Maybank GM Daily - 22 May 2015

FX

Global

Eurozone released a mixed bag of PMI-mfg data yesterday with an upside surprise from France matched by a disappointing print out of Germany. Still, a better number is better than none at all and EUR crept up and retained some of its gains in early Asia. US data also restrained the greenback with PMI-mfg also underperforming at 53.8 vs. prev. 54.1. Existing home sales was slightly off the mark at 5.04mn, May Philly Fed deteriorated to 6.7 from 7.5 while initial jobless claims rose to 274K from previous 264K. Markets perceived the data as a sign that Fed will not raise rate in a hurry with both bonds and equity markets bid overnight.        Whilst the dollar took a breather, GBP was the frontrunner on Thu, buoyed by a strong retail sales number for Apr. Still, the DXY could try the 100-DMA again and focus is on CPI print and Fed Yellen’s speech tonight. Oil prices took advantage of the USD slack to head higher overnight with WTI crude just under the USD61/bbl, within striking distance of the high at USD61.71 also backed by expectation of lower energy production from the US as well as a pick-up in global demand.        Nearer to home, Malaysia’s CPI is also due (Cons.: 2.2%y/y) at noon (SGT). Early starters in Asia are a mix of black and red with Nikkei a tad lower ahead of BOJ policy meeting later. Kospi was in moderate black though. FX-wise, SGD, MYR and KRW gained against the USD this morning but expect gains to be capped by key US CPI tonight.

Currencies

Watching Yellen Tonight for Fresh Cues. USD strength this week remained capped by 100DMA at 95.65 as the DXY closed 95.26 overnight as weaker than expected home sales, Philly and Kansas Fed Manf data offset better than expected initial jobless claims data (strongest since 2000). Focus tonight on Fed Chair Yellen’s speech (1am SGT) for further cues. We will also be watching Apr CPI data. Fed’s Fischer is also due to speak at an ECB forum later tonight. Day ahead sees 95.00 (21 DMA) – 95.65 (100 DMA) range in absence of catalyst in Asia hours.        EUR/USD – Range-Bound. Euro stayed firmed overnight in absence of Greek negative headlines amid slightly softer PMI composite numbers. Media reports that Greek PM Tsipras will meet Merkel and Hollande at the 2-day summit in Riga tonight, possibly to present some sort of debt restructuring plans.  Support still seen at 1.1050/60 (trend-line support from Apr 2015 lows) before 1.0920 (50 DMA) in the short term. Day ahead brings preliminary IFO business survey..        GBP/USD – Firm but Cautious of Technical Pullback. GBP firmed on much stronger than expected retail sales number yesterday. Pair traded a high of 1.57 before easing to close at 1.5660 levels. GBPUSD was last at 1.5665 this morning; daily momentum and oscillators are turning bearish bias. Possible bearish divergence as indicated on daily MACD. Next support at 1.5450 (21 DMA). A daily close below 21DMA could see the pair eased further towards 1.5180 levels.        USD/JPY – Buy on Dips. USD/JPY eased overnight tracking broad USD weakness and narrowing UST-JP 10Y yield spreads. Focus on BoJ meeting/ BoJ Kuroda’s speech later (11am); we do not expect any fresh easing at this meeting. Pair could head lower intra-day; interim support at 120.70 and 120.50. That said we remain better buyers of the pair on dips as overall bullish momentum remains intact. Bullish triangle formation appears to suggest a break-up could be in the making. Resistance still seen at 121.50 – 121.85 (previous high in 2015). We caution that a potential break on the upside could see the pair make a run towards 126 levels over time.           AUD/USD – Bearish Risk.  AUD/USD was little changed on Thu and inched above the 0.79-figure this morning. Pair is still supported by the 100-DMA at 0.7850, also underpinned by a small rise in iron ore prices.  Daily indicators still gaining bearish momentum and we expect intra-day bounces to be capped by 0.7918. We think near-term trades are whippy and would prefer nimble trades within range. 50-DMA is at the brink of crossing the 100-DMA, a slight bullish indicator in a broader bearish trend.        NZD/USD – Fade Rallies. NZD firmed overnight on short-covering and forecast milk production falling. NZ treasury forecast rise in TWI to 77.90, from 75.82 also saw some NZD short-covering overnight. Some IBs were also quoted on the wires saying RBNZ easing has been overpriced. NZD was last traded 0.7380 at time of writing; favour fading rallies towards 0.7430 levels. We continue to see further downside in the NZD on a combination of drivers including mounting expectation of RBNZ cutting rates in Jun, weak dairy prices, falling PPI.

