Maybank GM Daily - 10 Apr 2015

FX

Global

      Global equity party continued overnight rising to multi-year highs – Nikkei at fresh 15-year high; Europe Stoxx, Shanghai Composite and HSI at/around 7-year highs. Risk-on sentiment continued to fuel AUDJPY and NZDJPY higher. Oil prices rebounded on ongoing geopolitical tension in Yemen, Iranians not agreeing to any deal with the US unless all sanctions are simultaneously removed and market talks of strong buying of Brent from ChinaOil.

      Key relief news out of Europe overnight was the Greek repayment of EUR450mil to IMF, which saw Europe equities staging a relief rally. Fear of Greek missing future payments remain as another IMF repayment of about EUR770mil is due next month (12 May) alongside EUR3.4bn of wage and pension commitments and ECB repayment. Risk of debt write-off remains high and is expected to weigh on the EUR/USD.

      Day ahead in Europe, FR Feb Industrial, Manufacturing Production; SP Feb Industrial Output data are due for release. For US, Mar import price index data on tap; Fed speaks include Kocherlakota and Lacker later this evening. USD likely to consolidate with mild bias to the upside; we remain better buyers on USD dips.

G7 Currencies

      DXY – Buy on Dips. Dollar rebound continued overnight on better than expected initial jobless claims. We remained convicted to our USD bullish bias; reiterate our house-view for the first rate hike to begin in Sep 2015, totaling 50-75bps for year ending 2015and continue to favor buying USD on dips. Daily MACD and stochastics are indicating a bullish bias. Intra-day range of 98.50 – 99.50 expected. Day ahead brings Mar import price index; Fed speaks include Kocherlakota and Lacker.

      USD/JPY – Upside. The USD/JPY rallied towards the 121-figure overnight to a high not seen since 20 Mar on the back of a resurgence in the dollar as well as higher UST 10Y yields. Pair is holding steady this morning around the 120.50-levels with both intraday MACD and slow stochastics showing upside bias. With pressure to the upside, a test of our resistance level at 120.80 is possible. A clean break here could see the pair head above the 121-figure towards 121.41 ahead of the next at 121.85. Support remains at 119.50.

      AUD/USD – Bid. AUD/USD touched a high of 0.7739 before retracing to levels around the 0.77-figure. Notwithstanding the strength of the greenback, this pair retains a bid tone with interim support seen at 0.7665. Intra-day momentum indicators suggest that bulls are having a slight advantage in the short-term. Break of the 0.7740-resistance exposes the next at 0.7784 (61.8% Fibonacci retracement of 24 Mar-2 Apr downswing). 0.7658 to support intra-day offers. Feb home loans are out today and consensus expects a 3.0%m/m growth compared to a contraction of -3.5% seen in the month before.

      NZD/USD – Consolidate. NZD initially drifted higher off the back of risk-on sentiment as Asia bourses hit multi-year highs. But rally was capped at 0.76 levels (100 DMA). Mild bullish bias as indicated on daily momentum and oscillators. Possible upside but resistance at 0.76 levels needs to be broken for the pair to push towards 0.77 levels. Interim support at 0.7530-40 levels (previous day low). 

      EUR/USD – Fade Rallies. Another day, another big figure lower as EUR continued its decline overnight despite Greece managing to make an EUR450mil repayment to IMF; low of 1.0638 was traded before closing around 1.0659. Previous support at 1.08 levels now turned resistance. Day ahead see 1.0600 – 1.0830 with risk to further downside; continue to favour selling on rallies. Momentum and oscillators are also indicating a bearish bias. We continue to maintain our bearish-bias EUR/USD view amid structural decline in Europe fundamentals and diverging monetary policies - the Fed is still expected to be on a tightening bias as compared to its Euro-counterparts whom have just began QE amid ongoing unresolved Greek issues. Day ahead sees FR Feb Industrial, Manufacturing Production; SP Feb Industrial Output.

      EUR/SGD – Into Uncharted Territories. EUR/SGD broke below its previous 2015-low at 1.4573 to trade a fresh multi-year low of 1.4465 overnight. Pair remains well offered and looks to continue its decline in uncharted territories. 1.4570 now turned resistance; while downside is expected to continue towards 1.42-1.43 levels. Daily momentum is bearish bias.

