Maybank GM Daily - 9 Apr 2015

FX

Global

      Asian equities continue to build on their bullish momentum rising to multi-year highs – Nikkei at 15-year high; Shanghai Composite and HSI were at 7-year highs. Overnight US equities also finished higher. JPY-crosses were broadly higher on risk-on sentiment. Oil prices fell amid oversupply issues (again). EIA crude inventories showed a larger than expected increase -its biggest gain in 14 years, far exceeding the 3.2 million barrels forecast increase. WTI was last at $50.90/bbl; Brent at $56.05/bbl.

      FOMC minutes continued to reiterate that the committee will be patient in beginning to normalize monetary policy stance; timing of first rate hike hinges on economic conditions and outlook and the change in forward guidance (removal of the word patience) was not intended to indicate any decision on the timing on the first hike. We continue to reiterate our house-view for the first rate hike to begin in Sep 2015, totaling 50-75bps for year ending 2015.

      In Asia this morning, BoK kept interest rate unchanged at 1.75% as expected. BoK commented inflation is expected to remain low; domestic demand appeared to have improved. BoK also noted that future monetary policy will put priority on macroeconomic factors while considering financial stability

      Day ahead in Europe, GE Feb IP, Trade; FR Mar Business Sentiment data are due for release. For US, Initial jobless claims on tap. USD likely to consolidate with mild bias to the upside; we remain better buyers on USD dips.

G7 Currencies

      DXY – Buy on Dips. Dollar retraced most of its earlier losses to close unchanged overnight. FOMC minutes continued to reiterate that the committee will be patient in beginning to normalize monetary policy stance; timing of first rate hike hinges on economic conditions and outlook and the change in forward guidance (removal of the word patience) was not intended to indicate any decision on the timing on the first hike. We continue to reiterate our house-view for the first rate hike to begin in Sep 2015, totaling 50-75bps for year ending 2015. DXY now at 98.20; intra-day range of 97.80 - 98.80 expected; with mild bias to the upside. Daily slow stochastic is now rising from oversold levels. We remain better buyers of USD on dips. Week ahead Initial jobless claims (Thu); Mar import price index (Fri). Fed speaks include Kocherlakota and Lacker (Fri). 

      USD/JPY – Mild Upside Bias. The USD/JPY hit an overnight high of 120.31 following the release of the US FOMC minutes before easing to end the session at 120.13. Earlier yesterday, the pair had been weighed by the BOJ standing pat on policy and the lack of fresh revelation from the Governor Kuroda presser. Pair is back on the uptick this morning, heading towards 120.40-levels. Lacking fresh impetus for now, look for the pair to trade with a slight upside bias within its current trading range of 119.50-120.80 intraday still. Intraday MACD is still showing bullish momentum though slow stochastics is indicating little bias in either direction.

      AUD/USD – Two-Way Risks. AUD/USD swung to a high of 0.7728 before softening to levels around 0.7670. Topsides were capped by the overnight dollar recovery. As the pair makes its way lower, expect 0.7629 to support aggressive offers. Intra-day momentum indicators continue to exhibit mild bullish conditions though with the current downtick, momentum is not gaining steam. Expect 0.7734 to cap bids.

      NZD/USD – Mild Bearish Bias. NZD retraced earlier gains and traded softer this morning towards 0.7535 amid broad USD strength. Pair is expected to trade to the soft side; intra-day range of 0.7470 (50 DMA) – 0.7570 (23.6% Fibonacci retracement of 0.7192 – 0.7697); remain better sellers on rally.

      EUR/USD – Fade Rallies. EUR continued to slip overnight; broken below key support around 1.08 levels to trade 1.0765 low this morning amid broad USD strength. Break below 1.08 levels overnight is expected to see the pair revisit 1.07, 1.06 levels again. Day ahead see 1.0700 – 1.0830; continue to favour selling on rallies. Momentum and oscillators are also indicating a mild 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. Week ahead sees GE Feb IP, Trade; FR Mar Business Sentiment (Thu); FR Feb Industrial, Manufacturing Production; SP Feb Industrial Output (Fri).

