Maybank GM Daily - 1 Oct 2014

FX

Global

The end-of-quarter position adjustments saw equity indices ended in red on Tue. USTs were hit as well and the benchmark 10-yr yield closed a tad higher, just a within striking distance of the 2.50%. Data did not help. Sep consumer confidence index fell to 86.0 from the previously revised 93.4. Even so, the DXY index rose, underpinned by the soggy EUR. Advanced estimate of the Eurozone core CPI for Sep missed consensus (0.9%y/y) with a print of 0.7%. On the side, US reported its first Ebola case.       Onshore markets in China and Hong Kong are closed for National Day. Markets to resume in China on 8 Oct (next Wed). China’s PMI-mfg (official) for Sep came in at 51.1, steady from Aug. Japan’s Tankan survey reflected an improvement in business sentiments in quarter that ends on Sep. Early Asian starters have so far started the session on a cautious note, ahead of more releases later including, Thailand and Indonesia’s inflation numbers as well as trade numbers from Indonesia.       Later tonight, we have the first employment report (ADP) out of the US before NFP on Fri. Singapore’s PMI numbers will also be out at 2130 (HKT). Expect a firm dollar tone to keep USD/AXJs supported  for intra-day trades.

G7 Currencies

DXY – Firm. Dollar was lifted by the EUR retreat and the DXY index leveled off around the 86-figure. Intra-day chart shows a lack of momentum at this point and we expect the greenback to retain its buoyancy above the 85.752-level, marked by the 18-SMA on the 4-hourly chart. Next barrier that we have pencilled in is seen at 86.962 but interim resistance is formed at the fresh recent high of 86.218. The ADP report for Sep will be eyed for further bullish cues.       USD/JPY – Buoyant. The USD/JPY continued its slow march towards the 110-mark, underpinned by a firmer dollar tone. Pair is still on the uptick, sighted around 109.77, buoyed by the possibility of further BOJ easing after the sharp deterioration in business conditions in the non-manufacturing sector. We need to see a break of the recent high of 109.85 for bulls to advance towards the 110-figure ahead of the next at 110.66. Though business sentiments for large manufacturers rose in the 3Q Tankan results released this morning, a deeper reading of the survey showed that sentiments of the non-manufacturing sector were sharply lower, suggesting that output could be weak again in 3Q.       AUD/USD – Downward Tilt. AUD/USD slipped towards the lower bound of the 0.8684-0.8770 range after Aug retail sales missed expectations (0.4%m/m) with a print of 0.1%. Earlier, China’s Sep PMI-mfg was static from Aug but the figure 51.1 reflects growth in the manufacturing scene which should cushion the AUD/USD on dips. Last seen around 0.8690, Intraday MACD shows waning bullish momentum as the pair remains pressured by the 18-SMA on the 4-hourly chart. Expect the pair to remain in a holding pattern, with a downward tilt, ahead of the RBA annual report tomorrow (1315 HKT) and US NFP on Fri.       EUR/USD – Lacking Momentum. The EUR/USD touched a low of 1.2571 before reversing modestly higher at around 1.2620 this morning.  The softer estimate of the Eurozone core CPI triggered the EUR/USD offers yesterday. More PMI-mfg numbers are due today for Sep. 1.25-figure is the next technical support level to watch. Barring a big downside surprise, we do not expect the domestic data today to have a significant impact on the currency. Rather, our eyes are on ADP report which could be the bigger swinger via the greenback.

       EUR/SGD – Heavy. The EUR/SGD dipped to a low of 1.6042 before edging back to levels around the 1.61-figure. With 18-SMA still below the 40-SMA, pair is expected to remain heavy with next support is seen around 1.6020. PMI-mfg numbers are due from Eurozone as well as Singapore. The past few PMI-mfg numbers have not been inspiring. Rebounds are likely to be deterred by the 18-SMA at 1.1649 and 40-SMA at 1.6198. Save gun powder instead for the US ADP report tonight, the ECB policy meeting on Thu and US NFP on Fri.

Regional FX

      The SGD NEER trades 0.41% above the implied mid-point of 1.2826 with the top end estimated at 1.2570 and the floor at 1.3081.

      USD/SGD – Slow Grind Higher. USD/SGD is continuing its slow grind towards the 1.28-figure this morning, under4, coming within striking distance of our barrier at 1.2780. A break of this barrier could easily trip the 1.28-barrier and see the pair head towards the 2014 high so far of 1.2830. Manufacturing PMI for Sep is out later this evening.

