Maybank GM Daily - 25 Mar 2015

FX

Global

US equities closed marginally weaker amid mixed bag of US economic data. FX trading was choppy around US CPI data release overnight. USD weakness found a breather, with DXY closing around 97.20 levels. Most G7 currencies including EUR, AUD, NZD closed largely unchanged. AXJs including the SGD, MYR, IDR closed stronger against the greenback.  Quiet session in crude oil market with WTI and Brent at around 47.50, 55.20 levels, respectively.        Yesterday data showed inflation divergence between US and UK - US Feb CPI ex food and energy surprised to the upside (+0.2% m/m vs. 0.1% Cons.) while UK CPI inflation surprised to the downside (Feb core at +1.2% y/y vs. +1.3% Cons.). Meanwhile preliminary Euro-area Mar composite PMI rose to its highest level since Mar 2011 (54.1 vs. 53.9 Cons.), which could suggest tentative signs of growth momentum returning.        Day ahead brings GE Mar IFO; FR Mar Business Confidence for Europe. For US, Feb durable goods orders; Fed’s Evans to speak. Day ahead USD could consolidate further notwithstanding 2-ways moves; USD/AXJs expected to consolidate following large declines yesterday.

G7 Currencies

       DXY – Consolidation. USD pullback took a breather on better than expected CPI and new home sales data. Fed’s Bullard overnight commented that zero rates no longer appropriate; wants a rate hike in Jun. DXY low overnight was 96.40 before rebounding towards 97.25 levels this morning.  Day ahead pair could consolidate in 96.50 – 98.00 range in absence of fresh catalyst. Daily MACD and slow stochastics remain bearish bias. Week ahead brings 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 – Still Bearish. USD/JPY downward momentum continues with a move possibly towards 119.20 (50DMA) and then to 118.80 (100 DMA), where we look to buy on USD dips. Pair is currently sighted around 119.79. Rebounds today meet resistance at 120.80. Intraday MACD and slow stochastics are still indicating bearish bias.

       AUD/USD – Sell on Rallies. AUD rally stalled at 0.7938 before closing largely unchanged at 0.7877 overnight.  Daily MACD and stochastics are continues to exhibit mild bullish bias. Pair could consolidate 0.7830 – 0.7950 range for the day. No data for the week ahead.  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.

       EUR/USD –Fade Rallies. Choppy trading in EUR/USD overnight as the pair initially took a dip to 1.0930 lows on stronger than expected US CPI before surging to 1.1030 on stop-losses being triggered above 1.10 levels, before settling around 1.0920. MACD and slow stochastics are mild bullish bias. We favor fading rallies above 1.10 levels Day ahead 1.0830 – 1.1030 range expected. 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 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 continues to stay capped at 1.50 levels (23.6% Fibonacci retracement of 1.6390 – 1.4573) overnight.  MACD and stochastics remain biased for mild upside. A daily close above 1.50 could see upside risk towards 1.52 levels (50 DMA). Day ahead see 1.4850 – 1.5000 range intra-day.

Asia ex Japan Currencies

       The SGD NEER trades around 1.51% below the implied mid-point of 1.3457. The top end estimated at 1.3188 and the floor at 1.3726.

       USD/SGD - Consolidating Higher. USD/SGD is inching higher towards 1.3680 this morning after hitting an overnight low of 1.3610 - not seen since 27 Feb. Pair though continues to trade in a tight range within 1.3590-1.3700. Consensus continues to expect a re-centering, though we look for MAS to adopt a "wait-and-see" approach at the the Apr meeting as we believe support from the expansionary budget should keep the economy supported. The argument for MAS to move on weak inflation (Feb CPI: -0.3% y/y) holds little water as we believe the soft inflation has already been factored in during the inter-meeting move in Jan. Pair has lost most of its bearish momentum, while slow stochastics is now tilted to the upside, suggesting further upside ahead. Immediate barrier is at 1.3700 ahead of the next at 1.3720. Support is seen around 1.3590 today.