Asia ex Japan Currencies

      The SGD NEER trades around 0.10% below the implied mid-point of 1.3340 with the top end estimated at 1.3074 and the floor at 1.3607.

Bearish Bias. USD/SGD closed the session overnight largely unchanged. But traded softer this morning towards 1.3330 off the back of a slightly weaker USD. Recent rallies in the month of May saw the pair failed twice at 1.34 resistance amid waning bullish momentum. 50DMA has crossed 100DMA lower and could potentially suggest some mild downside pressure in the interim. Pullback could see the pair towards 1.3290 (21 DMA). Bigger support lies at 1.3180 (200 DMA). Intra-day range of 1.3280 – 1.3380 expected.        AUD/SGD – 50-DMA to be cleared next. AUD/SGD tested below the 50-DMA at 1.0532 but was unable to muster a close below that level. AUD bears reassert and daily momentum indicators show that it could be a matter of time before the AUDSGD reverse lower towards 1.0460, once the 1.0532-support is cleared. Topsides to be guarded by 1.0600 ahead of the next at 1.0675 in the near-term.        SGD/MYR – Ascending Wedge (Bearish Bias). SGDMYR remains in an ascending wedge and was last seen around 2.6930, awaiting for fresh cues to break-out. Daily stochastics has fallen from oversold levels while momentum is mild bearish. As cautioned previously, the break below 2.69 (50 DMA) sees 2.6770 (100 DMA) before 2.63 levels.        USD/MYR – Range-Bound. USD/MYR eased slightly tracking the mild rebound in oil prices and slightly softer USD overnight. Support levels seen at 3.5850 (21 DMA) before 3.5750. Intra-day range of 3.5800 – 3.6050. Day ahead focus on Apr CPI inflation.        USD/CNH – Range-Bound. USD/CNH fell towards 6.1960 by this morning, taking advantage of the absence of USD bulls as well as the improvement in HSBC flash PMI-mfg for May from the actual print in Apr. We expect USD/CNY fixing to be fixed slightly lower later. We also noticed reluctance by PBOC to fix the pair much higher against the dollar, underscoring our view that the central bank wants to ensure a steady yuan. Pair is still within the broader consolidative 6.1842-6.2292 range. A breakout is needed for more directional cues at this point. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which is near to the 200-DMA at 6.1924. On 21 May, USD/CNY was fixed 14 pips higher at 6.1139 (vs. previous 6.1125). CNYMYR was fixed 11 pips higher at 0.5826 (vs. 0.5815). In news, an editorial by the China Securities Journal warned that yuan strength will not help the weak economy and will undermine efforts to stabilize growth.        USD/IDR – Rangy. USD/IDR steadied around 13130-levels, little changed from its close at 13122 on Thu. 1-month NDF (USDIDR) was little inspired in the overnight action with gains still capped by the rather steady dollar.  Intraday MACD shows no strong momentum. On Thu, S&P raised the rating outlook of Indonesia to positive to the delight of the Finance Minister Brodjonegoro who urged the government maintain budget reform momentum and boost growth. In the absence of fresh catalyst, look for the 12950-13200 range to still hold intraday. Foreign funds bought a net USD24.7mn in equities yesterday and further demand for Indonesian assets could cap spot. The JISDOR was fixed lower at 13150 yesterday vs. prev. 13169 and we expect fixing to be little changed today.        USD/PHP – Ranging. The USD/PHP is still weighed around 44.460, in line with its regional peers as dollar bulls catch its breath. 1-month NDF also steadied this morning around 44.56 and we expect prices to remain rangy ahead of key US CPI tonight. Spot to remain within 44.40-44.72 in Asia today. Foreign funds sold a net USD14.60mn in equities yesterday and a further sell-off could keep USD/PHP supported in dips.        USD/THB – Consolidation.  USD/THB remains in consolidation within 33.30-33.60, last printed 33.44. Daily MACD forest shows mild bearish momentum. In news, Thailand’s government plans greater investment spending to boost growth. Inflation is seen at 1.1-2.1% in 2016, growth in the same year should average 3.7-4.7%. The latest budget is based on a 3.5-4.5% growth assumption. The abovementioned range should hold today as Asian investors look for US CPI for dollar cues. THB found some support yesterday from foreign buying of a net USD28.1bn in equities but FX players could remain on the sidelines in Asia trade.

