Maybank GM Daily - 16 Apr 2015

FX

Global

      US equities gained overnight driven by better than expected earnings from JPM, Intel despite disappointing US Industrial Production, Empire state manufacturing data. Of the 36 companies in the S&P500 that have reported earnings, more than 80% exceeded expectations. EU equities continued its upside momentum, fuelled by ECB’s commitment to QE. In FX, USD pullback continued amid weak US data. Most high-beta currencies including EUR, GBP, AUD, NZD, CAD benefitted. Oil continues to firm on EIA crude inventory rising less than expected, reduced output from Yemen and US-Iran talks deadlock.

      Key events overnight were centred on ECB and BoC. There was no surprise at the ECB as Draghi reaffirmed commitment to QE; clarified that concerns over bond scarcity is exaggerated. BoC kept rates steady at 75bps overnight; comments were slightly hawkish – Canada GDP growth to rebound in 2Q; impact of crude oil crash more front-ended but not deeper than expected; lower CAD expected to offset the negative impact of oil on growth and inflation. USD/CAD took a plunge to 1.22 levels.

      Day ahead for US, focus on housing data - Mar housing starts; building permits and Apr Philly Fed Business Outlook data. Fed speaks throughout the day includes Lockhart, Mester, Rosengren, Fischer. For Europe, IT Feb trade data on tap. Intra-day USD likely to consolidate in recent ranges with mild bias to the downside; we remain better buyers of USD on dips.  

Currencies

      DXY – Bias Downside; Buy on Dips. USD retreated overnight on weaker than expected IP, Empire state manufacturing data and disappointing Beige Book report. Day ahead may see consolidation with downside bias; intra-day range of 97.40 – 98.50. Daily stochastics is falling from overbought territories. On technicals, the setup appears bearish, with double-top formation formed near 100 levels; next support seen around 97.40 levels (23.6% Fibonacci retracement of 87.63 – 100.39). Over the medium term 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 2015 and continue to favor buying USD on dips. Week remaining brings Mar housing starts, building permits, Apr Philly Fed Business Outlook (Thu); Mar CPI; Apr Univ of Michigan sentiment (Fri). Fed speaks today includes Lockhart, Mester, Rosengren, Fischer (Thu).

      USD/JPY – Bearish. USD/JPY continues its slide lower though it is off its overnight low of 118.79, pressured lower by the sell-off in the EUR/JPY and GBP/JPY. Pair has been waffling around the 119-figure this morning but a move lower seems likely given that 4-hourly momentum indicator is bearish bias while slow stochastics is indicating tentative signs of a bearish tilt. Double-top formation at 121.85 continues to act as resistance in the short term. Pair should continue to trade within 118.30 – 119.50 intraday.

      AUD/USD – Bullish Divergence. AUD/USD reversed higher on overnight dollar retreat and hovered around 0.7685 this morning. Pair seems to be caught in a narrow range of 0.7530-0.7740 and capped by the bearish ichimoku cloud. Break of the upper bound could signal the start of a corrective rebound as the MACD tools indicates a bullish diversion. 0.7630 to support intra-day offers. Eyes are on Australia's labour report out at 0930 (SGT) and consensus expects an average addition of 15k employment for Mar, similar to the month prior. Jobless rate could remain stable at 6.3%.

      NZD/USD – Consolidate. NZD extended its rally overnight off the back of USD weakness despite drop in whole milk powder prices in GDT auction yesterday. Pair currently trades around 0.7620 and could attempt to test higher towards 0.77 levels (previous 2015 high in Mid-Mar). For the day expect NZD to continue to take cues from AUD; Aussie employment numbers at 930am SGT in focus. 0.7485 (50 DMA) levels now seen as interim support. Remain better sellers on rallies 0.7630-50 levels intra-day. Look to play 0.75 – 0.77 range.

      EUR/USD – Rebound; Fade Rallies. EUR/USD was soft into ECB meeting overnight; traded around 1.06 levels before getting the lift to above 1.07 levels amid disappointing US data. ECB Draghi reaffirmed commitment to QE; clarified that concerns over bond scarcity is exaggerated. Intra-day EUR/USD could see a drift higher towards 1.08 levels on USD weakness. Intra-day sees 1.0690 – 1.0830 range; remain better sellers on rally. We continue to maintain our bearish EUR/USD view amid structural decline in Europe fundamentals, concerns over Greece ability to meet repayment schedules, and diverging monetary policies between US and EU. Week remaining sees IT Feb trade (Thur); EC Mar CPI; ECB Feb current account (Fri). ECB officials will attend the IMF Spring meetings in Washington (Fri – Sun).

