Maybank GM Daily - 27 Apr 2015

FX

Global

      US equities shrugged off weaker-than-expected durable goods order last Fri and closed in modest black. Over the weekend, Greece’s governors and other local officials agreed to lend cash to the central government and the scenario of a default with Greece still to remain in EU seems more plausible now. Nearer to home, China announces that all firms in all Free Trade Zones (FTZ) will be able to move CNY and foreign currencies in and out of China with fewer restrictions. Currently, only firms in Shanghai FTZ can do so.

      Week ahead for FX could see USD weakness persist. That said, we remain convicted to our USD bullish bias and see this dip as opportunity to accumulate into. USD/AXJs have also declined in particular USD/MYR and the decline could extend further towards 3.53 levels for the week.

      Focus is on central bank meetings – BoT (Wed); BoJ, FOMC, RBNZ (Thu). We expect all to keep monetary policy on hold (BoT at 1.75%; RBNZ at 3.5%), but the accompanying statements could contain a dovish tone. US FOMC statement will be closely watched and could provide the catalyst for USD direction. Markets are somewhat expecting a dovish-biased statement given that recent job data and CPI inflation disappointed. RBNZ’s accompanying statement could re-emphasize RBNZ Assistant Governor’s speech (23 Apr) that monetary policy will remain stimulatory; cautious of verbal intervention to jawbone NZD strength. While it is not our base case scenario for BoJ to increase stimulus at the upcoming meeting, we remain cautious of any BoJ action, given LDP lawmaker Yamamoto’s comments that he sees likelihood of BoJ increasing stimulus at the upcoming meeting.

Currencies

       DXY – Correction; Accumulate on Dips. DXY slipped to a low of 96.75 on Fri amid disappointing US core capex orders. Daily momentum and oscillators are bearish bias; intra-day range of 96.00 – 97.30 likely. A daily close below opens room for further downside towards 95.50 levels (38.2% Fibonacci retracement of 87.63 – 100.39).  Week ahead brings Apr Composite/services PMI; Apr Dallas Fed Manf. Index (Mon); Feb S&P/CS home price index; Apr Richmond Fed Manf. Index (Tue); Apr MBZ mortgage application ;Q GDP; Mar pending home sales (Wed); FOMC meeting; Apr initial jobless claims, continuing claims; Mar PCE Core; Apr Chicago Purchasing Manager; Fed’s Tarullo speaks (Thu); Apr ISM Manufacturing, manufacturing PMI; Univ. of Michigan sentiment; Mar construction spending (Fri).

       USD/JPY – Pressured Lower. The USD/JPY slipped lower towards 118.70 on Fri underpinned by dollar weakness. Double-top formation at 121.85 still holds and will continue to act as resistance until broken, weighing on the pair. Daily momentum is mildly bearish bias with pair potentially moving lower towards 117.90 levels (23.6% Fibo retracement of Oct-Dec upswing) with a risk to 115.50 (38.2% Fibo retracement). All eyes will be on BOJ policy meeting and Kuroda press conference on Thu, which will also see the release of the BOJ semi-annual outlook report. Other data to watch out for includes Mar CPI, Mar jobless rate, cash earnings on Fri.

      AUD/USD – Upside Bias. AUD/USD remained on the climb this morning in the absence of onshore traders, heartened by the USD weakness. Momentum tools favour the bulls with resistance at 0.7840 at risk.  RBA Glenn Stevens makes his speech tomorrow and may attempt (again) to jawbone the AUD lower. Pair is supported by the tankan-sen of the daily ichimoku cloud at 0.7708. Nonetheless, we continue to expect the bullish divergence to play out 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 – Respite. NZD traded as low as 0.7543 before rebounding to close above 21 and 100 DMAs (at 0.7602) last Fri amid broad USD weakness. Key focus for this week - Mar trade (Wed) and RBNZ meeting (Thu). We see RBNZ keeping policy rate on hold, with accompanying statement/speech dovish-tinge. We also believe RBNZ could soon roll out macro-prudential cooling measures to address speculative pressure on its housing market. Daily MACD and slow stochastics are showing tentative signs of bearish bias. Next support at 0.7570 levels (21 DMA and 100 DMA), then 0.75 psychological level before 0.7385 (61.8% Fibonacci retracement of Mar to Apr 2015 run-up). Day ahead attempt to fade rallies towards 0.7640s; intra-day range of 0.7530 – 0.7640 likely.

