Maybank GM Daily - 29 Oct 2014

FX

Global

      US equities rose yesterday as the stronger Oct consumer confidence, eclipsed the slide in durable goods orders for Sep. UST 10-year yields bounced towards the 2.3% again, still a touch under the level in Asia morning. Dollar slipped in response to the weaker durable goods order and edged higher to levels around 85.40 by early Asia. That allowed EUR to rise above the 1.27-figure.

      In Asia, early starter Nikkei was buoyant after a positive NY close, last seen +0.5%. Sentiments were also boosted by better industrial production in Sep which rose 2.7%m/m compared to a fall of -1.9% in the previous month. Optimism should extent to the rest of Asia later though we look for gains to be capped ahead of the FOMC decision later tonight. Markets expect the Fed to wind up the quantitative easing program tonight.

      KRW and MYR strengthened against the USD again this morning while SGD bounced off from late NY lows. Expect Asian gains to be tempered by some apprehension ahead of the FOMC outcome tonight.

G7 Currencies

      DXY – Rangy. The DXY hovered around 85.40 after Sep durable goods order pushed the greenback lower. Risks for intra-day trades have tilted to the downside as we observe a negative crossover of the 18-SMA and the 40-SMA. The 85-figure marks the next technical should the DXY index make a clean break of the 85.24-support that it tested overnight. Upticks to meet barrier around 85.91. All eyes on FOMC decision tonight.

      USD/JPY – Consolidation. The USD/JPY bounced higher overnight ahead of the Fed meeting, widening yield differentials and firmer JPY crosses against the majors. Since then, pair has come off slightly, hovering around 108.11 as companies appear to shake off the sales tax hike pushing industrial production higher to 2.7% m/m (cons.: 2.2%; Aug: -1.9%) in Sep. This suggested further monetary boost might not be needed to bolster the economy. Pair is likely to remain in consolidative trades ahead of both the BOJ and Fed meetings. Look for the moves today to remain confined within 107.20-108.38.

      AUD/USD – Bullish Risk. The pair broke above the 0.8860-barrier overnight and remained sticky around this level for the rest of the session into Asia morning. Softer dollar tone underpins the pair and seemed to allow a regeneration of bullish momentum in the AUD. Next barrier is seen at 0.89-figure while support is marked at 0.8796. AUD players still await FOMC decision for better cues.

      EUR/USD – Tilting Higher. The pair remained on an upward drift to trade above the 1.27-figure this morning, underpinned by speculations that the Fed will aim to keep rates low. The EUR bounce was in response to the softer durable goods order for Sep that came in below the expectations. Focus at the moment is still on the Fed. Interim support is seen around 1.2665 ahead of the next seen at 1.2616 while upticks are still guarded by the nearby 1.2775 ahead of the next at 1.2850.

      EUR/SGD –Upside Risks. The EUR/SGD softened from its overnight high of 1.6246 towards the 1.62-figure. The 18-SMA has crossed above 40-SMA and we are still wary of upside risks in this cross. MACD is above the signal line and above the zero line, also indicating slight bullish risks. The 1.6252-barrier is the next technical resistance to eye and a break here could mean another attempt at the 1.63-figure. Interim support is seen around 1.6173 (40-SMA) ahead of the next at 1.6120. Eyes on FOMC verdict.

Regional FX

      The SGD NEER trades at 0.07% below the implied mid-point of 1.2732. We estimate the top end at 1.2478 and the floor at 1.2987.

      USD/SGD – Consolidation. USD/SGD is currently trapped within an intraday ichmoku cloud, hovering around 1.2723 at last sight. Intraday MACD is showing little directional cues again, though the bias is tilted to the downside. Ahead of the FOMC meeting, price action is likely to be muted today with barrier still seen around 1.2775 today, while support nearby remains around 1.2720 before the next at 1.2692.

      AUD/SGD – Upside Risks. AUD/SGD took out our barrier at 1.1275 overnight and is currently hovering around that level this morning, underpinned more by the strength of the AUD than SGD weakness. Risks are still pointing to the upside as indicated by our four-hourly chart. With the breach of our barrier at 1.1275, the next hurdle to cross cross is 1.1317 for bullish extension to continue. 1.1127 should be supportive today.   SGD/MYR – Congestion. SGD/MYR softened this morning, hovering around 2.5670, on the back of MYR strength. Intraday chart is showing a slight bias to the downside today, though risks continues on the upside given the 18-SMA lies above the 40-SMA still. However, a negative crossover could take place soon that could put the cross on a downward bias. Until then, we continue to expect the pair to gyrate within the confines of 2.5630-2.5750 ahead.

