Maybank GM Daily - 26 Feb 2015

FX

Global

      US equities continue to hold on to fresh highs while EU equities eased from recent highs on concerns whether the Greek bailout extension would be accepted by national parliaments. USD remains a touch weaker, with DXY at 94.20 levels as Fed Yellen’s speech continues to weigh. EUR still stuck in the middle of 1.13 -1.14 range as markets await national parliaments (Germans and Finns) to accept the bailout extension (expected to be accepted by 28 Feb). Commodity-linked currencies (NZD, CAD, SEK) enjoyed a rally. Oil prices firmed on improving demand.

      FX vols have eased from recent highs, helped by calming of sentiment from EU-Greek bailout extension. 1w EUR/USD realized vols have now collapsed 3.4 levels, below implied vols of 8.9. Earlier this morning, AUD 4Q capex came in weaker than expected, and could continue to weigh on sentiment as Aussie 4Q GDP is due for release next week. AUD was given down to 0.7840s from 0.7880s.

      Day ahead brings US Jan CPI, durable goods, house price index. For Asia, Singapore IP is on tap. USD pullback could continue; remain better buyers on dips.

G7 Currencies

      DXY – Consolidation; Buy USD dips. USD was a touch weaker at 94.20 at time of writing as Yellen’s speech continues to weigh on USD.  We continue to caution for USD near-term pullback for now, in line with our long-standing caution since late Jan. Next support level at 93.66 (23.6% Fibonacci retracement of 87.627 – 95.527) before 92.50 (50 DMA and 38.2% Fibonacci retracement). Resistance still seen at 95.50 levels (Jan high). Daily stochastics are falling from overbought areas.  Still favour buying USD on pullbacks. Focus for the rest of the week on Jan CPI, durable goods, house price index (Thu); 4Q GDP, Feb Univ. of Michigan Sentiment, Fed’s Mester and Lockhart to speak (Fri).

      USD/JPY – Consolidation. The USD/JPY is wobbling this morning after briefly climbing above the 119-handle overnight. Pair is still off its recent high of 119.93 and remains in consolidation within a tighter 118.30-119.41 range. Pair is currently sighted higher around 118.93, within striking distance of the 119-handle again. Both intraday MACD and slow stochastics are signaling a bearish tilt ahead, suggesting that upticks could be capped. Expect continued consolidation within 118.30-119.41 today.

      AUD/USD – Look for better levels to sell rallies. AUD/USD eased to 0.7840s this morning following weaker than expected 4Q capex data, which could continue to weigh on sentiment as Aussie 4Q GDP is due for release next week. Daily MACD is still indicating a bullish bias but stochastics is approaching overbought areas and exhibits very early signs of falling. For rest of the week watch range of 0.7780 – 0.7980; need to break above 0.7880-0.7910 for another leg higher. Prefer to look for better levels to sell AUD/USD.

      EUR/USD – Consolidation; Sell Rallies.  EUR/USD remains little changed holding around 1.1360 amid EU accepting Greece’s plan and Fed Yellen taming USD bulls. Day ahead sees 1.1300-1.1400 range. Week ahead brings GE Feb unemployment change (Thu); GE, IT Feb CPI, FR Jan PPI, GE Jan retail sales (Fri).

      EUR/SGD – Consolidation. EUR/SGD remains as little changed at 1.5390. Pair remains in consolidation; wider range 1.5280-1.5490 continues to hold. Day ahead see 1.5350-1.5450. MACD continues to exhibit signs of fading momentum in bullish bias and stochastics are now falling. 4-hourly MACD and slow stochs are rising and a move towards 1.5450 could be a good level to enter tactical shorts. Still favour playing the pair from the short side.

                         

Regional FX

      The SGD NEER trades around 1.52% below the implied mid-point of 1.3338. The top end is estimated at 1.3067 and the floor at 1.3609.

      USD/SGD – Capped. The USD/SGD sank towards the 1.3530-level overnight underpinned by a softer dollar tone but has rebounded slightly. Pair is hovering around 1.3545 at last sight, pulled higher possibly by the USD/JPY climb this morning. Intraday charts are still showing a bias to the downside, suggesting upside moves could be capped. Expect 1.3530 to provide support nearby before 1.3500, while 1.3580 should cap upside today.

      AUD/SGD – Retracing. The AUD/SGD is on the retreat this morning on the back of the relative weakness in the AUD, sighted around 1.0629 currently. Both intraday MACD and slow stockhastics are showing tentative signs of turning lower, suggesting the potential for further retracement. Further retracement should see support around 1.0570 today, while rebounds are guarded by 1.0730 still.

      SGD/MYR – Sideways. The SGD/MYR breached our support level at 2.6600 this morning but has since rebounded to hover around 2.6635. Pair appears to be playing catch-up following the USD/SGD moves lower overnight. However, rebounds today are likely to be capped, given the relative weakness in SGD this morning. Expect cross to trade sideways within 2.6430-2.6770 today. Intraday charts are signalling bearish bias ahead.

      USD/MYR – Buy on Dips. Spot USD/MYR continues to ease towards 3.6050 this morning. Daily stochastics are falling and could suggest some near-term retracement towards 3.59 levels before taking another leg higher 3.5700 (23.6% Fibonacci retracement of 3.3478 – 3.6375). Next resistance at 3.65-psychological level before 3.70. We continue to see persistent weakness in the Ringgit on contingent liability exposure which could put pressure on credit rating. Still favour buying USD dips.