      EUR/SGD – Fade on Rallies. EUR/SGD rebounded above 1.45 levels, following EUR strength. Daily stochastics is rising from oversold levels remains bearish bias; favour selling on rally towards 1.4660 levels (trend-line resistance from the falling peaks in Mar 2015).

Asia ex Japan Currencies

      The SGD NEER trades around 0.85% below the implied mid-point of 1.3432. The top end is estimated at 1.3161 and the floor at 1.3703.

      USD/SGD – Bearish, Accumulate On Dips. The USD/SGD remained pressure downwards below the 1.36-levels on the back of a softer dollar tone. Pair is currently sighted around 1.3550 with intraday MACD showing bullish momentum and slow stochastics tentative signs of a bearish bias. Bearish extension appears likely with our support level at 1.3570 taken out overnight. Our preference remains accumulating on dips. Key support is now around the 1.3470-levels and is expected to hold. Topside is seen around 1.3660 today.

      AUD/SGD – Bulls Taking Over. AUD/SGD extended its upmove on the back of AUD recovery and was last seen at 1.0450. Daily MACD chart also indicates bullish divergence for this cross. Intra-day chart shows bullish momentum as well but RSI indicates overbought conditions. Hence, 1.0466 could be the first barrier to cap bulls but only for today. 1.0360 marks the first support level. We are likely to witness buying interest on dips. Break of 1.0466-resistance exposes the next at 1.0525.

      SGD/MYR – Bulls Taking A Breather. SGDMYR pulled back this morning and was last seen around 2.7135. Bulls might be taking a breather for a while and we expect intra-day trade to be subdued. We still expect dips to attract buyers and 2.6975 marks the support for this cross. 2.7300 to cap bids.

      USD/MYR – Buy on Dips. USD/MYR opened lower this morning and currently trades around 3.6785 at time of writing, tracking USD weakness and SGD strength. Pair could continue to ease lower driven by USD weakness. Intra-day range of 3.6450 – 3.6900 likely with bias to buy on dips. We continue to reiterate our 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 – Bearish. Pair extends its downmove this morning, following the dollar retreat and in anticipation of another lower USD/CNY fixing. Prices, last seen around 6.1950, are fast approaching the 200-DMA at 6.1900. China’s growth came in as expected at 7.0%y/y, slowest since 2009. What was more concerning was industrial production that came in much weaker than expected at 5.6%y/y. Still, yuan bulls were steadfast, guided by the stronger CNY fixing against the USD. A decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of Oct-Mar rally). USD/CNY was fixed 35 pips lower at 6.1305 (vs. 6.1340). CNYMYR was fixed 5 pips lower at 0.5907 (vs. 0.5912). Retail sales are at 10.2%y/y, industrial production at 5.6%y/y while urban FAI came in at 13.5%y/y slower than the previous 13.9%.  At home, PBOC Shanghai has ordered banks to check margin trading risks. Elsewhere, a former PBOC adviser Yu Yongding said massive monetary and fiscal stimulus would weaken growth and stability in the medium and long term (China Daily). Moody’s has affirmed State Council’s latest reform plans for the country’s three policy banks. On the RMB, Premier Li Keqiang said he does not want to see further devaluation of the currency during the latest interview with Financial Times.

      USD/IDR – Bearish Tilt. The USD/IDR broke below 12900 – our support level - yesterday and continues to edge lower towards the 12800-levels, helped by the better than expected trade surplus for Mar (S1.13bn vs. cons. $589m) and dollar retreat overnight. Improving external balances should continue to weigh on the pair in the interim. New support is now at 12810 before the next at 12750. Topside continues to be curbed by 13000. 4-hourly MACD is showing only mild bullish momentum while slow stochastics are indicating bearish bias. Foreign funds continued to sell-off equities with a net USD50.57mn sold yesterday, which limited the pair’s move lower. 1-month NDF fell below the 13000-figure this morning to 12985 currently with intraday MACD and slow stochastics showing bearish bias ahead. JISDOR was fixed lower as expected at 12976 yesterday from Tue’s 12979 and another lower fixing is likely given the spot’s drift lower this morning.

