Maybank GM Daily - 23 Apr 2015

FX

Global

      US stock indices closed modestly higher on better housing sales and rising number of earnings reports that beat expectations.  In the FX space, the greenback firmed against most majors but was unable to beat GBP which strengthened 0.7% against the USD. GBP gained after a minority in BOE commented that the unanimous rate-hold decision was “finely balanced”.

      AUD managed to retain some of its gains against the greenback, underpinned by the 1Q CPI which turned out in line with expectations. The trimmed mean gauge rose 0.6%q/q, paring expectations of a rate cut on 5 May. Elsewhere, CHF declined more than 1% against the USD and EUR after SNB said it will reduce the number of financial institutions that are exempted from negative rates on cash deposits held with SNB (effective 1 May).

      Focus is on China’s HSBC flash PMI-mfg for Apr which could swing the AUD. Consensus expects the survey print to hold steady at 49.6. Australia will also release its NAB business confidence for 1Q. Nearer to home, Singapore is due to release its Mar inflation numbers (Cons.:-0.5%y/y) at mid-day. US and Europe will also release preliminary prints of PMI-mfg figures for Apr.

Currencies

        DXY – Consolidation; Accumulate on Dips. While DXY ended the overnight session little changed, overnight action was choppy and mixed. USD was weak against the GBP, AUD; strong against the JPY and CHF; largely unchanged vs. the EUR. Next support at 97.20 (50 DMA) before 96.90 – 97.40 key area; a break below could open way for further downside towards 95.50 levels (38.2% Fibonacci retracement of 95.50 – 100.39). Day ahead continue to see consolidation; intra-day range of 97.00 – 98.30. 4-hourly stochastics is mildly biased to the upside. Overnight US housing data was better than expected. Remaining week ahead brings initial jobless claims; Apr flash manufacturing PMI; Mar new home sales; Apr Kansas City Fed Manufacturing (Thu); Mar durable goods orders, cap goods orders (Fri).

       USD/JPY – Bullish. Bulls attempted but failed to push the USD/JPY towards the 120-levels, helped by the Nikkei breaking above the 20000 levels for the first time in 15 years underpinned by exporters. Continued gains in equities could see the pair test and possibly break above the 120-figure today. Resistance nearby remains at 120.15 with support around 119.50 intraday. Four-hourly MACD is showing bullish momentum and slow stochastics is fast approaching overbought levels.

       AUD/USD – Rangy. AUD/USD was choppy overnight with a swing above the 0.7800-handle followed a slip back to levels around 0.7730 as we write. The pair did not completely reverse out its gains on Wed and is currently supported by the base of daily ichimoku cloud at 0.7720. Intra-day momentum tools indicate downside risk and tenkan-sen remains below the kijun-sen, another bearish signal. That could play out should China’s HSBC flash PMI-mfg (due at 0945 SGT) signal deeper contraction in its manufacturing output. That said, we are wary of a bullish divergence on the daily chart and prefer to buy on dips for a tactical bullish target towards 0.80 within a broader bearish trend.

       NZD/USD – Downside Bias. NZD initially traded higher towards 0.7738 taking cues from stronger AUD during the Asian session yesterday, before reversing gains and trade lower towards 0.7590 levels this morning on RBNZ speech. As we write, RBNZ Asst Governor DR John McDermott said that monetary policy to remain stimulatory to support output growth above potential, to help lift inflation back to target. He reiterated that RBNZ is not considering any increase in interest rates; rising currency as export prices fall is “unwelcome”. Day ahead the pair is biased for some downside; intra-day favour to trade from the short side targeting 0.75; 0.7630-40 levels a sell zone. AUD/NZD parity play may need further patience.

       EUR/USD – Fade Rallies. EUR/USD was little changed overnight despite rally seen in GBP and AUD vs. the greenback as Greek ability to service repayment schedule weighs on sentiment. EC consumer confidence was below expectation. Bias to fade rallies towards the 21DMA of 1.0760; intra-day range of 1.0600 – 1.0760.  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. Remaining week ahead brings EC, GE, FR Apr manufacturing/services/composite flash PMIs; SP 1Q unemployment; ECB Praet speaks in Berlin (Thu); GE Apr IFO; GE Mar import prices; SP Mar PPI (Fri). Euro-area Finance Ministers meet over Fri-Sat on Greece.

