Maybank GM Daily - 24 Apr 2015

FX

Global

      US stock indices had another positive session with NASDAQ closing at record highs after majority of the earnings report exceeded expectations. Oil prices also closed higher with ICE brent crude priced at USD64.85/bbl, up 3.38% by close on Thu. Prices were supported by concerns about the security of Middle East oil supplies as the bombing on Yemen continues.

      In the FX space, the DXY softened further overnight, last seen around 97.40, allowing most of the majors to catch up. The greenback reacted to higher initial claims and lower new home sales for Mar. CHF rebounded yesterday, up 1.8%. To note, EUR was also up 1% ahead of a finance minister meeting. NZD was the only one among its peers to slip against the dollar. Asia morning trade saw some profit taking, though NZD remains the laggard.

      China’s HSBC flash PMI-mfg came in worse than expected at 49.2 vs. the consensus at 49.6. However, apart from causing a modest fall in HSI, down -0.3% by close, there was little reaction to the print elsewhere as market players start to price in an upside surprise in the actual print for Apr after the recent RRR cut takes effect. AUD was supported at the 0.7700-handle.

Currencies

      DXY – Correction; Accumulate on Dips. DXY fell to low of 97.15 levels on weaker than expected new home sales data, flash manufacturing PMI overnight. Next support at 97.20 (50 DMA) remains in focus and technical chart is shaping out further correction. Daily momentum and oscillators are bearish bias; intra-day range of 96.90 – 97.80 likely. Drift lower towards 95.50 levels (38.2% Fibonacci retracement of 95.50 – 100.39) cannot be ruled out. Day ahead brings Mar durable goods orders, cap goods orders – these set of data will be closely watched ahead of US GDP data next week. Core capex orders (Cons. +0.3%) will be watched for signs of any sustained weakness.

      USD/JPY – Consolidating Lower. The USD/JPY slipped overnight before consolidating around the 119.60-levels this morning. Softer dollar tone as well as renewed expectations that the BOJ is unlikely to move at its 30 Apr meeting following Governor Kuroda’s testimony to Parliament yesterday weighed on the pair. Pair is currently trapped within a thin intraday ichimoku cloud, suggesting rangy trades ahead are likely. Nearby support is still around 119.50 with a firm break establishing new support at the 119-figure. Resistance intraday is still around 120.15. Intraday MACD is showing no strong momentum though slow stochastics is indicating bearish bias.

      AUD/USD – Upside Bias. AUD/USD firmed overnight, underpinned by the softer greenback and shrugging off the weaker HSBC flash PMI-mfg from China. Momentum tools favour the bulls with resistance at 0.7840 at risk.  Pair is supported by the tankan-sen of the  daily ichimoku cloud at 0.7699. Bulls may take advantage of the current absence of impetus to head higher and 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 – Soggy. NZD was weaker overnight after RBNZ Assistant governor McDermott’s speech that monetary policy will remain stimulatory to support output growth above potential, to help lift inflation back to target and reiterated that NZD strength is unwelcome in the face of falling key export prices. Despite a weaker greenback against most currencies, the NZD failed to reverse any weakness. Low of 0.7537 was traded yesterday before closing at 0.7594. Pair now trades 0.7580 levels; intra-day range of 0.7520 – 0.7620 expected.

      AUD/NZD – Supported. Cross rebounded as high as 1.0265 this morning, from a low of 1.0043. The cross has formed an interim base for now; next resistance to break at 1.0280 (50 DMA) before a return towards 1.04 levels (100 DMA). Daily momentum and oscillators are also mild upside-bias.

      EUR/USD – Caution of Rebound Towards 1.10 Levels. EUR/USD jumped 1.7% to an overnight high of 1.0846 on headline news of Greek deal nearing (from Greek official). Euro-area Finance Ministers meeting over Fri-Sat remains a key event to watch if a deal will be reached. Flash PMIs out of EC, GE, FR all disappointed; but remain in expansionary territory implying a cyclical recovery. We reiterate that a cyclical recovery is not a structural recovery and Euro-area is still undergoing a QE. 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. Day ahead brings GE Apr IFO; GE Mar import prices; SP Mar PPI. Key resistance at 1.0840 (38.2% Fibonacci retracement of 1.1450 – 1.0458); break above could see the pair testing 1.1050 again. Daily momentum and oscillators are mild bullish bias.