       USD/SGD - Bullish Bias. USD/SGD hit an overnight high of 1.3365 following the pull-back in the EUR. The sell-off in the JPY and EUR continues to be supportive of the pair.  Intraday MACD is showing bullish momentum though slow stochastics is at overbought levels. With the bias still to the upside, look for moves towards 1.3401 ahead. Pullbacks, if any, should find support around 1.3320. It was announced yesterday that final 1Q15 GDP will be released on 26 May (Tue).

       AUD/SGD – 100-DMA Gives Way. AUD/SGD slid along with the AUD bears, waffling around 1.0560. Bears are gaining traction for this cross and could reverse towards 1.0465, should prices clear the 1.0532-support. 1.0526 marks the upper bound of the cloud and we expect this region to be formidable support. Topsides to be guarded by 1.0675 in the near-term.

       SGD/MYR – Ascending Wedge (Bearish Bias). SGDMYR remains in an ascending wedge and was last seen around 2.6980, awaiting for fresh cues to break-out. Daily stochastics has fallen from oversold levels while momentum is turning mild bearish. As cautioned previously, the break below 2.69 (50 DMA) sees 2.6770 (100 DMA) before 2.63 levels.

       USD/MYR – Mild Upside Bias. USD/MYR continued to take cues from oil prices and the greenback. Pair gapped higher this morning off the back of firmer USD and a slump in oil prices; pair last traded 3.61 at time of writing. Resistance seen at 3.62 (100 DMA) before 3.6380 (50 DMA). Support at 3.5870 (21 DMA). Daily momentum and oscillators are mild bullish bias. Week ahead focus on Apr CPI inflation (Fri).

       USD/CNH – Firmer in Range. USD/CNH steadies around 6.2090 this morning, buoyed by the resurgent dollar and perhaps another higher USD/CNY fixing by PBOC. We notice that PBOC has a reluctance to fix the pair much higher against the dollar, underscoring our view that the central bank wants to ensure a steady yuan. Pair is still within the broader consolidative 6.1842-6.2292 range. A breakout is needed for more directional cues at this point. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which is near to the 200-DMA at 6.1924. On 19 May, USD/CNY was fixed 19 pips higher at 6.1098 (vs. previous 6.1079). CNYMYR was fixed 9 pips higher at 0.5763 (vs. 0.5754).

       USD/IDR – Supported. USD/IDR slipped lower yesterday as bets unwound that the BI would cut rate to support the economy. Instead, the BI chose to keep the policy rate steady but loosened macroprudential policies to support the economy, namely raising the loan-to-value ratio of loans for mortgages and motorcycle loans. This morning though, the pair has regained most of its losses of yesterday, jumped back to 13181 at last sight, tracking its regional peers. Further upticks could be mild as intraday MACD is showing no strong momentum and slow stochastics is only showing mild bullish bias. Look for 12950-13200 range to hold intraday. The 1-month NDF is on the retreat after climbing back above the 13300-levels overnight, sighted around 13290 currently. Foreign funds sold a net USD32.59mn in equities yesterday. The JISDOR was fixed higher at 13183 yesterday from Mon’s 13116.