Asia ex Japan Currencies

      The SGD NEER trades around 0.91% below the implied mid-point of 1.3458. The top end is estimated at 1.3186 and the floor at 1.3730.

      USD/SGD – Range-Bound. The USD/SGD slide back below the 1.36-figure after briefing bouncing above that level overnight, helped by a softer dollar tone this morning. Pair is now trapped within a thin intraday ichimoku cloud, suggesting sideways moves are likely ahead in the absence of fresh impetus. Ahead of the MAS policy meeting on 14 Apr (Tue), cautious trades are likely as market is still split on the MAS policy decision. Continue to expect sideways trades within 1.3530-1.3650 to hold today. Intraday MACD and slow stochastics are showing a bias to the upside ahead.

      AUD/SGD – Two-way Trades. AUD/SGD hovered around 1.0480 this morning, underpinned by the AUD strength. This cross tests the 1.0486-resistance this morning. Momentum is bullish though RSI indicates near overbought conditions. Expect intra-day up-ticks to remain resisted and capped by the 1.05-figure. That said, offers are likely to be shallow with support seen at 1.0381.  

      SGD/MYR – Downside Bias. This cross gapped up this morning before pulling back to levels around 2.6775. Intra-day momentum indicators suggest that bias is still to the downside. Pair is expected to remain within 2.6710-2.6880 today. Beyonod the near-term, this cross is still rather supported with the ichimoku cloud deterring aggressive offers around 2.6650. A break here however opens the way towards 2.6381. (38.2% Fibonacci retracement of the Sep-Jan rally).

      USD/MYR –Technical Pullback Underway. USD/MYR consolidated in tight ranges before closing at 3.6318 yesterday. Pair traded a touch higher towards 3.6385 this morning tracking USD strength. Daily momentum and stochastics remain bearish bias. Intra-day range of 3.62 – 3.6450 expected. While a technical pullback is underway for the short term, our underlying view for Ringgit weakness off the back of soft oil prices, risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus remain unchanged.

      USD/CNH – Bullish Tilt. This pair was still bid around 6.2200 this morning, after a strong bullish session on Thu. Dollar strength still supports this pair and could guide the pair towards the upper end of the consolidative 6.1900-6.2250 range. Beyond the near-term, key support still seen at 6.1900 (200 DMA); a decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of 6.1113 – 6.3021). USD/CNY was fixed 32 pips higher at 6.1370 (vs. 6.1338). CNYMYR was fixed 3 pips higher at 0.5846 (vs. 0.5843). In Hong Kong, HSI closed 2.7% higher after trading to a high of 6.4% on Thu after Chinese investors used up the southbound quota for the Shanghai-Hong Kong Stock Connect on Wed. There are some rumours that regulators might increase the quota, positive for CNH in our view. In other news, Fitch commented that the default by Chinese computing firm Cloud Live Technology reflects “an increasing tolerance for defaults in China’s onshore corporate debt market”. This is the second default after Chaori Solar company failed to make a CNY89mn interest payment in Mar last year.  

      USD/IDR – Capped.  The USD/IDR is playing catch-up with regional currencies following the resurgent dollar overnight after sliding towards the 12900-levels yesterday. With fresh impetus lacking, pair continues to track the dollar in the interim. Further upside though could be capped, given that intraday MACD and slow stochastics are still mildly bearish bias. Our support at 12900 continues to hold up well but a firm break here could see the pair headed towards 128500. Upticks today should continue to be guarded by 13100. Foreign funds sold a net USD27.96mn in equities yesterday. 1-month NDF is slipped towards the 13000-level this morning with both intraday MACD and slow stochastics showing tentative signs of downside bias. JISDOR was fixed lower at 12973 as expected yesterday from Wed’s 13002 and a lower fixing is possible should spot continue to hover around current levels this morning.

      USD/PHP – Mild Bearish Bias.  The USD/PHP is playing catch-up with its regional peers after closing yesterday for a public holiday yesterday. Pair is hovering around the 44.50-levels currently with intraday MACD showing little momentum in either direction but slow stochastics indicating bullish bias. In the absence of fresh catalyst, look for the pair to track dollar moves ahead. Upside today should be capped by 44.700 still, while downside moves should be limited by 44.350 today. 1-month NDF was little changed this morning hovering around the 44.60-levels, near the middle of its current trading range of 44.400-45.230 with intraday MACD still showing no strong momentum and slow stochastics showing tentative signs of bullish bias.

