Risk assets rose overnight as markets price in UK to remain in EU. European and NY equity indices posted strong gains for Thu session as opinion polls continue to signal a victory for the “Remain” camp.

FX

Global

      Risk assets rose overnight as markets price in UK to remain in EU. European and NY equity indices posted strong gains for Thu session as opinion polls continue to signal a victory for the “Remain” camp. UST 10yr yields inched higher. The first result was of Gibraltar which had an overwhelming 19,322 who voted for remain while 823 chose leave. It was the second result “Newcastle-upon-tyne” that triggered the first sign of volatility in Asia morning. The 51% remain, 49% leave outturn was too close for comfort and triggered a sell-off in NZD, GBP, AUD. The Sunderland outcome of “Leave” was a stunner and drove GBPUSD to levels around 1.43. The risk rally that had built in much of the past week had dissipated.

      With more than 50% of votes counted and a weaker than expected win for Remain in London, risks are now skewed towards a Leave win. However, it is still early days yet. GBPUSD touched a low of 1.4017, ten big-figure lower from its 1.5018-high this morning. USDSGD is last seen around 1.3490, USDJPY hovered around 104, USDCNH at 6.60. The USDCNY was fixed at 6.5776 but that is likely already irrelevant. Watch for more swings in the FX space.

      Few other events are noteworthy in light of the closely watched poll results in the UK. Month-end importers demand would keep USDINR supported on dips. However, swings should not be ruled out intra-day as everyone keep their eyes peeled for the next “Leave” vote that could trigger more volatility.

Currencies

G7 Currencies

      DXY – Focus on EU Referendum Results. Overnight data was slightly softer than expected – CFNAI, new home sales while mfg PMI was better than expected. USD was pretty much driven by developments in UK; and early optimism (before count began this morning) has kept the USD on a backfoot. But as of writing (after 40 centres being counted, with Leave in 1-point lead over Remain), USD index has recovered some of its loss ground but we caution that the next few hours of trading in Asia is expected to be driven by swings in results. DXY was last seen at 93.87 levels. Tentative signs are emerging the dollar index may rebound mildly. Next support at 93.50 before 92 levels. Resistance at 94.90 (21 DMA), 95.65 (100 DMA, downward sloping trend-line resistance from Feb and May) and 96.50 (200 DMA). Day ahead brings Durable Goods Orders (May P); Univ. of Mich. Sent. (Jun F) on Fri. In Fed Kaplan’s speech early this morning, he said USD to be stronger on balance for year; stronger USD creates headwinds for US manufacturers; low rates can cause excessive risk taking.

       EURUSD – Eyes on Referendum Results. EUR took an early hit, tracking losses in GBP following the early and larger than expected Sunderland vote for Leave. Expect Referendum results to drive sentiment today. Pair was last seen around 1.13 levels. Daily momentum is flat; not indicative of a clear bias. Support remains at 1.1230 (21 & 100 DMAs). Break below this support could see a move towards 1.1150 (trend-line support from Dec to Feb lows) before 1.11 (200 DMA). Resistance at 1.13 (50 DMA), 1.1360 (23.6% fibo retracement of Dec low to May high), 1.1450 levels before 1.15.

       GBPUSD – Choppy as Referendum Results Swing Sentiment. The highly anticipated event is finally here with final results expected to be known within the next 5 hours (2pm SG/KL time). First 2 hours of results showed a slight lead for Leave over Remain by about 8-point after 40 centres being counted. Majority of the reporting is expected around 10 – 11 am SG/ KL time today. The estimated time for the national declaration should be around 6 - 7am UK time on 24 Jun (1 – 2 pm SG/KL time on 24 Jun). Expect GBP to remain driven by results – we have seen an early taste of volatility when Sunderland voted for Leave (61.3%), with GBP falling by about 400 pips. GBP has now fallen towards intra-day low of 1.4017 after the London results (75% remain). GBP was last seen at 1.4180 at time of writing. We reiterate that a Brexit could see GBP test beyond 2 standard deviations at 1.33 of (our fair value at 1.58). It remains our long-standing view that UK is expected to vote to remain in EU. And we expect sentiment to be restored, IPO/M&A deals to come back in the pipeline and lend further strength to GBP. We remain better buyers on GBP dips. We caution that a bremain (by slim margin) could trigger second round of volatility as a slim win could put PM David Cameron’s political career at risk (and could result in sell GBP on rally).