       USD/PHP – Gapping Higher. The USD/PHP gapped higher to 44.600 at the opening this morning, playing catch up with its regional peers. Continued gains in the dollar today should continue to keep the pair supported. Pair is currently sighted around 44.585, having lost most of its bearish momentum and with slow stochastics on the rise. Upticks today should see support around 44.715 and dips are likely to be supported around 44.400. The 1-month NDF was sighted around 44.670 this morning with intraday MACD showing bullish momentum and slow stochastics at overbought levels. Foreign funds sold a net USD7.99mn in equities yesterday and a further sell-off could keep USD/PHP supported.

       USD/THB – Upticks.  USD/THB is back on the upticks in line with the dollar moves. Sighted around 33.530 currently, intraday MACD forest is showing mild bullish momentum, and slow stochastics bullish bias. Further upside today is likely to meet resistance around 33.635 before the next at 33.810. Any dips today should see support around 33.450. Yesterda[y, foreign funds sold a net THB0.61bn in equities but bought a net THB2.26bn in debt that weighed on the pair yesterday.

Rates

Malaysia

In the local government bond market, the new 20y benchmark MGS 5/35 garnered a solid bid/cover of 2.724x with average yield of 4.254%, which is almost on par with the old 20y benchmark MGS 4/33 last done at 4.25%. Post auction bids were around 4.25% but no trades were done. The curve ended relatively unchanged from the previous day.        A very quiet day for the IRS market again. At the last minute, the 5y IRS traded at 3.90%. 3M KLIBOR remain unchanged at 3.70%.        PDS space was quiet with most names trading slightly wider. Aman, Plus and Manjung saw some interest but the papers traded at previous levels again. Trading volume was much lower, affected by the book opening of the new government guaranteed Jambatan Kedua sukuk. Final pricing for the 10y and 15y sukuk was set at 4.30% and 4.52% respectively, tighter than initial price guidance of 4.25/32% and 4.52/62%. We think the pricing for the 10y sukuk seems tight as 9y GGs were quoted around that level in the secondary market. The 15y sukuk, however, seems fairly priced as other GGs traded at similar levels. There appears to be not much concession for investors at current levels but we heard there is good demand from real money for the sukuk.

Singapore

SGS continued to underperform with selling interest largely concentrated on the 10y likely due to next week's auction of a new 10y benchmark SGS. Yields ended higher by 4-5bps in the 10y-20y region and 1-2bps elsewhere on the curve. SGD IRS closed flat to 1bp higher. Bond swap spreads seem to be heading tighter by another 5-10bps.

       In the Asian credit space, Chinese credits continued to be in demand with usual names like Baba, Huwhy, Dalwan and CHGRID being sought after along with some short dated Korean financials. Indonesia opened its book for a 10y USD sukuk guiding at 4.55% with an indicated size of at least USD500m. This coincided with S&P changing its outlook on the sovereign rating to positive from stable, possibly raising the rating to investment grade in the next 12 months. INDONs rallied about 0.5pt, but we see the new issuance's fair value to be around 4.40/45%. Elsewhere, new issuances like BJSTAT and ICBCAS still see good two way flows. All eyes were on US jobless claims last night for more direction.

Indonesia

       Indonesia bond market closed lower amid S&P increased Indonesia’s credit rating to BB with a positive outlook. Bond market directly response the news with a significant higher price shock while Rupiah appreciated to as low as Rp13,056 per USD. However, bond prices volatility normalize and closed lower compared to yesterday closing. S&P says that the positive outlook reflects the possibility that S&P could raise ratings on Indonesia over the next 12 months. Yesterday rating increase according to S&P was mainly due to improvements in Indonesia's policy framework which have enhanced monetary and financial sector management as well as Greater policy effectiveness and predictability which have resulted in expanded fiscal and reserve buffers and improved Indonesia's external resilience. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.801%, 8.026%, 8.237% and 8.307% while 2y yield shifts up to 7.496%. Trading volume at secondary market was seen heavy at government segments amounting Rp13,358 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,527 tn with 113x transaction frequency and closed at 102.154 yielding 8.026%.

       Corporate bond trading traded heavy amounting Rp635 bn. SMRA01CN3 (Shelf registration Sukuk Ijarah I Summarecon Agung Phase III Year 2015; Rating: idA+) was the top actively traded corporate bond with total trading volume amounted Rp60 bn yielding 10.511%.