FW: Maybank GM Daily - 12 Nov 2014

FX

Global

      Veteran Day witnessed a surge in the USD/JPY above the 116-figure in Asian hours before easing off to trade within 115-116 for the rest of the NY session. Exchanges were opened but trading volume was light with most players out for the holiday and benchmark indices closed flat.

      Japan’s tertiary industry index gained 1.0%m/m in Sep. That added to the buoyant sentiments in Asia as Nikkei traded 0.7% higher as we right. More positive data elsewhere as Australia’s Westpac consumer confidence index also improved to 96.6 in Nov from the previous 94.8, allowing AUD to extend its overnight upmove to levels around 0.8690.

      China’s Oct credit numbers are still outstanding, due anytime this week. Asia has a light data docket today. The European session may see more action as UK releases the ILO employment data as well as BOE’s quarterly inflation report.

      Broad JPY weakness had lent support to most majors overnight. AUD and EUR managed to gain against the greenback as well. Asia is a mixed bag this morning with MYR in the lead after oil prices stabilized overnight. KRW was on the other end of the spectrum, weakened another 0.5% this morning as rate cut expectations weigh. USD/AXJs are likely to trade lower amid the current positive mood but dips will be supported by dollar resilience.

G7 Currencies

       DXY – Shallow Dips. DXY slipped from its late Asian highs and hovered around 87.50 this morning. Momentum indicators have turned a tad bearish though dips are likely to remain underpinned by the ichimoku cloud on the intra-day chart with technical support still seen around 86.96. Interim support is seen around 87.21. Fed Plosser speaks today and no tier-one data is due.

       USD/JPY – Tilted Higher. The USD/JPY surged briefly above the 116-figure – a 7-year high - yesterday underpinned by rumors that PM Abe would call for a snap election to get a mandate to delay the next consumption sales tax hike. The pair hit 116.10 before easing back below the 116-figure and is currently hovering around 115.85, tempered by broad dollar weakness. Aside from BOJ ultra loose monetary policy and elections rumors, there is little other impetus driving the pair today. Instead, action on the dollar front is likely to be a key driver today with support nearby around 115.00 before the next at 113.64. With several of our barriers taken out, upticks today are likely to meet resistance around 116.10 (yesterday’s high) ahead of the next at 117.30.

       AUD/USD – Rangy. AUD bounced overnight, led by the AUD/JPY bids and further underpinned by the better consumer confidence data released this morning. Westpac consumer confidence rose to 96.6 in Nov from 94.8. The pair was last seen around 0.8680 though early bids were capped by bearish ichimoku cloud on the 4-hourly chart. This pair still hovers within the cloud but bids ran into offers as prices near the upper bound around 0.8732.

       EUR/USD – Range-bound. EUR bounced above the 1.24-figure, underpinned by EUR/JPY bids and hovered around 1.2460 at last sight, back on the downtick. Intra-day chart shows slight bullish momentum but bearish cloud above continues to cap downsides. Expect two-way trade to extend within 1.2370-1.2510. Expect this pair to retain range-bound trade until the end of the week. CPI and GDP figures are due on Fri.

       EUR/SGD – Tight Swivels. The EURSGD was lifted to a high of 1.6131 before softening towards the 1.61-figure this morning. Dips remained supported by soggy SGD and resilient EUR but we retain the view that this cross still needs to sustain a break above the 40-SMA at 1.6100 for further bullish extensions towards 1.6252. Major data release lies in wait at the end of the week with CPI and GDP due from the Eurozone on Fri.

Regional FX

       The SGD NEER trades at 0.16% above the implied mid-point of 1.2940 with the top end estimated at 1.2681 and the floor at 1.3198.

       USD/SGD – Range-Bound. The USD/SGD is regaining some of its overnight losses, bolstered in part by JPY weakness. Pair was last sighted around 1.2932 with intraday chart providing little direction cues today. A combination of positive equities and dollar resilience today should keep the pair in range-bound trade within 1.2806-1.2977 today. Any surprises in either direction could see the pair trade at a wider range between 1.2780-1.3000.