       USDJPY – Choppy Ahead of UK Referendum Result. USDJPY is choppy this morning as the world awaits the UK’s decision on its status in the EU. Early results showed the Brexit camp in the lead, sending the pair tumbling to its lowest levels in 2-years to 103.07. This was after the pair had climbed to a high of 106.84 after the YouGov poll results showed the Bremain camp winning by 52%. The pair is likely to stay choppy within its current trench channel until the results are out (75% of the count by 11am SGT; official results: 2pm SGT). For now, fears of a Brexit, sending safe-haven flows into Japanese assets, are weighing on the pair, though the Nikkei futures are still higher. BOJ released its summary of opinions from its 15-16 Jun meeting, which did not contain any surprises. The BOJ board continues to favour more easing but the timing remains a question. However market reaction to this summary of opinions was not unexpectedly muted as market remained focused on the UK referendum. Pair was last seen around 104.20 levels. Pair has lost most of its bearish momentum and stochastics is climbing higher from oversold levels. This could change should the UK votes for Brexit. In the event of a Brexit vote, there should be continued safe-havens inflows with the potential for the pair to breach the key 100-figure towards the 90 levels. A Bremain scenario though - our base scenario - could swing the pair towards 106.85 levels (21DMA) and then to 107.50 (23.6% Fibo retracement of the Jan-Jun downswing). For a true bullish reversal, there is a need for a return of market confidence in PM Abe’s and BOJ Kuroda’s fiscal and monetary packages. We have BOJ Nakaso speaking later today. BOJ governor will be in Switzerland attending the BIS meeting when the UK referendum results are announced.

       NZDUSD – Choppy; EU Referendum Results to Drive Sentiment. NZD fell following swings in results favouring Leave. Last seen around 0.7160 levels. Bullish momentum on daily chart remains intact while stochastics is near overbought conditions. Resistance at 0.7360 (76.4% fibo). Support at 0.7070, 0.6930 (50% fibo retracement of May-2015 high to Aug-2015 low). Expect the pair to trade in recent range of 0.7050 – 0.72.

       AUDUSD – Uptrend? AUDUSD was last seen around 0.7530 after a reversal from its upswing above the 0.76-figure. UK referendum polls will continue to dictate the AUD. Support is being tested around 0.7514. Momentum seems rather bullish at this point but it is premature to call at this point. 0.7280 (200-DMA) is the next support. MACD shows a weak bullish momentum and stochastics is still overbought. Beyond the 200-DMA lies next target at 0.7145.

      USDCAD – Two-Way Swivels. Even with all that is going on in the UK, USDCAD is still stuck around the 1.28-figure. However, we do not expect the USDCAD to escape unscathed should there be a Brexit. Daily stochastics has risen from oversold conditions and MACD forest is at the zero level, suggesting room for two-way moves. The 1.2530-1.3460 range still holds with the 50-DMA at 1.2856 still acting as a pivot point.  Strong support is still seen at 1.2660 before year low of 1.2460.

Asia ex Japan Currencies

      The SGD NEER trades 1.04% above the implied mid-point of 1.3580. The the top is estimated at 1.3311 and the floor at 1.3848.

