Maybank GM Daily - 23 Mar 2015

FX

Global

Equities closed in positive territories last Fri. USD tumbled amid a growing shift in consensus for rate hike to come later than earlier. Most currencies including EUR, GBP, AUD, NZD rebounded off their recent lows. USD/JPY eased towards 120-handle. Oil prices rebounded after US oil rig count fell to its lowest levels since Mar 2011 amid USD weakness. Day ahead USD may consolidate with bias to the downside. USD/AXJs likely to take a breather from recent moves.        Focus this week on 9 sessions of Fed speaks - Mester (Mon, Tue), Williams (Mon), Bullard (Tue, Thu), Fischer (Tue, Fri), Evans (Wed), Lockhart (Thu). For Asia, Philippines BSP and Taiwan CBC meeting (26 Mar), which we expect both to keep rates on hold.  China Mar HSBC manufacturing PMI (50.4 Cons.) will be closely watched. Singapore is also due to release Feb CPI inflation (Mon) and Feb Industrial production (Thu).        Other key data we are watching for the week includes US Feb CFNAI; US Feb existing home sales (+2.5% m/m Cons.); EC Mar Consumer confidence (Mon). For Tue, US Fed CPI (+0.2% m/m Cons.), Mar Manufacturing PMI (55.3 Cons.), new home sales (-1.3% m/m Cons.); EC, GE, FR, JP services/manufacturing/composite Mar PMI; UK Feb CPI, PPI and RPI are on tap. For Wed, US Feb durable goods orders (+0.6% Cons.); GE Mar IFO; JP Feb PPI services, PH trade data are on tap. For Thu, US Feb services, composite PMI, Kansas City Fed Manufacturing are on tap; FR 4Q GDP (+0.2% y/y prior); GE Gfk consumer confidence (9.7 prior); UK Feb retail sales-ex Auto (-0.7% m/m prior) are due for release. For Fri, US 4Q GDP (+2.4% q/q Cons.), Mar University of Michigan sentiment (92 Cons.); GE Feb retail sales (+2.9% m/m prior); JP Feb jobless rate (3.5% Cons.), retail sales (+0.6% m/m Cons.) and CPI (+2.3% y/y Cons.) are on tap.

G7 Currencies

DXY – Weekly Reversal. USD ended the week on a weaker note with DXY closing at 97.90 levels. In the near term we do not rule out more 2-way trading with some bias to the downside as consensus for rate hike is now shifting to later part of the year. We continue to caution for further pullback with a risk 95.50 levels (before the break-out and 38.2% Fibonacci retracement of 87.62 – 100.39). Interim support now at 97.30-levels (23.6% Fibonacci retracement).  Slow stochastics is now falling from overbought levels. But over a medium term we continue to reiterate our core view for mild bullish trajectory in the DXY and for FFR hike to begin Sep 2015 at the earliest totaling 50-75bps by end-2015. Next week brings Feb CFNAI; existing home sales; Fed’s Mester and Williams to speak (Mon); Fed CPI; Mar P Manufacturing PMI; Feb new home sales; Mar Richmond Fed manufacturing index; Fed’s Mester, Bullard and Williams to speak (Tue). Feb durable goods orders; Fed’s Evans to speak (Wed); Mar P. services/composite PMI; Mar Kansas City Fed Manufacturing; Fed’s Bullard and Lockhart to speak (Thu); 4Q GDP; core PCE; Mar Univ. of Michigan sentiment and Fed’s Fischer to speak (Fri).        USD/JPY – Consolidation with bearish bias. USD/JPY eased and closed at 120.04 last Fri.  An interim double-top formation has been formed in the pair at 121.85 and the pair could be vulnerable for a move lower to 119 levels (50 DMA), 118.50 (100 DMA) which are now seen as key support levels. MACD and slow stochastics are now showing tentative signs of bearish bias. Week ahead brings cabinet office monthly economic report for Mar; Feb supermarket sales (Mon); Mar manufacturing PMI; Mar small business confidence (Tue); Feb PPI services (Wed); Feb jobless rate; retail sales; overall household spending (Fri).        AUD/USD – Rebound Underway; Sell on Rallies. AUD turned higher amid a weaker USD.  Rebound in copper and oil prices also supported the bid tone. Daily MACD and stochastics are exhibiting signs of bullish bias. First resistance at 0.7835(50 DMA), before 0.7910 (2015 high), 0.8020 levels (23.6% Fibonacci retracement of 0.9505 – 0.7561. Over the medium term we continue to see further weakening in the A$ on a combination of factors including soft domestic economic growth, falling inflation and further intensification of USD strength. We still see at least another rate cut to come possibly in Apr or May meeting. We look for better levels towards those resistance levels to fade rallies. Week ahead brings RBA Asst. Governor Eddy participating in panel (Tue); RBA’s financial stability review (Wed).        EUR/USD –Fade Rallies. EUR rallied hard into NY close last Fri, closing above 1.08-handle. MACD and slow stochastics are both bullish bias and could suggest further rebound towards 1.0950 levels. Support around 1.07 levels (50% Fibonacci retracement of 1.1450 – 1.04558) should hold. Day ahead expect more 2-way trading between 1.07 – 1.09 range. Over the medium term we continue to maintain our core bearish EUR/USD view amid structural decline in Europe fundamentals and diverging monetary policies.Week ahead sees EC Mar consumer confidence (Mon); EC, GE, FR Mar P.services/manufacturing/composite PMIs (Tue); GE Mar IFO; FR Mar Business Confidence (Wed); GE Gfk consumer confidence; FR 4Q GDP (Thu); FR Mar Consumer confidence;  IT Jan Industrial and sales orders; GE, IT retail sales (Fri).