       AUD/SGD – Buoyant. The AUD/SGD on the upswing, underpinned by the relative weakness in the SGD. Cross is edging back towards the upper bound of its current trading range of 1.1026-1.1275, sighted around 1.1226. Intraday charts are showing the bias tilted to the upside while RSI is indicating overstretched conditions. A break of the 1.1275-barrier today would expose the next hurdle at1.1317. 1.1026 should continue to provide support. SGD/MYR – Consolidation With Upside Tilt.  The SGD/MYR is on the uptick this morning after yesterday’s downswing. Cross is sighted around 2.5885 currently with intraday momentum indicators providing little directional clarity. In the absence of fresh impetus, we look for the cross to trade range-bound with an upward tilt today within 2.5750-2.5940.

       USD/MYR – Narrow Trades. USD/MYR hovered around 3.3450 this morning, underpinned by the 18-DMA on the 4-hourly chart. 3.3511 is still a strong barrier and prices may remain in tight swivels. A break on the upside opens the way towards 3.3742. On the other hand, offers below the 3.3375-support, marked by the 18-SMA could trigger more aggressive offers towards the 40-SMA at 3.3085. 1-month NDF has pared much of its bearish momentum and is also wedged between the 40-SMA at 3.3470 and the 3.36-figure. Industrial production for Sep missed the consensus by a hair with a print of 5.4%y/y, slowing from the previous 6.5%. This had likely softened expectations for 3Q GDP, due later on Fri.

       USD/CNY was fixed at 6.1428 (+0.0015), vs. previous 6.1413 (+2.0% upper band limit: 6.2682; -2.0% lower band limit: 6.0224). CNY/MYR was fixed at 0.5451 (+0.0006). USD/CNY – Upward Tilt. USD/CNY hovered around 6.1240 this morning, tilted to the upper bound of the 6.1083-6.1264 range. Intra-day tools continue to show bullish momentum. Expect pair to remain on the rise with a break of the 6.1264-barrier to meet next resistance around 6.1292. Credit numbers are still outstanding and could be released anytime this week. Focus on bilateral talks between US President Obama and China’s Xi Jinping after the Asia-Pacific summit.

       1-Year CNY NDFs – Upside Risks. The NDF hovered around 6.2735 this morning, still sticky around the 6.2725-barrier. Momentum is bullish this morning with next target seen around 6.2841. Unexpected offers to meet support at 6.2653. Trades are likely to remain tilted to the upside. USD/CNH – Rangy. USD/CNH hovered around 6.1320, led higher by onshore peers. However, upmove is less drastic than the NDFs as gains remained capped by news of the Shanghai-Hong Kong Stock Connect, scheduled for its official launch on 17 Nov. Momentum has tilted to the upside and next barrier is seen around 6.1375. 6.1200 to deter aggressive offers. CNH continues to trade at a discount to CNY.

       USD/IDR – – Rangy. The USD/IDR is inching slightly lower this morning, helped by in part by market whisper that the President will announce the fuel price increase when he returns from his overseas trip this Sun. Pair is seen around 12213 at last sight with intraday MACD showing bullish momentum, which is likely to limit downsides today. We expect the pair to remain in rangy trades today within 11950-12280 today. Foreign funds bought a net USD76.81mn in equities yesterday but removed a net IDR4.2tn from their outstanding holding of debt. Continued buying today could provide the IDR with a lift today. The 1-month NDF is back above the 12300-region this morning, sighted around 12301 with intraday MACD showing bullish momentum. The JISDOR was fixed higher at 12163 yesterday from Mon’s 12138 and is likely to be fixed higher given the spot’s elevated position today.

