Maybank GM Daily - 13 Nov 2014

FX

Global

      US equities had a rather flat session on Wed in the absence of fresh market triggers. Only NASDAQ managed to eke out some gains, closing 0.3% higher. Earlier on Wed, UK’s ILO unemployment rate came in a tad higher than expected at 6.0% for Sep, steady from Aug. BOE’s quarterly inflation rate dealt a blow to GBP which sank to a low of 1.5760 against the USD, still on the slide this morning. The central bank expects subdued cost pressure from the labour market and the timing of a rate hike remains uncertain. News of six banks slapped with hefty fines did not help sentiments, leaving most European stocks in red.

      Japan’s machine orders for Sep slowed to a growth of 2.9%y/y from the previous 4.7%. Nikkei opened in mild black before slipping into negative. Key focus today is the next slew of China’s data for Oct – including FAI-ex rural, retail sales and industrial production. The release is expected to show economic stabilization. Thereafter, Bank Indonesia decides on policy reference rate and majority expects no monetary alteration from the central bank. Late Asia should see the release of Oct CPI numbers from some core economies out of Eurozone.  China’s credit numbers are still outstanding, due anytime this week.

      The DXY index remained in range and Asia is a mixed bag this morning. Eyes are on China’s data at 1330 (HKT) today as well as BI’s rate decision.  The lack of a lead from overnight action in the DXY suggests that intra-day moves are likely to be confined in range. 

G7 Currencies

       DXY – Shallow Dips. DXY remained trapped within the 87.21-88.20 range with dips supported by the intra-day ichimoku cloud.  There is a lack of momentum on the MACD and 18-SMA and 40-SMA have converged. We expect sideway gyrations to continue in this session. US data docket is light with only the weekly initial claims but inflation numbers are due for some of the core economies in the Eurozone. Expect any disappointment on that front to underpin the greenback.

      USD/JPY – Consolidation. The USD/JPY is wobbling this morning, pulled in two directions by the firmer dollar tone overnight as well as lingering concerns of a snap election and delay in the second sales tax hike, and weaknesses in global and domestic equities markets. Pair is seen inching lower around 115.46 with momentum indicators showing little directional clarity. Industrial production data for Sep is due later today but the impact is likely to be minor unless there are major surprises. Look for the pair to remain in consolidation within 115.00-116.10 today. Surprises in either direction today could see the pair trade in wider 113.64-117.30 range.

      AUD/USD – Rangy. AUD pierced through the top of the bearish cloud before easing off towards the 0.87-figure. 18-SMA has crossed above the 40-SMA and MACD shows steady bullish momentum for the pair. Even as risks have tilted to the upside, RSI indicates near overbought conditions with the 0.8750-barrier deterring bids. A break here could expose the next barrier around 0.8860 – a familiar barrier.

      EUR/USD – Range-bound. EUR was fairly contained within the 1.2370-1.2511 against the USD, last seen around 1.2435.  There is a lack of cues at the moment with RSI indicating ample scope on both sides while MACD was last seen at the zero line. Breaks on either side exposes next support around 1.2256 or next technical resistance around 1.2600. CPI numbers will be released from core economies. Expectations are not robust with prices to sustain another fall of -0.3%m/m for Germany in Oct. Expect any disappointment on that front to weigh on this pair.

      EUR/SGD – Risks Tilted South. The EURSGD is pressed towards the lower part of the 1.6008-1.6126 range, last printed 1.6052. Expectations of the CPI numbers out of the Eurozone due later weigh on this cross as well.  Risks are tilted to the downside with a clearance of the 1.60-figure to expose the next at 1.5836. Bounces to meet barriers around 1.6126 ahead of the next at 1.6252. Growth numbers await tomorrow.

Regional FX

      The SGD NEER trades at 0.18% above the implied mid-point of 1.2931. We estimate the top end at 1.2673 and the floor at 1.3189.

      USD/SGD – Wobbling. The USD/SGD is wobbling this morning, sighted currently around 1.2905, little changed from yesterday’s close. Pair is also currently trapped in an intraday ichimoku cloud, suggesting range-bound trading is likely ahead. In the absence of fresh impetus today, price action today is likely to be limited within 1.2806-1.2977. Any surprises in either direction though could see the pair trade at a wider range between 1.2780-1.3000.