      USD/MYR – Rangy. USD/MYR slipped below the 3.27-figure this morning and waffled around the 3.2680-mark, weighed by the overnight dollar retreat. Pair has settled back into range-trading within 3.2500-3.2860. The FOMC outcome tonight is the key event to monitor as we are wary of any rise in the UST yields that could drive a sell-off in the domestic bond markets. However, at this point, expectations are for the Fed to keep rates anchored. 1-month NDF steadied around the 3.2750-mark this morning, taking a breather from its overnight slide. Pressure is still to the downside, albeit within the 3.2660-3.2880 range.

      USD/CNY was fixed at 6.1405 (-0.0016), vs. previous 6.1421 (+2.0% upper band limit: 6.2658; -2.0% lower band limit: 6.0201). CNY/MYR was fixed at 0.5332 (-0.0009). USD/CNY – Heavy. USD/CNY gapped down this morning and waffled around the 6.11-figure, guided by the lower fixing Pressure is to the downside given the price action in the past few sessions. Next support remains around 6.1010 (7 Mar low). Barrier for intra-week trades is seen at 6.1292. At home, former PBOC adviser Li Daokui told China Securities Journal that financial support will be provided to first-home buyers in 2015-2016 as a form of economic boost. Another report noted that constant liquidity injections have lowered interest rates and eased liquidity conditions.

      1-Year CNY NDFs – Weighed. The NDF hovered around 6.2325 this morning, likely to remain under bearish pressure in the absence of dollar strength and ask risk sentiments remain positive. Next support is seen around 6.2263 while 6.2395 acts as a barrier for upticks. USD/CNH – Heavy. USD/CNH remained heavy and settled above the 6.1130-support. Pressure is still to the downside, as signalled by the lower onshore USD/CNY fixing as well as the absence of dollar strength. Next support is seen around 6.0973. CNH trades at a narrowing discount to CNY.

      USD/IDR – Range-Bound. The USD/IDR is on the retreat this morning, aided by the softer dollar tone overnight. Pair is sighted around 12154 with intraday momentum indicators including MACD still showing an upside bias. Fears that fuel price subsidy cuts could be delayed and cautiousness ahead of the Fed meeting could limit downside today. With the pair trapped in an intraday ichimoku cloud currently, range-bound trading is likely ahead. Resistance is seen around 12200 today while technical support is around 12110 (lower bound of the cloud) ahead of 11950. A failure to move on fuel price subsidy could see the pair head back towards the 12300-region, while a cut could see the pair head below the 12000-level towards 11870. Foreign funds sold a net USD52.69mn of equities on Tue, while adding a net IDR1.46tn to their outstanding holdings of debt on Mon, but improving risk appetite today provide support for the IDR. In contrast to the spot, the 1-month NDF remains on the uptick this morning at around 12205, still trapped within an intraday ichimoku cloud. As expected, the JISDOR was fixed higher at 12158 yesterday from 12042 on Mon. With the spot on the slide this morning, a lower fixing can seems likely today. New Coordinating Minister for Economic Affairs suggested that the government has been tasked by President Jokowi to develop detailed programs for 2015 to offset the pain from any fuel price subsidy move.

      USD/PHP – Still Rangy. The USD/PHP is on the slide this morning, helped again by the softer dollar tone, but remained well-within its current trading range of 44.500-45.050. Last sighted around 44.770, pair has lost most of its bearish momentum, though risks have now tilted to the downside with the recent negative cross-over of the 18-SMA and the 40-SMA. Lacking fresh directional cues domestically and ahead of the Fed meeting, we continue to expect the pair to remain in consolidative trades within 44.500-45.050 today. Improving risks appetite today could see foreign funds boosting Philippines asset purchases today after selling off a net USD0.4mn in equities yesterday, which would add to downward pressures on the pair today. The 1-month NDF dip slightly to 44.780 this morning, trading close to the lower end of its current tight trading range of 44.740-44.940.