      EUR/SGD – Bearish Bias. EUR/SGD remains well offered overnight; traded low of 1.4610 overnight. Favor fading rallies toward 1.4650 for a move back towards 1.4560 (previous low in 2015 and also the interim support). Daily momentum is mild bearish bias.

Asia ex Japan Currencies

      The SGD NEER trades around 0.99% below the implied mid-point of 1.3439 with the top end estimated at 1.3167 and the floor at 1.3710.

      USD/SGD – Tight Range. The USD/SGD is back on the slow grind higher after slipping over the past couple of sessions over dovish positioning ahead of the Apr MAS meeting. Pair is now inching back above the 1.3550-levels underpinned by the resurgent dollar as well as the rebound in the USD/JPY. In the absence of fresh impetus, pair should remain in tight consolidative trades within 1.3500-1.3600 today. Intraday MACD and slow stochastics continue to show bearish bias, suggesting upsides could be capped.

      AUD/SGD – Risks to the downside. This cross bounced to a high of 1.0333 before retracing towards the 1.30-figure, underpinned by stronger Feb retail sales. Pair still trades within the recent range of 1.0240-1.0400. MACD indicates slight deceleration of its bullish momentum on intra-day charts and there is still little sign of a recovery from its downswing last week.  As such, we expect current bounces to be gain little traction. RBA’s rate decision could swing this cross and bears could prevail regardless of the outcome. Should the nearby support at 1.0243 give way, next key support is seen at 1.0140 (76.4% Fibo retracement of 0.9066–1.3612). Break below key support could see the pair heading for parity. Expect 1.0360 to slow bullish attempts.

      SGD/MYR – Downside Bias. After yesterday’s 3-big figure move lower below the 2.68-levels, the SGD/MYR still on the slide. Cross is now hovering within the 2.6760-2.6900, sighted around 2.6831 currently. Intraday MACD and slow stochastics continue to show bearish bias. Look for continued trades within 2.6760-2.6900 intraday with a bias to the downside.

      USD/MYR –Technical Pullback Underway. We cautioned last week that that a decisive close below the previous week low around 3.65 levels could open way for some technical pullback towards 3.5950 and the pullback is now underway. Weekly, Daily  MACD and stochastics continue to exhibit a bearish bias.  That said, 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. Intra-day range of 3.62 – 3.65 expected.

      USD/CNH – Consolidate with Downside Bias. The pair continues to consolidate with mild bias to the downside. Low of 6.1918 was traded overnight before the pair rebounded towards 6.1970 post-USDCNY fix this morning. Key support still seen at 6.1890 (200 DMA); a decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of 6.1113 – 6.3021). Intra-day range of 6.1850 – 6.2100 expected.  USD/CNY was fixed lower by 43 pips at 6.1305 (vs. 6.1348). CNYMYR was fixed lower by 38 pips at 0.5857 (vs. 0.5896).

      USD/IDR – Slight Upside Bias. The USD/IDR gapped higher at the opening to 12970 this morning from yesterday’s close of 12960 underpinned by a resurgent dollar. In the absence of fresh catalyst, pair is likely to track the dollar higher today. Look for the pair to trade with a slight upside bias within 12900-13100 intraday. Intraday MACD and slow stochastics are showing little bias in either direction. Foreign funds bought a net USD35.99mn in equities yesterday, and added a net IDR0.79tn to their outstanding holding of government debt on 2 Apr (latest data available), supporting the IDR. 1-month NDF is back on the uptick towards the 13100-levels with both intraday MACD and slow stochastics showing mild bullish tilt. JISDOR was fixed lower again at 12942 yesterday from Fri’s 12995 and a higher fixing is likely given the spot’s climb higher this morning.

      USD/PHP – Gapping Higher. The USD/PHP gapped higher at the opening to 44.425 this morning from yesterday’s close of 44.390 on the back of a firmer dollar tone. Pair continues to inch higher on speculation this morning that the BSP could cut policy rate following the more moderate rise in inflation in Mar (2.4% y/y vs. Feb: 2.5%). The BSP governor has reiterated that policy “remains appropriate” and added though that the central bank was “ready to make adjustment as and if warranted”. Strong barrier at 44.500 should cap upside, though a firm break here could see the pair head back towards the 44.700-levels. Downside today should still see support around 44.300. 1-month NDF continues to consolidate at the lower bound of its 44.400-45.230 trading range this morning with intraday MACD and slow stochastics showing bullish bias. Foreign funds continued their buying spree with a net USD22.77mn in equities purchased yesterday, helping to prop up the PHP.