       USDSGD - Choppy.  USDSGD rebounded back above the 1.35-handle this morning as the early count in the UK referendum showed the Brexit camp in the lead. Trades though are likely to remain choppy until the outcome of the referendum is known (75% of the total tally at around 1130am SGT; official result at 2pm SGT). Yesterday, increasing expectations of a Bremain vote sent the pair to a new low for the year at 1.3313 before bouncing back higher. Pair was last seen around the 1.3460 levels. Bearish momentum remains intact but is waning and stochastics is showing tentative signs of climbing higher from oversold conditions. Further upticks on Brexit concerns could see the pair headed towards 1.3580 (23.6% Fibo retracement of the Jan-Jun downswing); 1.36-handle (50DMA); 1.3650 (38.2% Fibo). A Bremain could see the pair attempt to retest the 1.34-handle and then the year's low at 1.3313.  May CPI fell by a more than expected 1.6% y/y (Apr: -0.5%) on the back of lower accommodation cost (due to disbursement of service & conservancy charges rebates in Jun this year). Core inflation which excludes accommodation and private road transport cost rose 1.0% y/y - the fastest pace since Mar last year. MAS expects car prices and housing rentals to continue to dampan overall pressures this year with headline inflation to remain negative for the rest of the year.

       AUDSGD - Bulls Inspired By Risk. AUDSGD broke above the 1.0124-barrier and hovered around 1.0140. This cross seems poised for further upsides at this point, even as the cross saw significant pullback this morning from its highs of 1.0227. Support is seen at 1.0120 before 1.0028 (61.8% Fibonacci retracement of the Feb-Apr rally) and then at 0.9900. Barrier beyond 1.0221 is seen at 1.0340 (23.6% fibo).

       SGDMYR – Bias to Lean against Strength. SGDMYR broke out of its upward sloping trend channel, following MYR outperformance.  Cross was last seen around 2.9980 levels. Daily momentum is showing signs of turning mild bearish while stochastics is at overbought conditions. We remain bias to lean against strength. Resistance remains at 3.0480 (trend-line resistance from the highs of Nov and Jan) before 3.0640 (76.4% fibo retracement of Oct high to Apr low). Support at 2.99 (50% fibo). Break below 200 DMA can expose the cross to further downside pressure towards 2.9570 (38.2% fibo, 100 DMA).

       USDMYR– Bearish Bias. USDMYR rebounded, tracking losses in GBP; last seen around 4.0340 levels. Move was due to early leads by Leave but as of writing, it seems tilted towards Remain! Eyes remain fixated on development arising out of EU referendum (results to be known today at 2pm; about 75% of results will be out at 11am). We believe risk sentiment is likely to remain cautious. Support comes in at 4.0250 (50 DMA). A break below this puts 3.9850 (23.6% fibo retracement of 2016 high to low) in sight. Resistance at 4.07 (38.2% fibo retracement of 2016 high to low) before 4.1435 (50% fibo). We shared before and reiterated here that a bremain outcome (by large win) could see the MYR gaining by as much as 2% (vs. the USD) from last traded level.

       1s USDKRW NDF – Choppy. 1s KRW traded a low of 1140 this morning before rebounding as early results swung in favour of Leave. Last seen around 1151 levels. Focus remains on the outcome of UK’s vote on EU referendum (results to be known today at 2pm; about 75% of results will be out at 11am). We continue to expect a choppy session before greater clarity should be restored post-referendum results. We think in an environment of falling yields globally, no impetus from Fed to hike yet, and assuming a Bremain outcome, we think USDKRW could drift lower as sentiment recovers. Break below 1150 (on daily close) should see next support at 1130. We shared before and reiterated here that a bremain outcome (by large win) could see the KRW gaining by as much as 2.5% (vs. the USD) from last traded level. Data to be released In the fortnight ahead includes Jul business survey indicators (29 Jun); May IP (30 Jun); Jun PMI, CPI, trade as well as May current account balance (1 Jul).