       EUR/SGD – Consolidation; Bias to Fade Rallies. EUR/SGD traded higher above 1.49-handle tracking EUR strength. MACD and stochastics are biased for further upside. Key resistance at 1.50 levels (23.6% Fibonacci retracement of 1.6390 – 1.4573). 2-way trading expected between 1.4820 – 1.50 intra-day.

Asia ex Japan Currencies

       The SGD NEER trades around 1.91% below the implied mid-point of 1.3537 with the top end estimated at 1.3260 and the floor at 1.3812.

       USD/SGD – Consolidation; Bearish Bias. The USD/SGD continues to trade to the weaker side at around 1.38 levels. MACD and stochastics are bearish bias, suggesting further downside in stall. In view of the upcoming MAS monetary policy decision in Apr, consensus is tilted towards a re-centering while we maintain our view of MAS adopting a “wait-and-see” approach. We do not rule out another inter-meeting policy move should conditions deteriorate and warrant a shift in monetary policy stance. Day ahead, more 2-way trading is expected; 1.3730 – 1.3830 likely intra-day.

       AUD/SGD – Mild Bullish. AUD/SGD continue to squeeze higher above 1.07-levels. Weekly MACD and slow stochastics are now showing very tentative signs of bullish bias. We see the pair consolidating in 1.0650 (50 DMA) – 1.08 (100 DMA) range for the week. A decisive close above 1.08 (100 DMA) is needed to confirm that the downtrend could be over. We watch for further development.

       SGD/MYR – Mild Bias to Upside. SGD/MYR drifted slightly higher off the back of resumed weakness in the Ringgit following soft oil prices and heightened risk of rating downgrade. Pair could continue to consolidate with mild bias to the upside. Daily MACD and stochastics are suggesting early signs of bullish bias. Range of 2.6450 (100 DMA) – 2.6950 continues to be in focus.

       USD/MYR – Consolidation. 1m NDF traded a high of 3.7585 last Fri after Asia close before easing to 3.7290. Spot USD/MYR currently trade softer (from its NDF levels) at around 3.7085 this morning, tracking USD weakness. Daily slow stochastics is falling from overbought areas. Pair is likely to face 2-way trading while we continue to caution for leaning against the wind activities. Intra-day range of 3.70 – 3.7350 expected. We continue to see persistent weakness in the Ringgit on a combination of domestic worries including risk of smaller net foreign fund inflows and heightened risk of sovereign rating downgrade amid contingent liability exposure, lower fiscal revenue and declining current account surplus.

       USD/CNH – Consolidation. The pair opened below 6.20 to trade 6.1980 levels this morning, tracking a weaker USD. Day ahead, see 6.1850 (200 DMA) – 6.2150 (100 DMA) for USD/CNH. MACD and stochastics are bearish bias. That said, we continue to caution that the economy still face economic headwinds in particular to growth, debt, fx/capital outflow pressures and is likely policymakers may need to do more. We continue to see a 50bps cut to RRR sometime now till Apr. USD/CNY was fixed lower by 48 pips at 6.1448 (vs. 6.1496). CNYMYR was fixed higher by 3 pips at 0.5933 (vs. 0.5931).

       USD/IDR – Consolidation. USD/IDR continues to trade with a bearish bias, tracking a weaker USD.  Pair now trades around 13,060 levels and could consolidate in the range of 13000 - 131000.  Daily MACD and stochastics are bearish bias. We still see a risk of BI cutting rate by 25bps in its Apr meeting.

