Maybank GM Daily - 26 May 2015

FX

Global

Overnight session was quiet with US and UK out for holiday. Still, the impact of Yellen’s speech lingered with EUR hit the most. Antipodeans were resilient, little changed against the USD. Fed Hawks spoke last night with Fed Mester expecting the interest rate hike to come soon. Fed Fischer reiterated the Fed’s data dependency and expects rate normalization to be gradual. In his opinion, interest rate will reach 3.25-4.00% by 2017-2018. Dollar was last seen testing the 50-DMA at 96.62 this morning.        Tonight’s US durable goods order is a key data with an upside surprise that could add steam to the USD bulls. Consensus expects a -0.5% contraction to the headline from the 4.7% growth in Mar. New home sales and consumer confidence index will be watched as well.        Before that, Singapore released a stronger-than-expected (finalized) growth number of 2.6%y/y for 1Q this morning, accelerating from the 2.1%. New Zealand released trade data exports and imports roughly in line with expectations and a slightly wider trade surplus of NZD123mn than expected, lending support to the NZD. Philippines will release imports and trade balance numbers for Mar, followed by Thailand’s trade data as well at noon. Singapore’s industrial production should be released shortly after. In news, there is fresh speculation that the government will accelerate measures to boost the economy, lifting the Shanghai Comp above the 5000-mark.        Despite the strong growth number out of Singapore, SGD was the laggard this morning, down -0.2% against the USD. THB and MYR are also weaker against the greenback. Expect the USD to dominate the FX space still in the week ahead and as we move into month end.

Currencies

G7 Currencies

Watch Durable Goods Orders Data Tonight. Little action in the Dollar overnight as key markets in US, UK were closed for holidays.  No data was released; just Fed speaks – Fed’s Fischer says Fed processes are not date-determined but data-determined; "If the economy is growing very, very slowly we will wait. If the economy is growing faster we will do it quicker"; Fed’s Mester said “time is near” and will go into its Jun meeting with an “open mind”. DXY remains firm this morning; last at 96.50. Still favor playing from the long side; intra-day range of 96.00 – 97.00 expected. Daily momentum is mild bullish.  Key focus today on Apr durable/capital goods which is expected to watch for any follow-through in momentum; other data of focus today includes Mar S&P-CS home prices; Apr new home sales; May Richmond and Dallas Fed manufacturing activity; May Consumer confidence; Fed’s Fisher speaks. For week remaining, Fed’s Lacker speaks (Wed); May initial jobless claims; Apr pending home sales; Fed’s Williams and Kocherlakota speaks (Thu); 1Q GDP; May Chicago Purchasing Manager; May Univ. of Michigan Sentiment (Fri)..        EUR/USD – Soft. EURUSD continued to trade with a heavy bias on ongoing Greek concerns as the endgame (Grexit or stay in Euro) could be nearing as time is fast running out. There were other political noises that were being attributed to softer Euro including elections in Portugal and Spain showing their objection for austerity measures. EUR traded to a low of 1.0935 this morning. Daily momentum remains bearish while stochastics are at oversold levels. Intra-day support at 1.0890 (61.8% fibo of 1.0532 – 1.1467) before 1.0750 (76.4% fibo). Resistance at 1.0990 should cap rally intra-day. Week ahead data some of the data we are watching includes GE Jun GfK consumer confidence; FR May consumer confidence (Wed); EC May economic, consumer confidence (Thu); EC Apr M3; FR, IT Apr PPI; IT 1Q GDP (Fri).        GBP/USD – Cautious on Downside Short Term. GBP closed largely unchanged around 1.5465 (21 DMA) amid UK, UK hols. ended the week on a soft note amid broad USD strength. Pair was last seen at 1.5455this morning. We cautioned that daily momentum and oscillators were turning bearish last Friday, noting a possible bearish divergence. Day ahead GBP could face downside pressure; daily close below 1.5465 (21 DMA) sees little support in between before 1.5180 (50 and 100 DMAs). Week ahead data flow is light; key focus on 1Q GDP; May GfK Consumer confidence (Fri).        USD/JPY – Grinding Higher. USD/JPY continues its slow grind higher, helped by the dollar strength as well as GBP/JPY and AUD/JPY buying. Pair is fast approaching our resistance level at 121.85 and a firm break here could see the pair head towards the 122-figure. Also, a bullish triangle formation remains in the making, suggesting that a break higher could be in the making. For now, resistance is around 121.85 (previous high in 2015) – 122.00. A potential break on the upside could see the pair make a run towards 126 levels over time. We remain better buyers on dip; pullback today if any could see support around 121.00.        AUD/USD – Bearish Risk.  AUD/USD was hardly moved on Mon in the absence of UK and US players, last seen at 0.7810. Pair is still on the downmove today, testing the 50-DMA at 0.7800.  Daily momentum indicators are increasingly bearish and we expect intra-day bounces to be capped by 0.7918 ahead of the 0.80-figure. Corrective bounce seems to be over, in tandem with the dollar correction but the recovery in iron ore prices in the past two sessions could lend some support to the Aussie on dips. AUD/USD could settle into range within 0.7740-0.8000 hereforth. We watch the CAPEX numbers on Thu and we expect business investment to remain on a decline in 2015/2016. Mining investment to taper off from its peak and non-mining investment to remain flat.        NZD/USD – Descending Triangle (Bearish). NZD was largely quiet overnight; last traded 0.7308 levels this morning. Apr trade surplus was better than expected due to reduced imports as exports also fell. 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. Daily momentum remains bearish bias, but stochastics is at oversold levels. While we still see downside pressure, we are cautious of the pair nearing the lower end of its range. On the tech side, the pair appears to see a descending triangle formation in the making; break below 0.7288 support see first objective on the downside at 0.72. Week ahead brings Apr building permits; May ANZ business confidence (Fri).        USD/CAD – Bullish Momentum. USDCAD is still on the upmove this morning, underpinned by the dollar strength. Current uptick in the oil prices keeping the bulls on leash and pair was last seen around 1.2325. Bids have managed to inch above the 50-DMA. Any unlikely retreats should meet nearby support at 1.2160. Break of the 1.2320/60 region, marked by the 50 and 100-DMAs, is required for the pair to settle at a higher 1.2350-1.2780 range. 1Q GDP is the focus of the week, due on Fri together with the US’ release and consensus is a 0.2%q/q growth from a flat growth in the quarter prior. BOC meets tomorrow and markets expect no change to rates at 0.75%.