      AUD/SGD – Rangy. After climbing higher for the past few sessions, the upswing in the AUD/SGD appears stall. Cross is currently sighted inching lower around 1.1246 this morning, dragged lower by the relative weakness in the AUD. Still, intraday momentum indicators are still tilted to the upside though the cross is overstretched currently. Look for the pair to remain in rangy trades within a tighter 1.1178-1.1317 range today.  SGD/MYR – Range-Bound.  The SGD/MYR remains in choppy trade this morning, currently inching lower on the back of the relative weakness in the SGD. Cross is seen hovering around 2.5845 with intraday momentum indicators still providing little directional clarity. In the absence of fresh impetus, we look for the cross to remain in choppy trades with resistance seen around 2.5940 and support at 2.5750.

      USD/MYR – Narrow Trades. USD/MYR opened a tad lower before rebounding to levels around 3.3370. This pair has crossed below the 18-SMA on the 4-hourly chart and could signal more downsides ahead. Crude oil prices recovered from a slip in late New York session, capping the topsides in the USD/MYR as well. Momentum indicators have turned a tad bearish and next support is seen around 3.3131, marked by the 40-SMA. 1-month NDF hovered around 3.3455, recovering from the overnight low but still within the range of 3.3330-3.3600 that has held for the past few sessions. In news, Fitch commented that Malaysia’s contingent liabilities still weigh on rating outlook.

      USD/CNY was fixed at 6.1418 (-0.0010), vs. previous 6.1428 (+2.0% upper band limit: 6.2671; -2.0% lower band limit: 6.0214). CNY/MYR was fixed at 0.5433 (-0.0019). USD/CNY – Rangy. USD/CNY slid from its open to levels around 6.1250, inspired by the lower fixing. Intra-day tools show mixed signals with 18-SMA trading above the 40-SMA while momentum indicators flags deceleration in bullish momentum. Expect this pair to remain in sideway gyrations within the 6.1140-6.1292. Credit numbers are still outstanding and could be released anytime this week. Industrial production, retail sales and FAI-ex rural will be released today at 1330 (HKT). Consensus expects the release to indicate economic stabilization. In other news, state media Xinhua reported that northern Chinese province of Henan will merge its urban and rural permanent residency system and promote migration to cities.

      1-Year CNY NDFs – Flat. The NDF took the cue from overnight dollar action and hovered around 6.2715 this morning. Pair has pared much of its bullish momentum and remain sticky around the 6.2725-barrier. Short-term uptrend still intact with next barrier seen around 6.2841. Unexpected offers to meet support at 6.2653. USD/CNH – Rangy. USD/CNH steadied around 6.1320, largely unchanged for much of Wed. News that Hong Kong has scrapped the CNY conversion limit for residents in preparation of the Shanghai-Hong Kong Stock Connect launch next Mon likely cap the pair. We continue to expect this pair to remain in sideway trades within 6.1200-6.14300. CNH trades at discount to CNY.

      USD/IDR – Range-Bound. The USD/IDR wobbling this morning, and is seen below the 12200-level at around 12188 with intraday MACD showing waning bullish momentum. The central bank meets later today but no surprises are expected. Price action today should see the pair still trading range bound within 12050-12280 today. Positive sentiments yesterday saw foreign funds purchase a net USD174.77mn in equities but the dip in global equities today could temper risk appetite today and see a flow reversal, which could weigh on the IDR. The 1-month NDF slid lower this morning to 12263 with intraday MACD having flipped and is now showing bearish momentum. The JISDOR was fixed higher at 12205 yesterday from Tue’s 12163 as expected, but could be fixed lower today given the spot’s downward drift currently. BI decision on its reference rate is on tap today and market and our economic team is looking for the central bank to hold the rate steady today at 7.50% to keep the current account deficit in check and to steady the rupiah.

      USD/PHP – Two-Way Trades. After yesterday’s downswing, the USD/PHP appears to be in consolidation this morning, even as it ticks higher to 44.887 on the back of a firmer dollar tone. Intraday momentum chart continues to show bearish momentum with the RSI showing ample room for the pair to move in either direction. We look for the pair to still trade within 44.820-44.050 today. Flows data showed foreign funds selling a net USD12.2mn in equities yesterday, and weak global sentiments today could the sell-off continuing, weighing on the PHP. The 1-month NDF continues to edge lower after the overnight surge pass the 45-figure. The 1-month is currently sighted around 44.93 with intraday MACD now showing little momentum in either direction today.