       USD/PHP – Consolidate; Bias to Fade Rallies. USD/PHP traded a high of 44.95 last Fri but opened a touch weaker around 44.85 levels this morning amid USD weakness. Over the past 2-3 weeks Peso has been playing catch up with the rest of AXJs. For 2015, most AXJs except THB and PHP have been weakening relative to the USD, but since the beginning of Mar, PHP strength has reversed and weakened by about 2% against the USD (YTD PHP is nearly flat vs the USD). Likely to see more 2-way trading from here; consolidate in the range of 44.70 – 44.95 likely. MACD still bearish bias while stochastics is exhibiting very tentative signs of falling from overbought areas.

       USD/THB – Consolidate; Fade Rallies. USD/THB continues to trade with a bearish bias; falling from 32.78 to 32.58 levels. Daily MACD and slow stochastics remain bearish bias, suggesting further downside. Next support seen at 32.48 (200 DMA) before 32.35 levels. Resistance seen at 32.62 (50 DMA). Intra-day range of 32.48 – 32.65 expected.

Rates

Malaysia

§  Local government bonds ended mixed. Better demand was seen on the 30y MGS 9/43s by foreign names and the bond ended 2bps down from previous close with decent amounts done. Although the USDMYR moved higher, government bonds remained at current levels with buyers lining up for outflows. Feb CPI rose by 0.1% YoY which is lower than consensus. All eyes will be on the next auction which is a new 7.5y MGS 9/22 which we estimate a size of MYR4b.

§  IRS rates closed mostly higher probably due to higher US Treasury (UST) yields. 5y IRS was dealt at 3.81%. We suggest to pay low around 3.80% and receive closer to 3.90%. 3M KLIBOR unchanged at 3.76%.

§  In the PDS market, GG names such as PTPTN, Prasa and Dana appear well bidded but there were far too few offers. PTPTN 24s were given at MTM level of 4.35%. We think the GG curve has flattened and offers little upside unless the govvy benchmark curve flattens further. Similarly, the AAA space also saw good bidding interest but offers were too few and at lower than last traded levels. This suggests that investors are holding on to AAA bonds. Telekom bonds mostly tightened 1-2bps with the most notable trade being Telekom 06/23 which tightened 5bps from the last trade 2 days ago. Spreads for 9y and 10y AAA names are currently about 55-60bps, which we think is still fairly attractive as a decent carry as well as for those trading on local interest rate movements.

Singapore

§  SGS were sold at open as short term funding became more expensive with short dated bonds taking the brunt of the selling. Yields from the 5y point and below rose 7-11bps. Long end SGS fared better, ending 4-6bps higher and outperforming the IRS. Both the SGS and SGD IRS curves bear flattened – SGD IRS up 7-11bps across. Bond swap spreads tightened in the belly by 2-5bps but widened at the long end by about 3bps. After close, MAS announced the auction of SGD1.5b 8y SGS 07/23 with net SGD1.2b entering the market.

§  Asian credit space saw good two way flows, especially in the IG space. Names like BEIJII, HRAM, HTISEC were very well supported despite UST yields having moved up slightly overnight. In the Chinese HY space, we saw news on the Fujian deputy Governor Gang Xu being investigated by the government. The space traded slightly lower, with names like Yuzhou and CHINSC trading about 3pts lower. In the Indon space, sovereigns and corporates continue to see demand, trading a good two way flow. We saw some last minute buying interest on PETRONAS and Wakala towards day end. We believe in picking up some Chinese IGs and would be paying close attention to the new primary issuances that are coming to the market next week.

Indonesia

§  Indonesia bond market closed lower after strengthening on previous day post dovish statement by the Fed. Nothing much occur during the day as market was relatively quite due to minimal market sentiments. Market today would be moving ranging ahead of U.S. inflation data which will be published tomorrow post market close. We see the 10y benchmark series yield would close between 7.10% - 7.30% at the end of the first quarter of 2015. Foreigner booked net buy worth of Rp2.12 tn while insurance companies added Rp3.35 tn worth of Indonesia government bond to their portfolio last week. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.139%, 7.410%, 7.491% and 7.736% while 2y yield shifts up to 6.911%. Trading volume at secondary market was seen heavy traded at government segments amounting Rp13,445 bn with FR0069 (5y benchmark series) as the most tradable bond. FR0069 total trading volume amounting Rp5,660 bn with 53x transaction frequency and closed at 102.553 yielding 7.139%.

§  Corporate bond trading traded thin amounting Rp275 bn. BFIN02ACN2 (Shelf registration II BFI Finance Indonesia Phase II Year 2015; A serial bond; Rating: A+_(idn)) was the top actively traded corporate bond with total trading volume amounted Rp134 bn yielding 9.799%.