       USD/PHP – Sideways. The USD/PHP on the uptick this morning underpinned by a firmer dollar tone but still well-within its current trading range. Pair is sighted just a tad below the 45-figure at 44.940 this morning with intraday MACD still showing bearish momentum. In the absence of fresh impetus, we look for the pair to remain in sideway trades within the confines of 44.820-44.050 today. Foreign funds bought a net USD22.5mn in equities yesterday, and positive sentiments today could see continued buying, providing support for the PHP today. The 1-month NDF is edging this morning, hovering around the 45-figurewith intraday MACD showing little momentum in either direction today.

       USD/THB – Consolidation. The USD/THB is on the slide this morning following a softer dollar tone overnight. Pair is sighted around 32.855 currently with intraday MACD showing little momentum in either direction today. With the lack of fresh impetus driving the pair today, we look for consolidative trades within its current trading range of 32.585-32.966 today. Yesterday flows data showed foreign funds selling a net THB0.53bn and THB3.16bn in equities and debt, but the uptick in global equities overnight could see renewed buying interest, thus providing support for the THB today. The Finance Minister said yesterday that he had approved the BOT’s proposal to use headline inflation, instead of core inflation currently, to guide monetary policy. The change is to be effective in 2015.

Rates

Malaysia

      Local government bond market opened with sustained buying momentum from foreign names as the curve flattened further from the 15y to the 30y point. Price gains were capped by noon due to profit takers, while the front end of the curve was unchanged with a bias to sell better. Issue size for the 10y MGS 7/24 retap was announced yesterday morning at MYR3.5b as expected. The auction closes on Thursday. WI trading was done at 3.785%. Prices softened in the afternoon session as players became nervous due to a stronger USD against MYR.

       The IRS curve steepened slightly with the belly to the long end rising by 2-3bps, while the short end was up by about 1bp. 3M KLIBOR unchanged at 3.77%.

       The local PDS market saw significant volume transacted at MYR905m, but most of the buying was at the belly of the curve for Public Bank's notes which saw a combined total of MYR850m trades. Public Bank sub-notes 2023 tightened 5bps to close at 4.50% yesterday. We think that the callable papers offer a good yield pickup given a relatively safe name. DanaInfra opened its books yesterday with 7y, 15y and 20y papers. In view of the flattening govvy yield curve, we see more value in picking up the 20y DanaInfra paper which was guiding at a spread of 50-57bps to the benchmark curve.

Singapore

      SGS prices dipped about 3bps on opening and remained around that level until close. SGS yield curve rose 2-3bps from the 5y point onwards, while the short end was up by about 1bp. Overall it was a quiet day but bond swap spread widened 2bps.

       Asian credits were rather firm considering that US onshore market was closed for the holiday. Some accounts seem to be focused on year-end carry trades. Spreads tightened by 2-3bps and we continue to see accounts adding risk to some investment grade papers. Emerging market sovereign cash opened lower on the back of lower Treasury. We saw some demand for Thai and Malaysian names even though the spreads were relatively tight compared to peers. The new COFCO did well and traded tighter by 13 bps from its print of 215bps. Profit takers pushed spreads back up to 208/206 area. Chinese high yields were mostly unchanged.

Indonesia

      Notting much happened in Indonesia bond market yesterday as the market traded with a thin range amid minimal sentiments. Market continues to wait for upcoming 3Q current account publication along with BI RDG Meeting results. Developing news came from Indonesia Ministry of Finance which is scheduled to sign a new rule this year in regards for simplifying government paid import tax for shipbuilding industry with a possibility to charge 0% import tax. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.866% (+1.9bps), 8.011% (+0.0bps), 8.354% (-0.2bps) and 8.442% (+2.1bps) while 2-yr yield shifts down to 7.465% (+7.0bps). Government bond traded thin at secondary market amounting Rp5,538 bn from Rp7,654 bn with FR0070 (10-yr benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp973 bn with 24x transaction frequency and closed at 102.345 yielding 8.011%.

       Corporate bond trading was heavy amounting Rp611 bn (vs average per day (Jan – Aug) trading volume of Rp650 bn). PPKT02 (Pupuk Kaltim II Year 2009; Rating: idAA+) was the top actively traded corporate bond with total trading volume amounted Rp150 bn yielding 10.539%.