Maybank GM Daily - 18 Mar 2014

FX

Global

·         USD/CNY had its sharpest rally since 2008 on Mon, printing a high of 6.1827. There is a sense of calm ahead of the fixing this morning as USD/CNY softened below the 6.18-figure. CNH traded at a premium to CNY, adding to the sense of normalcy. PBOC widened the CNY trading band slightly sooner than expected but the move itself has been forewarned repeatedly. The message that the CNY is not a one-way appreciation bet is clear and USD/CNY is likely to remain supported for now.

·         Meanwhile, there are a few developments out of Crimea. Ukraine-related sanctions are imposed on Russia and US President Obama froze assets of Russian officials involved in the Crimea incursion (Rtrs). The risk events did not weigh on overnight sentiments which saw better US data releases. Industrial production swung into growth of +0.6%m/m in Feb from a slide of -0.2%. Mar empire manufacturing improved to 5.61 from 4.48 previously, albeit still missing average forecast of 6.50.

·         Asia has few important data releases today. AUD/USD softened from overnight highs even before RBA releases the Mar minutes. Tone was the same as that of the post-decision statement. The central bank reiterated their preference for steady rates which aids economic rebalancing. Later in Asian hours, Germany releases ZEW survey before US’ CPI. Two-day FOMC meeting commences tonight.

·         Insofar, AXJs have not been dragged by the recent CNY weakness. IDR is the outperformer, against the USD base, still reeling from the “Jokowi effect”.  We continue to see support for USD/AXJs on dips ahead of FOMC as well as risk events out of Ukraine/Russia.

G7 Currencies

·         DXY – Still heavy. The index slid to trade around 79.35.  We still see support at 79.268 ahead of the next greater one at 78.998. MACD forest is near the zero lin while RSI prints around 37, indicating smaller room for downsides.

·         USD/JPY – Scope for Upsides. Pair bounced away from 101.20 and was last seen around 101.80. Nikkei trades in the positive, in tandem with the pair. Momentum indicator shows increasing bullish momentum but pair still needs to sustain moves abvoie 101.80 before bulls can extend to 102.40.

·         AUD/USD – Supported. Pair touched a high of 0.9111 but is on the downward drift now, last seen around 0.9080. Current pullback may be a breather before the next bounce. Barrier is still at recent high of 0.9111 before the next at 0.9135 while current offers may be slowed by 0.9040, near the 40-SMA on the 4-hourly chart. RBA Minutes did not provide more cues to trade on.

·         EUR/USD – Rangy. Last seen around 1.3933, the pair is still unable to break above the 1.3957. Current dollar weakness has been providing more opportunities for the EUR/USD bulls. Support is still seen around 1.3837. MACD has started to tilt higher on the 4-hourly chart again. As such, we think the 1.40 –target is still within reach despite recent Draghi’s words.

Regional FX

·         The SGD NEER trades 0.27% below the implied mid-point of 1.2606 with the top end estimated at 1.2354 and the floor at 1.2859.   USD/SGD – bidded.  The USD/SGD is inching lower this morning, oscillating in a wide range between 1.2631-1.2656. Currently hovering lower around 1.2635, the pair continues to see strong support at 1.2630. A break of our support at 1.2630 would expose the next support at 1.2615. 1.2678 should act as barrier today.

·         AUD/SGD – still sideways.  The cross hit 1.1509 this morning, just a tad off our weekly resistance of 1.1510, before easing to trade lower around 1.1481 currently.  Momentum though is now on the uptick and further downside could be limited. We look for rangy trades between 1.1460/1.1510 today.  SGD/MYR – on the down move.  The cross plunged after the opening to an intra-day low of 2.5840 this morning before bouncing back to trade around 2.5850 at last sight. After the bearish engulfing move, further downside is still likely with MACD forest printing lower. Support nearby is at 2.5821 before 2.5782, while 2.5960 is seen as resistance today.

·         USD/MYR – Heavy. Pair slipped to a low of 3.2645 before a small rebound to trade around 3.2710. MACD shows bearish conditions while we note the negative cross-over of the 18-SMA and 40-SMA on the intra-day chart. 3.2615 is the interim support before the next at 3.2554. 1-month NDF was also on the slide for much of overnight trade before retracing to around 3.2780. Topside is still guarded by 3.2909.

·         USD/CNY was fixed lower at 6.1341 (+0.0020), vs. previous 6.1321 (+2.0% upper band limit: 6.2593; -2.0% lower band limit: 6.0138). CNY/MYR was fixed at 0.5318 (-0.0024).

·         USD/CNY – Choppy. Spot bounced to around 6.1890  as we write, in spite of a lower fixing. Downsides are now limited by 6.1500. Momentum indicators showing increase in bullish momentum. Investors will also be watching out for less PBOC intervention, as pledged by the authorities. At this rate, the pair may reach 6.20-figure sooner, rather than later – a convergence of spot and 1-Year NDF price. More concerns on defaults at home as a CNY3.5bn debt of real estate developer (Zhejiang Xingrun Real Estate Co.) collapsed after the company could not repay creditors, including more than 15 banks (Rtrs)

·         1-Year CNY NDFs – On the upmove. The NDF hovered around 6.2090, seemingly calm.  MACD shows increasing bearish momentum.  The lack of action on the NDF front, seems to indicate less depreciation in the CNY in the longer term. Support is seen around 6.2030.