      USD/THB – Range-Bound With Bullish Tilt.  Onshore markets re-open today after closing for a holiday yesterday. USD/THB is on the uptick this morning, underpinned by a firmer dollar tone overnight, though it continues to trade within its current 32.350-32.550 range. In the absence of fresh catalyst, pair is likely to remain in these familiar ranges intraday but with an upside bias. Intraday MACD is showing tentative signs of bullish momentum, while slow stochastics is indicating mild bullish bias.

      USD/SGD – Sideways. The USD/SGD is back on the uptick, lifted by the resurgent dollar overnight. Pair continues to trade below the 1.36-levels though with intraday MACD showing bullish momentum and slow stochastics little bias in either direction, suggesting the grind higher could be gradual. Trades are likely to be cautious as well ahead of MAS policy meeting on 14 Apr (Tue), where we are expecting the MAS to stand pat. We expect sideway trades within 1.3530-1.3650 to hold intraday.

      AUD/SGD – Two-way Trades. AUD/SGD pared its overnight gains and waffled around 1.0410. This cross has entered a thickening ichimoku cloud. With RSI near 50 and intraday MACD showing a slight deceleration in bullish momentum, expect bulls to take breather. This cross should trade within 1.0360-1.0500 today. 

      SGD/MYR – Heavy. The cross remains heavy this morning, last seen around 2.6750 as we write. Intra-day momentum suggests that risks are still to the downside with further offers to meet first support around 2.6713. Any unexpected bids may run into offers around 2.6854.

      USD/MYR –Technical Pullback Underway. We maintain our short term tactical call (sent in tech weekly last Fri) for a technical pullback towards 3.5950. Pair closed at around 3.6300 levels yesterday; now at 3.6320 levels at time of writing. We continue to see a heavy bias. Weekly, daily MACD and stochastics continue to exhibit a bearish bias. Intra-day range of 3.62 – 3.6420 expected. That said, 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 extends its upmove this morning and was last seen at 6.2115, moving in tandem with its onshore peers. Stronger dollar leads the way but expect the pair to remain within the consolidative area of 6.1900-6.2250. 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 lower by 7 pips at 6.1338 (vs. 6.1345). CNYMYR was fixed lower by 8 pips at 0.5843 (vs. 0.5857). Economic Information Daily reported that bank loans to the steel industry missed its projection last year amid risk concerns. In other news, Shanghai-Hong Kong Stock connect saw a record turn over yesterday as Chinese investors hit the south-bound daily quota of CNY10.5 bn.

      USD/IDR – Sideways.  After sliding to a low of 12955 yesterday, the USD/IDR bouncing higher again this morning, underpinned by the firmer dollar tone overnight.  In the absence of fresh impetus, look for the pair to track the dollar ahead. Still, further moves higher are likely to be gradual given that intraday momentum indicators and oscillators are showing no strong bias in either direction ahead. Intraday moves within 12900-13100 are likely. Foreign funds bought a net USD19.86mn in equities yesterday but removed a net IDR0.32tn from their holding of government debt on 7 Apr (latest data available). 1-month NDF is now showing no strong momentum and slow stochastics still falling from overbought levels. JISDOR was again fixed higher at 13002 yesterday from Tue’s 12982 and but a lower fixing is likely given the current level of the spot this morning.

      USD/PHP – Closed For Holiday.  Onshore markets are closed today for a public holiday and re-opens tomorrow. 1-month NDF is inching lower this morning towards 44.500-levels, though it remains well-within its current trading range of 44.400-45.230 with intraday MACD showing little momentum in either directio and slow stochastics still falling from overbought levels. Foreign funds sold a net USD7.85mn in equities yesterday ahead of the public holiday today.