      USD/CNH – Buy on Dips. CNH failed to make further gains (vs. USD) despite China HSBC manufacturing PMI surprising to the upside yesterday. Media reported that China could act to support the housing market by cutting down-payment on second homes and remove sales tax after homeowners hold their property for 2 years (Note that this is non-official news). We wish to caution that Jan-Feb housing data tends to be weaker due to seasonal distortion (Lunar New Year hols saw sales offices closing and buyers putting off their purchases typically). We do however acknowledge their housing prices remain soft but housing transaction saw some pick-up in 4Q 2014. This was also driven by discounts offered by developers (hence explaining why price was soft). We do not rule out housing transaction to pick-up into Mar as buyers return and sentiment can further improve should authorities act to support the housing market. Nevertheless this supports our earlier call that it remains too early to call for a bottoming-out in China’s housing market and further supports our 3m-4m view for USD/CNH to be higher on a combination of drivers including further intensification of USD strength, ongoing domestic growth, debt, capital, fx outflow concerns and possibility of further rate cuts (RRR and lending rate). Remain better buyers on USD dips. The pair now trades 6.2720; expect 6.2650 – 6.2780 range intra-day. USD/CNY was fixed lower by -5 pips at 6.1379 (vs. 6.1384). CNYMYR was fixed lower by -17 pips at 0.5710 (vs. 0.5727).

      USD/IDR – Range-Bound. The USD/IDR is wobbling this morning, currently sighted around 12866. Pair is pulled in two directions: one by softer dollar tone and the other by renewed expectations of a further rate cut. We are now pencilling another 25bp cut to the BI reference rate possibly at the Apr meeting. Intraday charts are showing a bias to the downside today, suggesting upticks could be capped ahead. We also remain watchful for BI intervention to guard against IDR volatility. Continue to look for range-bound trading within 12800-12945 today. Foreign funds bought a net USD61.52mn in equities yesterday, and added a net IDR2.09tn to their outstanding holding of debt on Tue. The 1-month NDF has slipped below the 13000-figure and is currently hovering around 12948 this morning with both intraday MACD and slow stochastics showing bearish momentum ahead. The JISDOR was fixed higher again at 12887, a level not seen since 16 Dec 2014, but could be lower today given the spot’s drift lower this morning.

      USD/PHP – Bearish Bias. The USD/PHP took out our support at 44.110 on its way down yesterday. Pair again tested that support level this morning but has since rebounded to 44.115 at last sight on the back of a slightly firmer dollar tone this morning. Intraday MACD and slow stochastics are still showing a bias to the downside ahead, suggesting the 44.110-level is likely to be tested again. New support is now at the 44-figure with 44.370 still the barrier to cross. Foreign funds bought a net USD16.86mn in equities yesterday, helping to keep the PHP supported. The 1-month NDF edged towards the 44-figure this morning before rebounding slightly to hover around 44.080. A re-test of the 44-figure is likely. Intraday MACD is showing bearish momentum still.

      USD/THB – Range-Bound.  The USD/THB continues to be well-supported around the 32.500-level amid choppy trades. Pair is waffling this morning, pulled in of a rate cut by the BoT, especially after exports underperformed in Jan, in the other. Currently sighted around 32.530, intraday MACD and slow stochastics are signalling a bearish bias, so any upside could be capped today. There was a sell-off in the equities market by foreign funds yesterday with a net THB5.30bn sold, which offset the gains from their purchase of a net THB1.35bn in debt. Look for continued choppy trades within 32.500-32.610 today.

Rates

Malaysia

      Local government bonds ended 1-4bps lower on the back of local buying ahead of the 5y new GII 8/20s auction. Lower 10y US Treasuries and USDMYR led to buying on MGS and GII issues at the 5y point and below. All eyes are on today’s auction, though we deem the new 5y GII to be a tad expensive at the last done of 3.80%.

      IRS market still seems to have better onshore paying interest. There were no trades yesterday. 3M KLIBOR remained at 3.79%.

      In the local PDS market, buying continued with the usual suspects in the AAA space, such as longer dated Aman and Plus, trading 1-2bps tighter. GG bonds Dana 2022 and Dana 2023 also traded better with the former tightening 3bps from MTM levels. With the benchmark govvy curve steepening yesterday, we saw increased buying interest in the short dated AA space and names such as BGSM, Kesas and Tanjung Bin were traded. In addition, higher yielding AAA names such as Aquasar and Boustead were also snapped up.

Singapore

      The SGS market had a pretty interesting and choppy day. Right before the 30y SGS auction closed the bonds traded to 2.85% and the cut-off bid came in at 2.86%, which is lower than expected. The median yield was 2.80% and bid-to-cover ratio was 1.85x. It appears that asset management and lifers were more interested than PDs. Post-auction, yield on the 30y fell by as much as 11bps before there was giving interest and it ended 9bps lower than previous close. A rather jittery market as USDSGD came off, SGD funding getting softer and bond swap spreads remain tight.

      Asian credits traded firmer yesterday. Sovereign issues were taken mostly with the rally in US Treasuries. In the Chinese space, we saw some profit takers in HTISEC and HRAM with offers being fairly absorbed by the market, while Kaisa traded almost 2pts higher. As money market eases for CNH after the Chinese New Year, we saw more two way interest for CNH papers, especially from real money. With the rates going back lower, we also saw more primary deals in the pipeline this week

Indonesia

      Indonesia government bond market was opened with slow tension yesterday as USDIDR was still not softer yet after a dovish comment from Yellen. The government bonds were traded sideways in the morning session with limited volume. Meanwhile, their prices were gradually higher after London Open. The 10Y bond yield was traded to be lower to 7.14% or dropped by 3.4 bps and 20Y at 7.38%, dropped by 7.8 bps.  Onshore banks were taking profit at this level, limited the rally potential.