       USDCNH – Drifting Lower. USDCNH have been swung by the UK referendum drama and was last seen around 6.6000. Price actions are likely to remain jerky. Barrier remains at 6.6181 while dips to meet support at 6.5779 (21-DMA). Expect a Brexit scenario to see USDCNH swing towards 6.70 in tandem with regional peers. However, a risk off scenario would strengthen the yuan, trade weighted wise. CFETS index could see a bounce from its recent downdrift. USDCNY was fixed 277 pips lower at 6.5658 (vs. previous 6.5935). CNYMYR was fixed 3pips lower at 0.6115 (vs. previous 0.6112). Minxin PMI-mfg  (SMEs) fell to 43.2 for Jun from 45.8 in May with firms saying falling market demand and a shortage of skilled workers. The services measure also fell. BBG also reported that internet giants like Baidu Inc would be able to release its own unemployment rate, consumer spending gauge and other indicators. In separate news, Premier Li said that the monetary policy should be kept unchanged. China should stick to prudent monetary policy with more flexible implementation. This seems to be a reiteration of what he had said recently that the real economy should be supported with reasonably sufficient liquidity, stable exchange rates. This was something he said at the HQ of PBOC and to China Construction Bank in Beijing.  He also highlighted that some regions and industries in the real economy are facing growth challenges. We continue to expect PBOC to use adhoc measures like pledged supplementary lending, medium term lending facility and standing lending facility to supply credit to the targeted sectors that require more liquidity support. Broad based RRR cuts may not be used as that is likely to generate flows to assets that are prone to bubbles (real estate in the tier-one property sectors), risks undoing deleveraging efforts in the economy and unhinging the CNY. With yuan stability still at the fore of top officials’ minds, risks of RRR cut has lowered in spite of weaker investment and IP data in May or even in Jun.

       SGDCNH – Hammer. SGDCNH reversed out its high yesterday, ending with a hammer doji candlestick, last seen around 4.9070.  Stochastics in overbought levels and price action show the indecisiveness ahead of the event risk today. The first hour of polling result release is slightly skewed to “Exit” from EU. That had traders scrambling for an exit out of risk. Caution to keep SGDCNH on the backfoot but a risk recovery could keep the SGDCNH on the uptrend. Barrier is still seen around 4.9151 before 4.9420. Pullbacks to meet support at 4.8827 before 4.8400.

       MYRCNH – Swings. The risk on rally lifted this cross to a high of 1.6649 before a sharp reversal towards the 1.6490. Similar to the SGDCNH, event risk and fresh fears of “Brexit” saw an unwinding of risk rallies including this cross. Support is seen around 1.6282 (50-DMA) and then at 1.6152 (100-DMA).  Expect more swings ahead. Barrier is tentatively at day high of 1.6649 before the next at 1.6800 (76.4% Fibonacci retracement of the 2015 sell-off, close towards Apr high) before 1.7155.

       1s USDINR NDF – Fear of Brexit Reignites. The 1M NDF hovered around 67.93, underpinned by importers demand. When the pair was rejected at the 68.18-barrier, a double top was formed and still holds now. That is a key barrier before the next at 68.3656 (23.6% Fibonacci retracement of the Oct-Feb 2015 rally), and then at 69.43. Support is seen at 67.4850 before the next at 67.00. Barrier is seen at 68.3656 before 69.43 comes into view. Risk appetite has dried up in the markets now.  INR is likely to swing by UK voting results, not helped by importers dollar demand. Outflows have been spurred at first by Rajan’s announcement to return to academia. Now exogenous factors are likely to take over.  Investors sold USD4.7mn of equity and bought USD16.6mn of debt on 22 Jun.

       1s USDIDR NDF – Whippy. 1s NDF remains whippy this morning, climbing at one point to a recent high of 13420 when the Brexit camp took the initial lead. Pair had earlier fallen to a recent low of 13113 overnight. Even with the Bremain camp now in the lead, pair remains supported amid cautious trades. Official results for the UK referendum will be known at 2pm SGT though results of 75% of votes will be known around 1130am SGT. 1s NDF was last seen around 13320 levels. Daily momentum continues to be bearish bias but waning and stochastics is climbing gradually higher. Immediate barrier is at 13435 levels (21DMA) ahead of 13470 (38.2% Fibo retracement of the Jan-Mar downswing). Support nearby at 13150 with a break here exposing the next at the 13000-figure (year's low). The JISDOR was fixed lower at 13265 yesterday from 13298 on Wed. Risk sentiments again soured yesterday with foreign funds selling USD14.93mn in equities. They had however added IDR0.89tn to their outstanding holding of debt on 22 Jun (latest data available).