      EUR/SGD – Consolidate in Recent Range. EUR/SGD traded a 1.4371 – 1.4566 range before closing around 1.4523 overnight. Pair continues to pivot around 1.45 levels. Day ahead could continue to see the pair consolidate in recent range with some bias to the upside. Intra-day range of 1.4470 – 1.4600 expected.

Asia ex Japan Currencies

      The SGD NEER trades around 0.31% below the implied mid-point of 1.3367 and the top end is estimated at 1.3099 and the floor at 1.3635.

      USD/SGD – Bearish; Accumulate on Dips. The USD/SGD is back on the slide this morning, tracking the USD/JPY lower. Pair has taken out our support-level at 1.3430 and a firm close below this level could see the pair headed back below the 1.3400-levels towards 1.3380. Our preference remains to accumulate on dips. Any rebound should meet resistance around 1.3470. Intraday MACD and slow stochastics are bearish bias. For the fifth straight month, headline inflation fell by 0.3% y/y (vs. cons.: -0.5%) in Mar from Feb’s 0.3%, while core inflation eased to 1.0% y/y in Mar from 1.3% in Feb.

      AUD/SGD – Supported on Dips. AUD/SGD inched lower and was seen around 1.0430. AUD and SGD bulls are in a tug-of-war with the latter gaining momentum. Support is still seen at 1.0376. Intra-day tools indicate room for two-way movement with RSI at 50 and MACD on the zero line on the 4-hourly chart. 1.0526 to cap gains. Daily MACD still show mild bullish conditions and we reckon dips will still be supported.

      SGD/MYR – Mild Bearish Bias. SGDMYR cross continued to trade to the soft side; low of 2.68 was traded this morning (50 DMA). Daily MACD and stochastics are bearish bias. Next support at 2.67 (100 DMA). Intra-day sees range of 2.6700 (100 DMA) – 2.6900 (21 DMA).

      USD/MYR – Choppy. USD/MYR continued to drift south amid a weak USD and firm oil prices. Pair opened and traded a low of 3.5928 this morning and continues to look bearish on the daily technical chart. Daily momentum and oscillators are mild bearish bias.  Intra-day range of 3.5850 - 3.6100 likely. 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 – Head and Shoulders. The USD/CNH is back at the 6.19-figure. Prices are weighed by the soft greenback and we look for more declines towards the intra-day support level at 6.1841 (Oct 2014 high) which coincides with the 61.8% Fibonacci retracement of the Oct-Mar rally. Topsides capped by 6.2070. Expect USD/CNY fixing to be lower from the fixing at 6.1281 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. On 23 Apr, USD/CNY was fixed 9 pips lower at 6.1281 (vs. 6.1290). CNYMYR was fixed 35 pips lower at 0.5807 (vs. 0.5842). SSEC touched fresh high of 4444.17 on Thu and China approved 25 IPOs on Thu. In related news, Zhao Min, Vice Head of CSRC investor protection bureau warned stock investors to consider market risks and the factors that drive Chinese share prices (Shanghai Securities News).

      USD/IDR – Supported. The USD/IDR slipped lower this morning, dragged lower by the softer dollar tone. Still, further dips could be short-lived as negative sentiment surrounding the President’s fight against corruption following the appointment of graft-tinted policeman as deputy police chief could weigh on the IDR. Look for resistance around 13030 still and support around 12900. Foreign funds sold a net USD58.46mn in equities yesterday, but added a net IDR0.21tn to their outstanding holding of debt on 22 Apr (latest data available). 1-month NDF continues to consolidate within the 13000-13100 range recently with intraday MACD and slow stochastics showing little bias in either direction. The JISDOR was fixed lower for the first time in five sessions at 12939 yesterday from Wed’s 12952.