       AUD/SGD - Range-Bound. AUD/SGD continues to consolidate above 1.07 levels after failing to close above the 1.08-levels yesterday.  We need to see a firm close above 1.08 to confirm bullish extension. Otherwise, look for consolidative trades capped by 1.08 today. Intraday MACD and slow stochastics are showing little momentum in either direction today. Intraday range of 1.0700-1.0800 is likely.

       SGD/MYR - Consolidation. After spiking to a high of 2.7010 (23 Mar), SGD/MYR has eased off towards the 2.6650-levels today. With the absence of fresh catalyst ahead, look for the cross to remain in consolidative trades within 2.6650-2.6900 today. Cross has losts most of its bullish momentum, while slow stochastics is showing a bearish bias.

       USD/MYR – Consolidation. USD/MYR traded heavy tracking USD weakness; closed at 3.6460 yesterday. Pair opened at 3.6525 this morning.  Daily MACD and slow stochastics are bearish bias, suggesting further downside. Support levels still at 3.64 levels (23.6% Fibonacci retracement of 3.3474 – 3.7350), before 3.6270 (50 DMA).  Intra-day range of 3.64 – 3.6850 expected. Short term USD correction aside, 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 remains in consolidative mood and looks set to consolidate further. Intra-day range of 6.1950 – 6.2170 (100 DMA)exxpected. Daily stochastics are now nearing oversold levels and is potentially turning higher, which could suggest a potential pause from recent decline. Daily MACD remains bearish bias. USD/CNY was fixed higher by 12 pips at 6.1410 (vs. 6.1398). CNYMYR was fixed lower by 14 pips at 0.5867 (vs. 0.5881).

       USD/IDR – Capped. USD/IDR continues to trade below the 13000-handle, helped by a softer dollar tone.  Pair is sighted higher around 12938 currently with intraday momentum and oscillators indicating a bearish bias, suggesting upsides today could be capped. Look for upside to be guarded by 13000, while dips should see support around 12890. 1-month NDF is heading lower today, possibly back below the 13000-levels today with intraday MACD showing no strong momentum and slow stochastics a tentative tilt to the upside. JISDOR was fixed at 12972 yesterday, lower than Mon's 13076 with another lower fixing likely this morning. Yesterday saw foreign funds selling a net USD73.6mn in equities, and a net IDR1.82tn was added to their outstanding holding of government debt on 20 Mar (latest data available).

       USD/PHP - Consolidation. USD/PHP climbed higher towards the 44.800-levels this morning, in line with its peers in the region. As we have mentioned previously, the pair has been playing catch-up with the rest of the region strengthening for the first two months of the year. Intraday MACD and stochastics are indicating a bearish bias, suggesting upside moves could be capped. Eyes will be on BSP policy rate decision tomorrow, and consensus is expecting no moves. Ahead of the BSP meeting, we expect the pair to trade sideways within 44.500-45.000 today. I-month NDF remains in consolidation within 44.580-45.000 with intraday MACD and stochastics showing a tilt to the downside ahead. Foreign funds bought a net USD13.45mn in equities yesterday, helping to support the PHP.

       USD/THB - Consolidating Mildly Higher. USD/THB is in consolidative mode, hovering around the 32.500-region this morning. Pair is trading with a tentative bullish bias. Intraday MACD and slow stochastics are showing mild bullish tilt, suggesting some upside pressure. Resistance is seen around 32.650 ahead of the next at 32.700. 32.430 should be supportive today. Intra-day range of 32.430-32.65 expected. Foreign funds sold a net THB0.39bn of equities yesterday but were offset by the buying of a net THB1.40bn of government debt.

Rates

Malaysia

       Buying interest was seen across the local government bond curve as the MYR opened stronger. MGS benchmarks ended mixed from 1-3bps down to up by 3bps. Meanwhile, GII benchmarks traded unchanged from last done levels.