Asia ex Japan Currencies

The SGD NEER trades around 0.22% the implied mid-point of 1.3412 with the top end estimated at 1.3144 and the floor at 1.3681.        USD/SGD – Upside Bias. USD/SGD continued its climb higher, ignoring the better-than-expected final 1Q15 GDP print as the focus remained on the dollar. The economy expanded by a better-than-expected 2.6% y/y in 1Q15 vs. flash est. of 2.1%, helped by an improvement in manufacturing (1Q: -3.2% vs. flash est.: -3.4%) and construction (1Q: 5.7% vs. flash est.: 3.3%). Pair traded to a high of 1.3457 this morning but is currently sighted around 1.3446. Intraday momentum is bullish bias, though oscillator is at overbought levels currently. With our weekly resistance level at 1.3430 taken out this morning, a firm close above that level could see a move towards 1.3480 (50 DMA). Support today is seen around 1.3400. Apr IPI this afternoon (cons.: 1.1% y/y) will be eyed.        AUD/SGD – Fresh Bullish Attempts. AUD/SGD bounced unexpectedly yesterday on SGD weakness. Fresh bullish attempts try at the 50-DMA at 1.0532 and the cross last printed 1.0511. 1.0440 is the near-term support now ahead of the next major one at 1.0376. Topsides now guarded by the 50-DMA at 1.0523 ahead of the next resistance at 1.0600. Bias is still to the downside.        SGD/MYR – Ascending Wedge; Watch out for the Decline. SGDMYR, last seen at 2.6920, remains on the verge of a breakdown, with an ascending wedge (bearish bias) in the making and a top formed at 2.7150 levels. Weekly stochastics is also falling from overbought levels while weekly MACD is bearish bias. The break below 2.69 (50 DMA) sees 2.680 (100 DMA) before 2.63 (200 DMA) levels. Remain better sellers on rally.        USD/MYR – Range-Bound. USDMYR continues to trade range-bound taking cues from a firmer USD and oil prices. No key data for release this week. Interim support at 3.58 levels (trend-line support from Apr - May 2015 lows). Next resistance at 3.6220 (100DMA) before 3.63 (50 DMA).        USD/CNH – Rangebound. USD/CNH hovered around 6.2050, supported by dollar strength. We expect USD/CNY fixing to be higher later and 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 25 May, USD/CNY was fixed 34 pips higher at 6.1165 (vs. previous 6.1131). CNYMYR was fixed 6 pips lower at 0.5808 (vs. 0.5814). In news, speculations of more growth boosting measures from the government are rife, lifting the Shanghai Comp Index above the psychology 5000-level, up 3.0% in the session. Expect Hang Seng to play catch up this morning. Fuelling the euphoria at home, China and Hong Kong is confirmed to start cross border sales of funds on 1 Jul.        USD/IDR – Inching Higher. USD/IDR is bouncing higher this morning, tracking the dollar gains overnight. Pair is currently sighted around 13198 with intraday MACD forest showing increasing bullish momentum and slow stochastic fast approaching overbought levels.  In the absence of fresh catalyst, look for the 12950-13250 range to hold intraday. 1-month NDF inched higher to 13285 this morning with bullish momentum intact though slow stochastic is showing little directional bias. Foreign funds sold a net USD10.67mn of equities yesterday and removed a net IDR1.42tn from their outstanding holding of debt on 21 May (latest data available) and continued selling should keep the pair supported. The JISDOR was fixed higher at 13186 yesterday from Fri’s 13136.        USD/PHP – Bullish Bias. The USD/PHP climbed higher to 44.665 this morning, playing catch up with the rest of its regional peers. Pair remains bid with intraday MACD showing mild bullish momentum and slow stochastics bullish bias. Support is seen around 44.580 today with resistance around 44.715. The 1-month NDF is bid this morning, hovering around 44.730 with intraday MACD showing mild bullish momentum and slow stochastic little directional bias. Foreign funds sold a net USD8.03mn in equities yesterday and a further sell-off could keep USD/PHP supported. Imports fell 6.8% y/y in Mar with the trade balance flipping to a surplus of USD264mn.