      EUR/SGD – Consolidate in Recent Range. EUR/SGD continued to trade a 1.4412 – 1.4530 range before closing around 1.4456 overnight. Pair continues to pivot around 1.45 levels awaiting for fresh cues. Day ahead could continue to see the pair consolidate in recent range with some bias to the downside. Favor fading rallies towards 1.45 levels for a move towards 1.4350 intraday.

Asia ex Japan Currencies

      The SGD NEER trades around 0.50% below the implied mid-point of 1.3405. We estimate the top end at 1.3135 and the floor at 1.3674.

       USD/SGD – Upticks. The USD/SGD headed lower towards 1.3420-levels yesterday but has since rebounded back towards the 1.3490-levels, underpinned by dollar strength and bounce in the USD/JPY. In the near term, the grind higher is likely to be gradual given the MAS’ “modest and gradual appreciation” policy stance. Mar CPI (cons.: -0.5) is eyed today but no significant impact on the pair is expected. Intraday range of 1.3430-1.3535 should hold. Intraday MACD is showing mild bullish momentum, though slow stochastics is indicating little directional bias.

       AUD/SGD – Supported on Dips. AUD/SGD bears on the slide, dragged by the AUD pullback. Support is still seen at 1.0376. Intra-day tools indicate room for two-way movement with RSI at 37 and MACD on the zero line on the 4-hourly chart. 1.0526 to cap gains. Daily MACD still favours the bulls and we reckon dips will still be supported.

       SGD/MYR – Range. SGDMYR cross eased to a low of 2.6768 (50 DMA) yesterday before rebounding towards 2.6850 levels this morning. Daily MACD and stochastics are bearish bias. Key support level at 50 DMA; if broken could see moves lower towards its 100 DMA of 2.67. Intra-day sees range of 2.6750 – 2.6950.

       USD/MYR – Choppy. USD/MYR traded a low of 3.6068 in Asia while is NDF traded even lower towards 3.60 levels into London session overnight amid weak USD sentiment. Onshore spot opened higher at 3.6137 this morning. While we caution that the pair could drift lower towards 3.5950 levels (100 DMA), we remain better buyers in the pair on dips. Intra-day ahead range of 3.5950 - 3.6430 in focus. 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. Malaysia Mar CPI released yesterday rebounded +0.9% y/y, in line with expectation

       USD/CNH – Head and Shoulders. The USD/CNH still lacks a bias and steadied within the tight range of 6.19-6.20-figure. Prices are supported by a resilient greenback and much of near-term action may be confined within 6.1840-6.2070 for now. Expect USD/CNY fixing to be hardly changed from the fixing at 6.1290 yesterday. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which coincides with the 200-DMA. Near-term support is seen around 6.1841 (Oct 2014 high) which coincides with the 61.8% Fibonacci retracement of the Oct-Mar rally at 6.1842. On 22 Apr, USD/CNY was fixed 10 pips higher at 6.1290 (vs. 6.1280). CNYMYR was fixed 3 pips lower at 0.5842 (vs. 0.5845). China is due to release its HSBC flash PMI-mfg for Apr and consensus expects a print of 49.6, steady from Mar. Elsewhere, PBOC Chen Yulu told state media that persistent deflationary risks suggests “high possibility” of more policy easing in China.

       USD/IDR – Mild Bullish Bias. The USD/IDR should edge higher this morning, tracking the dollar moves overnight. The near term support from the expected smaller 1Q15 current account deficit should see the pair grind higher only gradually back towards the 13000-levels. Intraday MACD and is showing bullish momentum but slow stochastics is indicating tentative sign of bearish bias. Look for support around 12850 and resistance around 13030 intraday. Foreign funds sold a net USD12.33mn in equities yesterday. 1-month NDF is edging lower towards the 13000-figure but remains in consolidative mode after yesterday’s move lower with intraday MACD showing mild bearish momentum and slow stochastics bearish bias. The JISDOR was fixed higher for the fourth straight session at 12952 yesterday from Tue’s 12942.