       The 5y IRS traded at 3.78%. IRS curve appears to be under pressure from foreign parties, and as such there could be some opportunities to pay lower. 3M KLIBOR was down again by 1bp to 3.74%.

       In the PDS market, investors picked up longer dated GG and AAA names. Dana 28s, Prasa 28s and PTPTN 24s tightened by 3-4bps. For AAAs, Telekom 24s traded at 4.49%, lower than previous traded level of 4.51%, and Plus 24s tightened 2bps. We think the spreads at the longer end of the GG and AAA curves could compress further as investors seek high yields. In addition, the low supply of new primary issuances have spurred an increase in demand.

Singapore

       SGS rallied strongly with big local banks seen buying up the long dated bonds. The lower USDSGD and short dated FWD points helped fuel the bullish sentiment. Liquidity, however, was thin as dealers were caught off guard by the runaway prices. SGS yield curve bull flattened, closing 4-15bps lower. The SGD IRS curve also ended lower by around 8bps while swap spreads widened by as much as 7-8bps at the long end.

       Asian credit market saw BOCAVI and HYUCAP priced overnight: 1) HYUCAP at T5+125bps for USD400m and 2) BOCAVI at T5+170bps for USD750m. The new BOCAVI was taken to +165bps and went to a low of +158bps before steadying back at +162/160 level. The INDON and PHILLIP sovereign spaces were less active. Most traded unchanged as there were not much changes in Treasuries as well. Elsewhere, Chinese IGs mostly traded range bound while HYs closed slightly weaker. Exim Bank of India is issuing USD 5y green bonds with a price guidance of T5+165bps, which gives a decent 20-25bps pickup over its existing 2020 bonds.

Indonesia

       Indonesia bond market closed with a gain supported by appreciating Rupiah against the USD and declining UST 10y yields. Rupiah managed to close below Rp13,000 per USD which gave positive sentiment to the LCY bond market. U.S existing home sales data was not that fancy as well as it came in at $4.88 mn level which is slightly lower than economist consensus of US$4.90 mn. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 6.992%, 7.189%, 7.388% and 7.573% while 2y yield shifts down to 6.815%. Trading volume at secondary market was seen heavy at government segments amounting Rp15,335 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp3,909 bn with 69x transaction frequency and closed at 107.743 yielding 7.189%.

       Indonesian government conducted their final sukuk auctions in first quarter yesterday and received incoming bids worth of Rp3.25 tn versus its target issuance of Rp2.00 tn or oversubscribed by 1.6x. Following last week conventional auction, yesterday’s sukuk auction receives the least incoming bids since the start of this year. Incoming bids significantly decline by 57% compared to 10 Mar sukuk auction. However, DMO only awarded Rp1.98 tn bids for its 5mo, 1y, 6y and 26y bonds. Incoming bids were mostly clustered on the short end tenors. 5mo SPN-S was sold at a weighted average yield (WAY) of 5.87891%, 1y PBS008 at 6.98941%, 6y PBS006 at 7.28632% while 26y PBS007 was sold at 8.12142%. No bids were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.04X – 2.76X. Incoming bids were seen quite sluggish amid better domestic data, FOMC dovish statement, appreciating Rupiah and better performance of the LCY bond market today. The appetite of investors might have decline as the trading volume on previous day was quite moderate. Till the date of this report, Indonesian government has raised approx. Rp92.12 tn worth of debt through bond auction which represents 117.3% of the 1Q 15 target of Rp78.50 tn. On total, Indonesian government has raised approx. Rp167.4 tn worth of debt through domestic and global issuance which represent 37.1% of this year target of Rp451.8 tn.

       Corporate bond trading traded heavy amounting Rp952 bn. BVIC03SB (Subordinated Bank Victoria III Year 2013; Rating: idBBB+) was the top actively traded corporate bond with total trading volume amounted Rp150 bn yielding 11.525%.