      USD/THB – Mild Bearishness.  The USD/THB is retracing this morning on the back of softer dollar after climbing higher yesterday, but continues to hover in a tight range. Pair is heading back towards the 32.50-levels with intraday MACD showing no strong momentum and slow stochastics showing tentative signs of bearish bias.  Pair could face some downward pressure in the near term as should expectations grow that the BoT could cut policy rate again at its 29 Apr meeting in the wake of the central bank’s pessimism that growth could underperform its 3.8% forecast. Moves lower though is still likely to see support around 32.500 and rebounds to meet resistance around 32.640 still. Yesterday, foreign funds purchased a net THB0.29bn in equities but sold a net THB5.70bn in government debt, which pressured the THB lower.

Rates

Malaysia

      Local govvies traded range bound amidst better buyers on any dip. We noticed foreign names collecting the current 5y and 10y MGS benchmarks together with 10y off-the-run GIIs, which are trading higher on yields against the current 10y GII benchmark. Players await the new 5.5y MGS 10/20s scheduled to be auctioned in the middle of the month which we expect an issuance size of MYR4.0b.

      IRS levels were more or less where they were. The 5y IRS traded at 3.75% several times and 2y IRS traded at 3.61%. The curve was quoted flatter but it is not meaningful given the long end seldom have trades. 3M KLIBOR stayed at 3.73%.

      In the PDS market, we saw strong bidding interest for GG and AAA papers in the 7-9y maturities. 7y Danainfra papers tightened 3bps and yields for 3 tranches of 9y Telekom papers were driven down 1-3bps. Based on yesterday’s 10y govvy level, we still see spreads of 60-65bps for AAA names. Elsewhere, longer dated names such as Danga 30 also tightened 3bps. This paper is a good pick up for carry and/or capital gain, currently offering 60bps spread over the benchmark.

Singapore

      SGS rallied again as SGD funding eased further. The yield curve steepened slightly as yields from the front end to the belly rose 9-11bps while the long end was up 2-3bps. SGD IRS curve steepened as well, ending lower by 1-3bps. Meanwhile, bond swap spreads widened back with the 10y benchmark swap spread at -19bps.

      Asian credit space saw active trading on Chinese names, with better buyers seen on Chinese financials and O&G names. Chinese property bonds traded 0.25-0.50pts higher. Korean names were also in demand. Shinhan Bank priced its 5y USD600m bond overnight at T+92.5bps. The new bonds initially traded around 88/87 then settled around 90/89 before the day ended. ING is issuing AT1 Perp NC5 and 10y bonds with initial price guidance of 6.375% and 6.875% respectively. There is a heavy pipeline ahead. Players will look to the movement in US Treasuries after last night’s jobless claims data release for a clearer direction.

Indonesia

      Indonesia bond prices continue its incline. Positive sentiment came from Bank Indonesia which announce PBI No.17/3/PBI/2015 which restricts the usage of US Dollar for any transaction onshore. Rupiah is predicted to appreciate in near future which also triggered incline in bond prices. Greece loan payment to IMF worth of €450mn has also given a positive support to the bond market yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.134%, 7.227%, 7.427% and 7.612% while 2y yield shifts up to 6.947%. Trading volume at secondary market remains heavy at government segments amounting Rp15,472bn with SR007 (3y) as the most tradable bond. SR007 total trading volume amounting Rp7,924bn with 2,788x transaction frequency and closed at 102.402 yielding 7.334%. The heavy trading volume of SR007 would continue at least till next Tuesday as the 1 month minimum holding period would come to its end. DMO in the future would start issuing retail bonds with a 3 months minimum holding period. We believe that Indonesia retail bond sales would continue to hike amid this new provision.

      Corporate bond trading traded thin amounting Rp294bn. ISAT01ACN1 (Shelf registration I Indosat Phase I Year 2014; A serial bonds; Rating: _idAAA) was the top actively traded corporate bond with total trading volume amounted Rp60bn yielding 9.082%.