·         USD/CNH – Up. Pair pared bullish momentum but bias is undeniably to the upside. Last seen around 6.16, the pair was still heading towards the 6.1820. Strong barrier between 6.18-6.20. Another round of sharp CNH unwinding expected should the pair rally past this region.

·         USD/IDR – choppy. The USD/IDR is wobbling this morning after yesterday’s choppy move lower. The pair is currently hovering around 11288 with MACD still printing lower, though on the wane. Still, foreign funds continued to be bullish on IDR assets, buying a net USD178.2mn in equities, and if it persists, should provide support for the IDR today. Price action today should see rangy but choppy trade between 11200/11340 today headed. The 1-month NDF is inching higher this morning at 11315, in contrast to the spot, from yesterday’s close of 11293 with momentum still to the downside. The JISDOR was fixed lower at 11272 yesterday - a low not seen since 31 Oct 2012 - from Fri’s 11421.

·         USD/PHP – upticks.  The USD/PHP remains on the uptick this morning amid choppy trade with the pair sighted at 44.640 currently. Continued foreign buying like they did yesterday, buying a net USD21.2mn in equities yesterday, should cap upside moves. With bullish momentum still holding steady, upticks should be capped by 44.700 ahead of 44.840, while 44.495 should slow downsides. The 1-month NDF is again edging higher at 44.660 from yesterday’s close of 44.620 with waning bearish momentum.  Philippines’ remittances disappointed, rising at a more moderate 5.9% y/y in Jan vs. market’s expectations of 8.8%. This was after remittances rose at a neck-breaking pace of 10% (upward revised from 9.1% previously) in Dec 2013 – a pace not seen since Nov 2011. A consolation was the upward revision of 2013 remittances growth to 7.4% from 6.4% previously.

·         USD/THB – bearish. The USD/THB is on the slide again this morning, taking out our support at 32.215. Last spotted at 32.212, risks remain on the downside with the pair hovering close to oversold conditions. A sustained breach of 32.215 today would expose moves towards 32.176-support nearby before 32.151. 32.400 is seen as resistance. Improved risks sentiment, sparked in part by the possible lifting of the emergency decree today, could see foreigners add to their portfolio today after buying a net THB123mn in bonds yesterday but selling a net THB1.5bn in equities.

Rates

Malaysia

·         Yields on local government bonds market ended a tad higher in a lackluster market. Many were on the sidelines in the absence of market moving factors. Steady UST performance and the gradual strengthening of MYR failed to excite and generate market interest. At market close, 3, 10 and 30-year benchmark MGS inched up by 1-2bps to 3.39%, 4.12% and 3.52% respectively.

·         Rates managed a small rebound of 1-2bps on the back of higher UST yields and higher offshore levels. However, it was a very quiet day in global rates. We still advocate the range trading play. Short end should remain elevated as KLIBOR shows no signs of backing down lower.

·         In the PDS market, GG papers remained in demand. Govco 18 was done at 3.95% and 3.94%. Pengurusan Air 18 dealt through at 3.95%, and Khazanah 18 was taken at 3.97%. We expect the buying interest to go on for a while and might extend to the belly. There are buyers on the long end namely Danainfra 28 and 33, with Danainfra 28 being traded at 4.95%.

Indonesia

·         DMO to conduct final conventional bond auction in first quarter of 2014 today with total indicative auctioned amounting Rp10 tn. Five series to be auctioned today are SPN12150108 (Coupon: discounted; Maturity: 8 January 2015), SPN12150305 (Coupon: discounted; Maturity: 5 March 2015), FR0069 (Coupon: 7.875%; Maturity: 15 April 2019), FR0071 (Coupon: 9.000%; Maturity: 15 March 2029) and FR0068 (Coupon: 8.375%; Maturity: 15 March 2034). We see that today’s conventional bond auction will remain receiving good demand and sees the indicative yield for certain series as follows FR0069 (range: 7.700% – 7.800%), FR0071 (range: 7.970% – 8.070%) and FR0068    (range:    8.570%  –  8.670%).

·         Indonesia bond market continue it increase amid minimum market sentiment moving the market as the market was rather quite. Yield curve bull flattening with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifting down to 7.705% (5.2bps), 7.959% (6.0bps), 8.453% (6.3bps) and 8.549% (7.0bps) respectively while 2-yr yield shifted down to 7.238% (3.3bps). Trading volume at secondary market remains heavy amounting Rp11,424 bn (vs average per day trading volume of Rp7,602 bn). FR0069 (5-yr benchmark series) was the most tradable bond during the day with total trading volume amounting Rp1,493 bn with 59x transaction frequency and was last traded at 100.694 yielding 7.705%.

·         On the corporate bond segment, trading volume was seen heavy with total trading volume amounting Rp996 bn (vs average per day trading volume of Rp750 bn). ASDF02ACN2 (Shelf registration II Astra Sedaya Finance Phase II Year 2013; A serial bond; Maturity date: 5 Jun 18; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp300 bn and was last traded at par yielding 8.743%.

Rgds,

Maybank FX Research

Global Markets

Maybank

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