      USD/PHP – Limited Downside. The USD/PHP gapped lower at the opening this morning to 44.460 from yesterday’s close of 44.545, helped by the dollar retreat overnight as well as strong rebound in remittances in Feb (up 4.2% y/y vs. Jan’s 0.5%). Lacking fresh impetus, further downside moves could be limited today with trades within 44.300-44.540 should hold intraday. Intraday MACD and slow stochastics are showing only mild bearish bias. 1-month NDF continues to edge towards the lower bounds of its 44.400-44.850 range at 44.490 currently with 4-hourly MACD should bearish momentum, though slow stochastics are at oversold levels. Foreign funds again sold a net USD33.3mn in equities yesterday.

      USD/THB – Bearish Tilt.  Onshore markets re-open today after closing for the Songkran holidays the past three days. The USD/THB continues its slide lower towards the 32.400-levels on the back of a softer dollar tone. Data-wise, it is a quiet day and the pair should continue to track the dollar moves ahead. With our support at 32.420 taken out yesterday, new support is seen around 32.350. Rebounds should be capped by 32.520 (50DMA) today. Intraday MACD is showing bearish momentum but slow stochastics continues to indicate little bias in either direction.

Rates

Malaysia

      Malaysian government bond market opened biddish on the back of stronger UST. Price uptick, however, was quickly met with profit taking as MYR continued its weakness. Market overall was quiet throughout the day with thin liquidity. Most trades were done direct; most notably, MYR120m of MN 3/23 traded at 97.05 (3.917%). At market close, yield was little change from yesterday.

      In the MYR IRS market nothing was traded and the curve barely moved. 3M KLIBOR stayed unchanged at 3.73%.

      MYR PDS market traded firmer with buyers taking across the AAA offers. Putrajaya opened book today on 7ys and 10y for MYR100m each. The book closed at 4.25% and 4.40% respectively. This has led to buying frenzy on the 2024 maturity AAA papers that were still being offered at above 4.40% level. The likes of Telekom, Plus and Aman were taken to the low of 4.42%. We think the levels has gotten a tad too tight given the MGS did not move as much. The small size issuance Putrajaya should not be taken as a benchmark and there should be more value in the other tenors of the curve.

Singapore

      SGD funding continued to ease driving the front-end SGS yields lower with 2y SGS down 6bps and 5y SGS down 3bps. At the longer end of the curve from 10y point onward yields however rose by 2-4bps resulting in a notably steepening of the curve. It was a volatile day with PD actively buying and selling back. 3M SOR declined by another 4bps to 0.87%.

      In the Asian credit market primary issuances took centre stage. Formosa, Haitong, China Communications Construction and Central China rallied upon FTT by about 0.5 to 1pt until profit taking set in and settled around inside reoffer levels. Secondary papers remain pretty much unchanged. Petronas was active with 2-way flows with investors wanting to take profit after the Government of Malaysia sukuk deal announcement of 10y and 30y bonds. Initial guidance draws mixed comments but generally market feels that it is a bit on the tight side for  10y at CT10 + 135 area and 30y at CT30 + 185 area respectively. A bit of selling of Indons took place and closed softer upon this announcement. More issuances are expected for this quarter in the Asian space.

Indonesia

      Indonesia bond market continue to slide amid better than expected March trade balance data. Based on Indonesia statistic data release, March trade balance came in at a surplus of US$1.13 bn with export value was recorded amounting US$13.71 bn while import value was recorded amounting US$12.58 bn. Minimum sentiment remains which may have made investors confused with where the bond prices are actually heading in a medium term. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.276%, 7.329%, 7.521% and 7.713% while 2y yield shifts up to 6.986%. Trading volume at secondary market remains heavy at government segments amounting Rp17,955 bn with SR007 (3y) as the most tradable bond. SR007 total trading volume amounting Rp3,823 bn with 1,077x transaction frequency and closed at 101.844 yielding 7.541%.

      Corporate bond trading traded heavy amounting Rp651 bn. APLN01CN3 (Shelf registration I Agung Podomoro Land Phase III Year 2014; Rating: _idA) was the top actively traded corporate bond with total trading volume amounted Rp122 bn yielding 11.251%.