       USD/THB – Bullish Tilt.  USD/THB is on the climb higher again passed the 33.600-levels. Pair remains on the bullish tilt today with intraday MACD still showing bullish momentum though slow stochastics is at overbought levels. Intraday range of 33.450-33.670 should hold. A firm break of the 33.670 resistance level would expose the next at 33.810. Yesterday, foreign investors bought a net THB0.97bn in equities but sold a net THB1.04bn in debt, providing little clear directions for the THB.

Rates

Malaysia

Government bond market had a lacklustre start to the week with yields ending largely around last done levels. Trading volume was thin as players look to the next auction - the reopening of the 7y GII 7/22, which was last done at 3.89%. The issue size could be announced today which we estimate to be MYR3.0b.        Unsurprisingly, no trades were seen in the IRS market as the US, UK and HK were out on holiday. Rates from the 3y point onwards were up by 1-2bps. 3M KLIBOR remained the same at 3.70%.        PDS market mirrored the quietness in the govvy market. Short dated GGs widened 3bps, while good demand was seen for longer dated AAA names such as Plus and Manjung. Telekom 10/2024 was given to the bid at 4.43%, same as previous close. In the AA space, Sarawak Energy papers saw some demand with the 9y trading 2bps tighter at 4.65%. Benih Restu (rated AA2) opened its books for a 10y sukuk guaranteed by Genting Plantations Bhd with the final price set at 4.62%. The pricing appear to be at levels of those rated one notch higher, but given the current weak palm oil prices, we think some concession should be given to investors.

Singapore

       SGS market had a relatively quiet day with small two way interest. SGS yields were up by 1-4bps, while SGD IRS ended 3-5bps higher from last Friday. The USDSGD was a tad higher but SGD Forwards did not move up much. Bond swap spreads may look to tighten further should SGD funding creep higher.

       The Asian credit market was quiet as major centres Hong Kong, UK, and US were out yesterday. We did see some good two way interest in the new INDOIS 2025 in the morning, but the afternoon session was muted. Trading activity is expected to resume today.

Indonesia

       Indonesia bond market booked losses on the first trading day of the week in reply to Fed Yellen’s explicit statement of rate hike within this year. There were not much market sentiments as several foreign market such as Hongkong, London and US market were closed due to holiday’s. We believe that bond market today would move sideways and would only turn positive if incoming bids came in heavy with awarded Weighted Average Yield (WAY) seen lower compared to market yield. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.886%, 8.078%, 8.242% and 8.326% while 2y yield shifts up to 7.555%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,148 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,562 tn with 74x transaction frequency and closed at 101.825 yielding 8.078%.

       Indonesia issued Global Sukuk worth of US$2 bn last Friday with 10y tenors. This global sukuk pay a fixed coupon rate of 4.325% p.a. and was sold at par. However, the coupon rate was higher compared to Indon 10y yield Thursday closing yield. Incoming bids during the issuance came in worth of US$6.8 bn or oversubscribed by 3.4x. 41% of Global Sukuk investors were Middle East investors, 21% were American investors, 16% were European investors, 12% were Asia (excl. Indonesia) investors while the rest were Indonesian investors.

       DMO will conduct their conventional auction this week with three series to be auctioned which are SPN12160304 (Coupon: discounted; Maturity: 4 Mar 2016), FR0070 (Coupon: 8.375%; Maturity: 15 Mar 2024) and FR0068 (Coupon: 8.375%; Maturity: 15 Mar 2034). We believe that the auction will be oversubscribe by 1.5x – 2.5x from its indicative target issuance of Rp10 tn while our view on the indicative yield are as follows SPN12160304 (range: 6.750% – 6.850%), FR0070 (range: 8.100% – 8.200%) and FR0068 (range: 8.300% – 8.400%).

       Corporate bond trading traded heavy amounting Rp691 bn. WOMF01BCN3 (Shelf registration I WOM Finance Phase III Year 2015; B serial bond; Rating: AA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp204 bn yielding 10.222%.