       1s USDPHP NDF - Still Bullish Bias.  1s USDPHP NDF remains on its uptick as the Brexit camp in the UK referendum took the initial lead, climbing to a recent high of 46.90 before retracing to around the 46.70 levels currently. The BSP decision to keep policy on hold was shrugged off with the market focused on the UK referendum. Pair was last seen around 46.75 levels. Daily momentum remains mildly bullish bias and stochastics is fast approaching overbought levels. Further upticks should meet barrier at 47-figure (200DMA). Support at 46.12. Risk sentiment remained supported with foreign funds buying USD11.77mn in equities yesterday. On tap today is imports, Apr trade balance. 

      USDTHB - Bullish Bias.  USDTHB hit a recent high of 35.430 this morning as the Brexit camp took the initial lead in the UK referendum. Since then, pair has retraced to around 35.270 as the Bremain camp overtook the lead. Nevertheless, trades are likely to remain whippy until the results are known (official results at 2pm SGT; 75% of the total tally at 1130am). Pair has lost most of its bearish momentum and stochastics is on the gradual climb higher. Further upticks should meet barrier at 35.570 (50% Fibo retracement of the Jan-Mar downswing). Support is at 34.800. Risk appetite improved yesterday with foreign funds buying THB1.29bn and THB1.55bn in equities and government debt. 17 Jun foreign reserves is due later today.

Rates

Malaysia

      MYR government securities traded range bound with most trades centered upon the 5y benchmark MGS 11/21. Some light buying was seen on the curve in the morning but yields ended overall unchanged ahead of the UK referendum.

       IRS market pretty quiet ahead of the UK referendum. There was a trade reported on the 5y point for flow squaring. IRS curve ended circa 1-3bps higher at the belly. 3M KLIBOR unchanged at 3.65%.

       Largely quiet day in the PDS space in lieu of the UK referendum. In AAA, Aman 21 was given to the bid 1bp tighter than last traded at 4.18% (G+76bps/Z+44bps). With the rally in the 5y MGS benchmark, 5y credit spreads look attractive and may pull in buyers after the event risk. Elsewhere, GG curve traded unchanged at the belly and long end, while AA curve was 1bp wider at the belly and long end.

Singapore

       Profit taking ahead of the EU referendum pressured SGS prices lower, retracing gains earlier in the day. SGD IRS also rebounded from morning lows and ended roughly unchanged as the decline in USDSGD intraday triggered receiving interests. SGS trading thinned out and pricing turned defensive into the close. Yields ended 1-3bps higher, compressing swap spreads by the same magnitude.

      Asian credit spreads in IG space +/-2bps from previous day, while CDS better by 2-3bps. Outperformers include ASRIIJ (Alam Synergy) and FMGAU (FMG Resources), both rising up about 2pts on the back of positive news. For Alam Synergy, a Chinese RE will be co-investing in a project, while for FMG Resources, it is a loan repayment statement.

Indonesia

      Indonesia bond market closed higher during the day supported by assurance that tax amnesty bill would be decided on June 28. Overall, the hike in IGS market was hinder by the upcoming Brexit vote. Domestic market sentiment remains minimal which may cause the IGS prices to move in a tight range. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.436%, 7.545%, 7.825% and 7.866% while 2y yield shifts lower to 7.191%. Trading volume at secondary market was seen thin at government segments amounting Rp10,572 bn with FR0073 as the most tradable bond. FR0073 total trading volume amounting Rp2,774 bn with 136x transaction frequency and closed at 108.04 yielding 7.825%.

       Corporate bond trading traded heavy amounting Rp1,859 bn. BNLI01SBCN2 (Shelf registration Subordinated I Bank Permata  Phase II Year 2012; Rating: idAA+ was the top actively traded corporate bond with total trading volume amounted Rp459 bn yielding 9.095%.