      AUD/SGD – Downside Risks. The AUD/SGD continues to test our 1.1094-support, but have so far failed to firmly break below that level, last sighted around 1.1102. A still bearish AUD should continue to weigh on the cross with a break of the 1.1094-support exposing the next support at 1.098. Any rebound is likely to be capped by 1.1215 still.  SGD/MYR – Sideways. The SGD/MYR is edging lower this morning, hovering around 2.5712 at last sight. Intraday MACD continues to show little directional cues, suggesting sideway trades remains likely ahead. Support is still seen around 2.5633 (38.2% Fibo retracement of the Jan-Aug downswing) today while the immediate barrier is around 2.5750 ahead of the next at 2.5785.

      USD/MYR – Uptrend intact. USD/MYR edged higher this morning, catching up with overnight dollar upmove and was last seen around 3.2860. The barrier at the 3.29-figure could be breached sooner than we think and we eye next resistance at 3.2960. Support is seen at 3.2660. 1-month NDF was still on the climb this morning, last seen around 3.2945. Next barrier is seen at 3.3077. Strong dollar momentum continues to underpin both the NDFs and spot prices.  In the domestic bond markets, strong interests were seen for MYR govvies throughout Tue, noted by our traders even with a weaker MYR. Foreign names were especially interested in the 7yr and 10yr.

      As of 30 Sep, USD/CNY was fixed at 6.1525 (-0.0014), vs. previous 6.1539 (+2.0% upper band limit: 6.2781; -2.0% lower band limit: 6.0319). CNY/MYR was fixed at 0.5298 (-0.00210). USD/CNY – Onshore markets closed for National Day Holiday.  The official PMI-mfg for Sep came in close to expectations at 51.1.

      1-Year CNY NDFs – Sideways. The NDF has settled into sideway trades with support seen around 6.2625. Last seen at 6.2705, expect downsides to remain supported by dollar strength and bias to remain on the upside even as onshore markets are closed for National Day holidays. USD/CNH – Onshore markets are closed for China’s National Day.

      USD/IDR – Upside Risks. The USD/IDR is bouncing higher again this morning but has come-off from the recent high of 12255 hit yesterday. Pair is currently hovering around 12194 with intraday MACD still showing bullish momentum, though the pairing is overstretched at this moment. Ongoing concerns about the incoming president’s ability to mobilize support within a hostile incoming parliament to push through necessary but unpopular reforms as well as twin deficits concerns are also weighing on the IDR. Waning risks appetite is likely to weigh on the IDR as well as they did yesterday where foreign funds sold off a net USD74.19mn in equities. Given these concerns and expectations of even more dollar upticks, further upside seems likely. Upside today is likely to be capped by 11280 today with 12100 likely to limit downside. The 1-month NDF is on the slide this morning but remained elevated at 12329 at last sight. Intraday MACD has flipped and is now showing bearish momentum. The JISDOR remained above the 12000-figure, fixed at 12212 on Tue from 12120 on Mon.

      USD/PHP – Shallow Dips. Unlike its peers, the USD/PHP is on the retreat this morning, hovering lower around 44.952 with the pair having lost most of its bullish momentum. The 45-figure continues to be the hurdle to cross this risks BSP intervention. We still expect immediate resistance around 45.050 ahead of the next at 45.325. Still, dips are likely to be shallow given expectations of dollar strength with support still seen around 44.580 today. The 1-month NDF is on the slide this morning, hovering just a tad below the 45-figure at 44.990 with intraday MACD now showing increasing bearish momentum.

      USD/THB – Upside Bias. USD/THB is still on the climb higher after the upmoves during the European session. Pair is currently sighted around 32.440, underpinned by the firmer dollar tone and waning risk appetite. This was reflected in the continuing sell-off of Thai assets yesterday by foreign funds with a net THB0.43bn and THB0.42bn in equities and debt sold. Risks remained to the upside given the 18-DMA lies above the 40-DMA, though the pair is approaching overstretched conditions. Bids today are likely to be still capped by 32.500, while offers should see support around 32.355 today. Sep CPI is due later today and market is expecting headline inflation to moderate to 1.97% y/y from 2.09% in Aug, while our economic team is expecting 2.0%. Month end data releases showed both private consumption and investment contracting in Aug by 0.8% and 5.6% y/y vs.  +0.3% and -3.6% in Jul. Though the data prints were weak, the BoT remained optimistic that a V-shaped recovery remains possible. Seo CPI is eyed later this afternoon and consensus is for headline inflation to accelerate by 4.57% y/y from 3.99% in Aug, though our economic team expects it to come in a faster 4.76% clip. As well, Aug Trade data will be released at the same time and market is expecting exports and imports to expand by 8.65% and 9.40% y/y and trade balance to widen slightly to USD130m from Jul’s USD124mn.