      AUD/NZD – Supported. Cross remains well supported; traded as high as 1.0316 levels this morning. Trend-line resistance (Nov 2014 high to Jan 2015 high) at 1.0320 is a key level to watch; a daily close above could see the pair re—visit 1.0410 (100 DMA). Daily momentum and oscillators are also mild upside-bias.

      EUR/USD – Caution of a Rebound Towards 1.10 Levels. EUR/USD traded as high as 1.09 last Fri on stronger than expected German IFO before easing to close around 1.0870 levels. The 50DMA at 1.09 remains a key level; a daily close above could see further move higher towards 1.1070 levels. Intra-day of 1.08 – 1.0940 range likely.  Greece talks over the weekend saw little progress; bailout talks to resume today.  We continue to maintain our bearish EUR/USD view amid structural decline in Europe fundamentals, concerns over Greece ability to meet repayment schedules (total of EUR16.5bn debt repayments between now and Jul), and diverging monetary policies between US and EU. Week ahead brings speeches from ECB’s Coeure and Stevens (Mon); GE Apr CPI; EC Apr consumer confidence (Wed); EC, IT Apr CPI; FR, IT Mar PPI; EC, GE, IT Mar unemployment rate (Thu).

      EUR/SGD – Familiar Range. EUR/SGD traded a 1.4421 – 1.4565 range before closing at 1.4491 Fri. Cross continues to trade a familiar range of 1.44 – 1.46 in absence of fresh cues. Consolidation remains the name of the game.

Asia ex Japan Currencies

      The

      The SGD NEER trades around 0.01% above the implied mid-point of 1.3328. The top end is estimated at 1.3061 and the floor at 1.3594.

      USD/SGD – Bearish. The USD/SGD broke below key supports at 1.3470 (100DMA, 32.2% Fibo retracement of 1.2705-1.3941) and at 1.3320 (50% Fibo retracement). Further moves below 1.3320 should see new support at 1.3170 (61.8% Fibo retracement). Daily momentum remains bearish while oscillator is at oversold levels. Expect 1.3470 to cap upside in the interim. Industrial production slipped by 5.5% y/y in Mar – the largest y/y fall since Feb 2013 – compared to Feb’s -3.3% and consensus’ -5.8%, dragged lower by pharmaceuticals and electronics output (-13.9% and 5.2% respectively). The slippage though did not stem the pair’s move lower on Fri as the focused remained on the softer dollar.

      AUD/SGD – Supported on Dips. AUD/SGD bears lost momentum this morning as the cross tracked the AUD higher, last priced at 1.0440. Support is still seen at 1.0376. Daily tools suggest that current momentum is tilted to the upside. 1.0526 is the first barrier for this cross to clear ahead of the next at 1.0659 - the top of the ichimoku cloud).

      SGD/MYR – Mild Bearish Bias. The double-top formation around 2.71 levels continued to hold well, capping the pair from moving higher. Daily momentum and oscillators are bearish bias. Next support at 2.67 (100 DMA) if broken could see the pair ease towards 2.6350 (23.8% Fibonacci retracement of 2013 low to 2015 high). 

      USD/MYR – Choppy. USD/MYR continued to push lower; traded a low of 3.5835 this morning amid firmer oil prices and weaker USD. Daily technical chart still looks bearish with momentum and oscillators bearish bias.  Intra-day range of 3.5350 - 3.5850 likely. While firmer oil prices have given the Ringgit some breathing space we continue to sound caution over Ringgit strength on potential risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus.

      USD/CNH – Head and Shoulders. USD/CNH is still locked in tight 6.1900-6.2000 range. 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 6.1241 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 24 Apr, USD/CNY was fixed 40 pips lower at 6.1241 (vs. previous 6.1281). CNYMYR was fixed 45 pips higher at 0.5853 (vs. 0.5807). Mar industrial profits will be out at 0930 (SGT). Over the weekend, China announced that the current pilot plan of allowing firms in Shanghai Free Trade Zone (FTZ) to move yuan and foreign currencies in and out of China via its capital accounts will be extended to other FTZs as well.  This comes after the three FTZs (Tianjin, Fujian and Guangdong) were just opened last Tue, underscoring China’s efforts to liberalize its capital accounts. The latest could add pressure for China’s commercial banks to lower their current lending rates.

