credit curve mid-to-low AA rated papers saw some trades likely driven by yield seeking.

Singapore

      SGS traded mixed with the front end below 5 years underperforming the SGD IRS whereas 10 years and above outperforming the SGD IRS. The curve steepened in line with the USD rates at US trading close. After the weaker-than-expected nonfarm payrolls, market might return to range trading with the 10y UST looking to be in the 2.55%-2.35% region.

      In the Asian credit space, market seemed to be on holiday mode alongside China and Korea. Hong Kong market is close on Tuesday for Mid-Autumn Festival. Buying interest was firm on INDON and Malaysian USD credits with good demand on PETMK 19 and EIBMAL 19. We still see heavy supply of new issuances flooding the market. Pipeline issuance includes the AAA-rated Islamic Development Bank which will start road shows this week for USD paper, which is expected to be well received.

Indonesia

      Amid profit taking were seen during the day by foreign investors, LCY bond market continue booking gains. There weren’t much market sentiment during the day as well. Trading volume was noted heavy amounting Rp9,464 bn from Rp16,322 tn with FR0068 (20-yr benchmark series) and FR0070 (10-yr benchmark series) remains as the most tradable bond with FR0068 total trading volume amounted Rp1,493 bn with 132x transaction frequency and closed at 99.305 yielding 8.448% while FR0070 total trading volume amounted Rp1,472 bn with 82x closed at 102.544 yielding 7.990%.

      Sukuk auction with indicative target issuance of Rp1.5 tn will be held Today with three series to be auctioned today which are SPN-S10032015 (Coupon: discounted; Maturity: 10 Mar 2015), PBS005 (Coupon: 6.750%; Maturity: 15 Apr 2043) and PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020). We do believe that the auction will be oversubscribe by 2.0x – 2.5x from its indicative target issuance while our view on the indicative yield are as follows SPN-S10032015 (range: 6.780% – 6.880%), PBS005 (range: 9.250% – 9.350%) and PBS006 (range: 8.190% – 8.290%). Till last week, Indonesian government has raised approx. Rp75.39 tn worth of debt through bond auction in 3Q 14 which represents 78.53% of the 3Q 2014 target of Rp96tn.

      Corporate bond traded thin amounting Rp550 bn (vs average per day (Jan – Jul) trading volume of Rp684 bn). WOMF01ACN1 (Shelf registration I WOM Finance Phase I Year 2014; A Serial bond; Rating: AA(idn)) was the top actively traded corporate bond with total trading volume amounting Rp80 bn yielding 9.859%.