      USD/THB – Waffling. The USD/THB remains in consolidative trades within 32.585-32.966 after the upmoves on Mon. Pair is currently sighted inching lower at around 32.845 on the slide this morning following a softer dollar tone overnight. Pair is sighted around 32.853, little changed from the overnight’s close. With intraday momentum indicators showing little direction clues, continued range-bound trading within 32.585-32.966 is likely today. Foreign funds bought a net THB0.51bn in equities yesterday but sold a net THB0.27bn in debt, but risk-on mood today is likely to dampen appetite for Thai assets and hence see limited support for the THB today.

Rates

Malaysia

      Local government bonds started the day trading range-bound with players anticipating the rally to fade. The afternoon session saw Fitch’s announcement reiterating its concern on Malaysia’s contingent liabilities which led bonds to tumble and yields rose 1-5bps from the front end to the belly of the curve. The WI for MGS 7/24 sold the most by 5bps. Players will look to today’s auction with hopes of a good response to it. Lacklustre demand in the bond auction could trigger more selling on the MGS and GII curve.

      IRS market traded a tad higher in view of softer MGS and there were some trades reported on the 3y and 5y IRS. 3M KLIBOR was steady at 3.77%.

      Local PDS market was well offered yesterday with some buying interest, but generally we saw wide bid-ask spreads. On the high grade side, buying seems to be focused at the longer end of the curve with Plus 31 and Dana papers being picked up. Dana 33 traded 1bp lower, while Dana 24 traded at the previous level. We think that spreads for 10y papers are a little tight at the moment and are more attractive to long duration. For belly bonds, we saw buying interest across the AA curve with IJM 22 having about MYR60m of trade volume. As we approach the end of the year, we saw some possible significant portfolio reallocation. The market took a backseat in the afternoon trading session due to the selloff in govvies after Fitch’s announcement. We expect this would soften activities in the local PDS market for the next few days as investors gauge the effect on the benchmark yield curve.

Singapore

      SGS market did not see much interest as it opened from the previous day’s US holiday. SGS remain broadly unchanged along with SGD IRS. 10y bond swap spread closed at around -11bps level the previous day and the near target looks to be at -15bps. We saw small buying interests on the belly bonds throughout yesterday though it was pretty quiet. Overall, bond swap spread tightened 1-2bps at the end of yesterday.

      Asian credits continued to trade firmer from the previous day’s finish. Investment grades opened 2-3bps tighter, and COFCO continued to perform and traded tighter again to 200+, which is about 5bps tighter from the previous day. There seem to be quite a bit of demand for perpetual and AT1 papers which reached new tight levels. PB continues to be a buyer of BOC AT1. 10y China oil and gas names were also sought after. OGIMK 23 tightened 15bps on the recent report about Malaysia's Deputy Finance Minister confirming its letter of support. Emirates NBD, from the Middle East and rated Baa1/A+ by Moody’s and Fitch, opened book on a conventional 5y issue with IPG of MS+150-155bps.

Indonesia

      Bond market remains flat on yesterday’s trading session as investor expects that there won’t be any shock coming post central bank RDG Meeting. Consensus believes that central bank would halt its reference rate at 7.50% on today release. DMO might not change their issuance strategy in 2015 and would remain sell maximum of 20% of 2015 target issuance in foreign currency which is inline with what we have expected. On normal basis, DMO would start their issuance with global bond issuance during the 1Q of each year. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.866% (+0.1bps), 8.000% (-1.1bps), 8.348% (-0.6bps) and 8.440% (-0.2bps) while 2-yr yield shifts up to 7.472% (+0.8bps). Government bond traded moderate at secondary market amounting Rp9,597 bn from Rp5,538 bn with ORI011 (3-yr) as the most tradable bond. ORI011 total trading volume amounting Rp1,538 bn with 781x transaction frequency and closed at 101.009 yielding 8.207%.

      Corporate bond trading was heavy amounting Rp753 bn (vs average per day (Jan – Aug) trading volume of Rp650 bn). ASDF02ACN3 (Shelf registration II Astra Sedaya Finance Phase III Year 2014; A serial bond; Rating: AAA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp157 bn yielding 8.107%.