      USD/IDR – Supported. The USD/IDR is currently trapped within an intraday ichimoku cloud and should oscillate within that cloud for the time being. The dim economic outlook together with negative sentiments surrounding the President’s fight against corruption could weigh on the IDR. With fresh catalyst absence ahead, expect the pair to remain choppy within 12850-13000 in the week ahead. Foreign funds bought a net USD1.08bbn in equities last week, and added a net IDR1.68tn to their outstanding holding of debt on 20-22 Apr (latest data available). 1-month NDF is now trapped within a daily ichimoku cloud, suggesting range-bound trading ahead. Daily MACD is showing no strong momentum and slow stochastics is indicating bullish bias still. The JISDOR was fixed higher at 12941 on Fri from 12939 on Thu.

      USD/PHP – Downside Bias. The USD/PHP continues to consolidate within 44.130-44.400 range even as it plays catch-up with its regional peers. Daily momentum remains bearish while oscillator is now at oversold levels. In the absence of fresh catalyst, pair should track dollar movements ahead within the 44.000-44.400 trading band in the week ahead with a bias to the downside. 1-month NDF continues to consolidate within its current trading range of 44.200-44.400 with daily MACD showing bearish momentum and slow stochastics fast approaching oversold levels. Foreign funds bought a net USD1.07bn in equities last week.

      USD/THB – Bullish Tilt.  USD/THB remains on the upswing ahead of the BoT policy meeting on Wed, where the market is pricing in a rate cut though consensus is expecting no change. Also not helping is concerns over the draft constitution. Daily MACD and slow stochastics are still showing bullish bias, which suggest potential moves back towards the 32.700-levels. Look for support around 32.300 and resistance at 32.830 this week. Last week, foreign funds purchased a net THB2.54bn and THB4.39bn in equities and debt.

Rates

Malaysia

      Local government bond curve ended 1-2bps lower as buying interest was seen throughout the day, especially by offshore names. Any further rally might be capped by locals as we noted better profit takers locally. Most trades were centered on MGS in the 3y-10y tenors.

      Overall a quiet day in the IRS market and rates fell as MGS rallied further. The 3y IRS was dealt at 3.64%. There may be some paying interest on the basis of no rate cuts. 3M KLIBOR stayed at 3.72%.

      Local PDS market was muted despite the strengthening MYR and tightening govvy curve. We saw PTPTN 24 trade 1bp tighter and Suria KLCC spread compress by 2bps. Market remained biddish but offers were quoted wider or not shown in the case of longer dated names. We suggest to marketweight GGs and prefer to overweight AAAs. There is some value in selective AAA names which have lagged behind the rally seen in Telekom and Plus papers. We also think 7y and 8y Telekom papers still look attractive presently. 

Singapore

      SGS market ended last week relatively calm. There was slight but manageable volatility. We saw some profit taking interest in SGS at the start of the day until the dip in USDSGD spurred some buying interest which pushed yields down by 1-2bps. Meanwhile, SGD IRS rose about 1bp and bond swap spreads widened 1-2bps. This should come as a slight relief to the PD community as month end approaches.

      Asian credit space traded a tad tighter with INDONs trading tighter and Korean names being highly sought after. The new Korea Resources 5y issuance, which was priced at +97.5bps, was last seen dealing around +92/+91bps. Chinese IGs also did well as more buyers were attracted by the higher absolute yields as a result of the previous spread widening. Chinese property names traded tighter, with Greenland Holding outperforming the rest on news of its listing via an asset swap with Shanghai Jinfeng. This is credit positive for Greenland as it would broaden the company’s funding channel. Elsewhere, new Sinope still traded rather near its reoffer and others closed mostly unchanged.

Indonesia

      Indonesia bond market closed lower on Friday’s trading supported by minimum market sentiments. We believe market would move slightly negative today along with better U.S. durable goods order data as well as ahead of bond auction tomorrow. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.423%, 7.517%, 7.703% and 7.866% while 2y yield shifts up to 7.195%. Trading volume at secondary market was seen heavy at government segments amounting Rp12939bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp4422tn with 81x transaction frequency and closed at 105.482 yielding 7.517%.

      Corporate bond trading traded heavy amounting Rp1,476 bn. SSIA01B (Surya Semesta Internusa I Year 2012; B series bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp354bn yielding 9.550%.