      USD/THB – Capped.  The USD/THB is inching higher towards the 32.600-region, underpinned by a firmer dollar tone overnight. Further moves higher could be slowed by continued foreign interest in Thai assets. Yesterday, foreign funds purchased a net THB2.02bn and THB6.58bn in equities and government debt, which kept the THB supported. Pair is edging closer to our barrier at 32.640. With our barrier at 32.580 taken out overnight, the new hurdle to cross is now at 32.640. Support is seen around 32.500 today. Intraday MACD is showing mild bullish momentum, though slow stochastics is showing a very mild bearish bias.

Rates

Malaysia

§  Local government bonds ended mixed. Yields on the 5y and 7y benchmarks were up by 2-5bps as that part of the curve started to cheapen ahead of the upcoming 5.5y new MGS 10/20 auction. We anticipate a size of MYR4.0b on this new 5y benchmark.

§  In the IRS market, there was generally a lack of interest to trade despite plenty of two way quotes. We still saw the aggressive foreign seller. IRS levels overall ended on par as global rates hardly moved, though 5y IRS was dealt at year-to-date low of 3.74%. 3M KLIBOR unchanged at 3.73%.

      Activity returned to the PDS market with over MYR1.0b volume done. We saw buying interest at the belly of the GG curve with 6y-9y Dana and PTPTN papers tightening about 1-2bps. For AAAs, Suria KLCC 24s tightened 2bps to 4.48%, while other names saw good two way quotes but not much volume. Rantau 19 had the highest amount of traded volume at MYR75m and tightened about 2bps to close at 4.05%. In the AA space, we saw Gamuda, YTL Power and Sarawak Energy being lifted. RHB Investment Bank opened its books for a Basel 3 10NC5 issuance with final price guidance at 4.95%. We think the pricing is attractive at these spreads for exposure to a fairly strong local investment bank.

Singapore

      SGS yields were down by 3-5bps as SGD funding eased and SGD IRS curve fell 5-8bps. Bond swap spreads tightened about 3-4bps with the 10y benchmark ending at -15bps. This could be due to reducing of positions ahead of FOMC minutes release last night. We suggest to look for further tightening before loading up on bond swap spreads again.

      The Asian credit market was back in full force with heavy buying and a very constructive tone. IG spreads tightened about 3-5bps. Real money accounts were buying up names such as PETMK/CNOOC and Tencent. There was more interest on longer duration papers especially in the 5-10y tenor. INDON sovereigns outperformed against the US Treasuries as offers across the curve were taken up and ended higher by about 0.25-0.50pts. HYs did fairly well, especially BB rated property names, and on average were up 0.25pts. In the primary pipeline, we have: 1) ShinHan Bank (A1/A/A) 5y guiding at CT5+110 bps, 2) China Comm Construction (A3) possibly a 10y, 3) Formosa Plastices (BBB+) possibly a 10y, and 4) Doosan Heavy Industries, guaranteed by KEXIM (Aa3/AA-) possibly a 5y. Market would have been watching FOMC minutes release last night for guidance.

Indonesia

      Bond prices incline in LCY bond market amid declining March foreign reserves to US$111.60 bn as minimum market sentiments remains. The decline in March foreign reserves due to Indonesia Central Bank was mainly influenced by the Government external debt payments and in order to stabilize rupiah exchange rate in accordance with the fundamental. Official reserve assets at the end of March 2015 can adequately cover 6.9 months of imports or 6.6 months of imports and servicing of Government external debt repayment. Post FOMC minutes release, UST 10y yield closed at 1.906% which was higher by 0.02%. We feel that during the day, LCY bond market would move sideways within a tight range on the note of minimal market sentiments. 10y yield today in our view would move between 7.20% - 7.35%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.170%, 7.257%, 7.454% and 7.641% while 2y yield were seen unchanged at 6.942%. Trading volume at secondary market remains thin at government segments amounting Rp10,619 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp3,540 bn with 118x transaction frequency and closed at 107.251 yielding 7.257%.

      Corporate bond trading traded heavy amounting Rp689 bn. ADMF02BCN4 (Shelf registration II Adira Finance Phase IV Year 2014; B serial bonds; Rating: _idAAA) was the top actively traded corporate bond with total trading volume amounted Rp64 bn yielding 9.502%.