      USD/PHP – Consolidating Lower. The USD/PHP edged lower this morning, tracking the dollar moves. Pair continues its slow grind lower towards the 44.100-levels. With fresh catalyst absent, look for the pair to consolidate within its current 44.130-44.400 range intraday. Intraday MACD is showing no strong momentum, though slow stochastics is indicating bullish bais ahead, suggesting range-bound trading ahead.  1-month NDF remains well-within its current trading range of 44.200-44.400 with intraday MACD showing bullish momentum and slow stochastics little directional bias. Foreign funds bought a net USD2.14mn in equities yesterday.

      USD/THB – Two-Way Trades.  The USD/THB hit a weekly high of 32.512 overnight before easing off towards the 32.400-levels this morning, shaking off bears concerns over a firmer dollar tone this morning and rising tensions over the draft constitution. Pair is also now trapped within a thin intraday ichimoku cloud and a break-out here could see THB bears’ control strengthened. For now, continue to expect two-way trades within 32.320-32.500 to hold intraday. Four-hourly MACD is showing bullish momentum, though slow stochastics is indicating tentative signs of bearish bias. Yesterday, foreign funds sold a net THB1.84bn in equities, which more than offset the purchase of a net THB0.19bn of debt, which weighed on the THB.

Rates

Malaysia

      Local government bonds opened defensive on the back of higher US Treasury (UST) yields overnight. However, late afternoon saw sudden inflows into the belly of the curve, especially for the 3y and 5y benchmark MGS 10/17s and MGS 10/20s. Zeti’s comments lent further buying momentum for the rest of the curve as buying picked up on the 10y bonds.

      IRS were quoted lower following Zeti’s speech. The 5y IRS almost traded at 3.79% but nothing was dealt at the end. IRS levels have come down from recent highs. The 5y IRS traded at 3.81% just a few days ago. Players could consider playing the range by collecting some paid positions if rates move lower. 3M KLIBOR remained at 3.72%.

      Activity in the PDS market remains subdued. Most trades in the AAA space were at previous levels and with low volume. AAA names such as Telekom, Aman, Suria and Danga continued to be highly sought after given few primary issuances in the space. In the GG curve, we saw more liquidity with long dated Dana papers tightening 1-3bps and slightly over MYR300m in trading volume. It was reported that Khazanah could be issuing the first tranche of its SRI sukuk in May or later.

Singapore

      SGS curve flattened out at the back end, while the SGD IRS curve steepened slightly. Meanwhile, bond swap spreads widened about 1bp with the 10y spread closing at -13bps.

      The Asian credit space saw more buyers on the back of the UST movement overnight. MALAYs continue to hold up well with more buying interest on the 21s and 25s. Malaysian corporate USD issuances such as RHBC and CAGA were also lifted. New SINOPE traded slightly tighter, along with other recent issuances such as Cinda and INDKOR. Korea Resources Corp (Aa3) is issuing 5y USD bonds with guidance at T+115. We think the fair level should be around T+105 after taking into account a premium for weak commodity prices currently. PT Pelabuhan Indonesia ll also came out with 10y and 30y USD issuances with price guidance at 4.625% and 5.625% respectively. We expect the guidance to tighten at least 10bps given PELINDO III’s existing issuance was taken at 4.24%.

Indonesia

      Minimum sentiment remains to envelop Indonesia bond market and as a result, the LCY bond market closed with a negative tone as investors was seen selling their asset. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.389%, 7.488%, 7.688% and 7.858% while 2y yield shifts down to 7.154%. Trading volume at secondary market remain thin at government segments amounting Rp10981bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp4626tn with 74x transaction frequency and closed at 105.673 yielding 7.488%.

      Corporate bond trading traded thin amounting Rp330 bn. MAPI01BCN2 (Shelf Registration I Mitra Adiperkasa Phase II Year 2014; B series bond; Rating: idAA-) was the top actively traded corporate bond with total trading volume amounted Rp80bn.