      USD/THB – Wobbling. The USD/THB remained in consolidative trades, currently wobbling around 32.440-region. Yesterday, the pair had been dragged higher after custom trade data showed the trade balance sinking into a deficit of USD1.8bn in Sep from a surplus of USD1.2bn in Aug on the back of a stronger surge in imports (Sep: +14.42%; Aug: -14.17%) compared to exports (Sep: +3.19%; Aug: -7.40%). Further upside yesterday though was capped by foreign funds purchasing a net THB3.20bn in debts, offsetting their sell-off of a net THB2.32bn in equities. Pair has lost most of its bullish momentum, though risks remains on the upside given the 18-SMA still lies above the 40-SMA.  Cautious trades ahead of the FOMC meeting is likely to dominate and we should continue to see the pair consolidating within 32.355-33.500 today, though the bias is tilted slightly to the upside. According to the Finance Minister, the government is mulling plans for further stimulus measures to support the economy, but these measures are unlikely to be in place until next year.

Rates

Malaysia

      Local government bonds did not see much trades done in the secondary market apart from the usual GII 5/24 and some interest on the 15y MGS benchmark. The long end of the curve still seem cheap, but 10y MGS 7/24 look exceptionally expensive. Bank Negara announced an auction size of MYR3.5b for the retap of GII 11/17 which closes on Thursday. Tightest WI quoted was 3.67/63, but nothing was done as players wait for tonight’s FOMC meeting.

      IRS rates were quoted lower yesterday after receiving higher quotes on Monday. However, there were no trades again. Although offshore seems well supported at 3.94%, onshore players lack the drive to push beyond 3.90%. Bid/offer spreads on short end basis tightened, yet nothing traded either. 3M KLIBOR stayed at 3.76%.

      Local PDS market saw a pick up in trading activities with buying interest focused on names like Westports and BGSM. The new Kesas 5y and 6y notes traded 2bps lower from the sell down level, indicating buying interest that is gaining on the AA curve. We see value on 7-10y AA names that are still giving 80-100bps over govies.

Singapore

      SGS market mainly saw selling in the 5y benchmark and its neighbouring off the run issue SGS 9/20 by a single player. This kept the belly of the curve depressed. In contrast, activity at the long end was rather muted. SGS IRS curve mostly fluctuated in negative territory following the overnight decline in USD rates. Swap spreads ended narrower in the belly tracking the recent trend at the long end of the curve.

      Asian credit market was driven by new issues yesterday with China Travel Services (CHITRA) as the clear winner as its 10y tranche printed at CT10+345bps and tightened 20bps to +325/22bps. On the other hand, Korea Expressway strangely postponed its deal, despite having been upgraded to AA- from A+ by Moody’s, citing unfavourable market conditions. In the high yield space, HongQi did just as well and rallied 1pt to 101.00 at the break. Market seems firmer with buying on Indonesian sovereigns and Indois 24 traded higher by about 0.25pts. We reckon the market is putting on risk as it pre-empts a more dovish FOMC minutes tonight. Hutchison Whampoa is opening books for 3y and 10y notes guiding at CT3+110bps and CT10+150bps respectively and another 7y Euro tranche guiding at MS+80bps. Fair value for the HK investment grade papers would be around 90bps, and 130bps for the USD tranches.

Indonesia

      Bond prices slightly moved lower yesterday with concern on fuels-subsidy cut delayed. Hence, Coordinating Minister for Economic Affairs Sofyan Djalil told the reporter post market closed that they might announce something regarding fuel in near future without detailing it. On the other hand, central bank sees deficit in 3Q 14 trade balances. Market might be at wait and see mode ahead of post FOMC meeting statement and 3Q US GDP data. There were minimum sentiments domestically which could move the prices higher. In regards to 2015 global bond issuance, DMO might issue Indonesia sovereign in other currency such as EUR and JPY than its normal issuance in USD. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.890% (+1.2bps), 8.061% (+4.2bps), 8.404% (+3.9bps) and 8.497% (+3.4bps) while 2-yr yield shifts up to 7.504% (+2.5bps). Government bond traded thin at secondary market amounting Rp5,994 bn from Rp5,151 bn with FR0070 (10-yr benchmark series) as the most tradable bond. FR00070 total trading volume amounting Rp1,496 bn with 75x transaction frequency and closed at 104.899 yielding 8.404%.

      Corporate bond trading was heavy amounting Rp827 bn (vs average per day (Jan – Aug) trading volume of Rp657 bn). MAYA03SB (Subordinated Bank Mayapada III Year 2013 bond; Rating: idBBB+) was the top actively traded corporate bond with total trading volume amounted Rp200 bn yielding 10.993%.