Rates

Malaysia

      Local government bonds were well supported throughout the day despite MYR weakening against USD. We saw buying flows especially in the afternoon session as 7y MGS 9/21s and 10y MGS 7/24s were taken up by foreign names and the bonds closed 1bp lower from yesterday’s trade.

      There were no trades in the IRS market today. IRS were generally quoted 1bp higher due to higher KLIBOR. 3M KLIBOR was up by 1bp to 3.74%. This came as much of a surprise to certain offshore parties who believed KLIBOR should decline as there was no rate hike.

      The local PDS market had a fairly muted and lacklustre day as there was no lead in the market to provide a direction. The bullish USDMYR did not help the sentiment. Most trades were done around MTM levels and bigger volume trades appear to be for asset reallocation since today is the last day of 3Q. Genuine buyers seemed to be more interested in adjusting their duration portfolio to short dates as quite a few papers maturing in 2014 and 2015 were traded. We do not expect much buying interest to come in this week if the sentiment persists.

Singapore

      Local government bonds were well supported throughout the day despite MYR weakening against USD. We saw buying flows especially in the afternoon session as 7y MGS 9/21s and 10y MGS 7/24s were taken up by foreign names and the bonds closed 1bp lower from yesterday’s trade.

      There were no trades in the IRS market today. IRS were generally quoted 1bp higher due to higher KLIBOR. 3M KLIBOR was up by 1bp to 3.74%. This came as much of a surprise to certain offshore parties who believed KLIBOR should decline as there was no rate hike.

      The local PDS market had a fairly muted and lacklustre day as there was no lead in the market to provide a direction. The bullish USDMYR did not help the sentiment. Most trades were done around MTM levels and bigger volume trades appear to be for asset reallocation since today is the last day of 3Q. Genuine buyers seemed to be more interested in adjusting their duration portfolio to short dates as quite a few papers maturing in 2014 and 2015 were traded. We do not expect much buying interest to come in this week if the sentiment persists.

Indonesia

      Indonesia bond market recorded losses again ahead of inflation and trade balance data. The event of conventional auction and continuation of Rupiah depreciation has also added pressure to weakening of LCY bond market. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.314% (+13.0bps), 8.492% (+9.2bps), 8.891% (+9.4bps) and 9.050% (+6.9bps) while 2-yr yield shifts up to 7.733% (+13.1bps). Government bond traded heavy at secondary market amounting Rp14,448 bn from Rp10,156 tn with FR0071 (15-yr benchmark series) as the most tradable bond. FR0071 total trading volume amounted Rp4,949 bn with 106x transaction frequency and closed at 100.868 yielding 8.891%.

      Indonesian government held a series of auctions yesterday and received a total of Rp19.87 tn bids versus its target issuance of Rp10.00 tn or oversubscribed by 2.0x. However, only Rp7.75 tn bids were accepted for its 3-mo which was sold at a weighted average yield of 6.33975%, 1-yr SPN at 7.05517%, 15-yr FR0071 at 8.93967% while 20-yr FR0068 was sold at 9.05940%. Incoming bid during were mostly clustered at the 15-yr and 20-yr benchmark series. FR0069 (5-yr benchmark series) bids was rejected during the conventional auction. Awarded average yield during the auction were either slightly higher or lower than our expectation yet the incoming bids came in line with our expectation. Overall, we see the declining incoming bids and higher demand of weighted average yield occurred as a result of improving US data last which raise the discussion of how fast will the Fed raise their FFR. Instability of political condition with Indonesia parliament passing the bill to scrap direct election for regional leaders has also contributed to the declining incoming bids during the auction. Several domestic data such as September inflation and August trade balance data along with upcoming NPF that may be published this week may resist investors taking position at this current point of time.

      Aside from the conventional auction, DMO has also conducted PBS007 issuance worth of Rp1 tn through private placement. PBS007 is a 26 years sukuk bond paying coupon rate of 9.00%. However, PBS007 was sold at a discount since the yield at issuance was at 9.10%. PBS007 is available at the secondary market as could be traded.

      Corporate bond traded thin amounting Rp144 bn (vs average per day (Jan – Aug) trading volume of Rp657 bn). APLN01CN1 (Shelf registration I Agung Podomoro Land Phase I Year 2013; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp24 bn yielding 9.767%.