       USD/PHP – Mild Bullishness. The USD/PHP should bounced higher this morning underpinned by the firmer dollar tone overnight. Still, we expect the pair to continue to consolidate within its current trading range of 44.130-44.4000 intraday in the absence of fresh catalyst. Intraday MACD and slow stochastics is showing no strong directional bais ahead, suggesting range-bound trading ahead.  1-month NDF continues to consolidate within 44.200-44.400 with intraday MACD and slow stochastics showing mild bullish bias. Foreign funds sold off a net USD6.20mn in equities yesterday.

      USD/THB – Two-Way Trades.  The USD/THB is edging higher again towards the 32.400-levels underpinned by a firmer dollar, but continues to hover within the 32.320-32.500 trading range.  It also does not helped that there increasing pressure from the government on the BoT to cut the policy rate further next week as well as the brewing tensions over the draft constitution. Lacking fresh impetus for now, look for the pair to remain in two-way trades within a tighter 32.350-32.450 range intraday with a bias to the upside. Some support is likely should foreign buying of continue their buying of Thai assets as they did yesterday where a net THB0.90bn and THB1.74bn of equities and debt were purchased. Intraday MACD and slow stochastics are showing mild bullish bias.

Rates

Malaysia

      In the local government bond market, better buyers were seen throughout the day and the curve ended 1-3bps lower on the back of foreign inflows on the 7y to the 15y bonds. Most trades centered on the 7y benchmark MGS 9/22s with yields down by 3bps.

      IRS curve flattened and ended 1-3bps lower overall. The 5y and 7y IRS traded at 3.79% and 3.96% respectively. Foreign parties could still be looking to collect paying on dips. 3M KLIBOR unchanged at 3.72%.

      PDS market was uneventful. We saw keen buying interest for long dated AAA names. Danga 30 tightened 2bps which is in line with the move in the benchmark curve. At this level, we think Danga 30s is still a buy with potential upside. Plus 32, which was quoted at 4.84/82%, might provide some pick-up in carry. 7y-9y AAA papers saw smaller trading volume with prices staying firm. 7y and 9y Telekom papers traded at 4.32% and 4.42% respectively. Suria KLCC was quoted at 4.44/43% but no trades were done. TBEI bonds saw some trades done likely due to its project sponsor’s listing.

Singapore

      SGS market remained volatile though good two way interest was seen in the morning, driven by SGD spot it seems. SGS yields closed 2-8bps lower across whereas SGD IRS was down 4-5bps. Bond swap spreads widened about 2-3bps with the 10y benchmark at -12.

      Asian credit space traded tighter, with long end INDONs higher by about half a point. New Shenzhen Qinghai traded 1pt up with overwhelming demand from PB clients. Sinopec opened yesterday morning with most tranches trading around reoffer levels. We are seeing quite some selling interest for Korean names likely to make room for heavy new Korean issuances in the pipeline. MALAYs are still holding up well as the 25s and 45s were lifted around +110 and +158 level respectively.

Indonesia

      Indonesia bond market closed higher supported demand which were willing to pay at a higher price. Demand came in mixed from onshore and offshore buyers. However, this hike in prices was supported by thin trading volume. There were minimum sentiments during the day to justify the hike in prices. On other hand, President Jokowi held bilateral meeting with Japanese Prime Minister Shinzo Abe, Jordanian King Abdullah II, Chinese President Xi Jinping and Singaporean Prime Minister Lee Hsien Loong, consecutively. Positive sentiment may come if the President succeeds to obtain FDI’s deals with these countries. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.405%, 7.429%, 7.643% and 7.780% while 2y yield shifts up to 7.164%. Trading volume at secondary market remain thin at government segments amounting Rp8965bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2469tn with 81x transaction frequency and closed at 106.070 yielding 7.429%.

      Corporate bond trading traded thin amounting Rp482 bn. SISMRA01CN3 (Shelf Registration sukuk ijarah I Summarecon Agung Tahap III Year 2015; Rating: idA+(sy)) was the top actively traded corporate bond with total trading volume amounted Rp150bn.