Maybank GM Daily - 31 Mar 2014

FX

Global

·         Equities were choppy on Friday. Indices had a strong start before reversing out much of their respective gains to end in modest black. US Personal income and spending grew 0.3%m/m each in Feb.  Univ. of Michigan Confidence had a slight improvement to 80.0 from previous 79.9. DJI ended at +0.4%, S&P at +0.5% and NASDAQ at +0.1%.

·         The generally buoyant sentiments lifted USD/JPY to a high of 102.98. Pair is still sticky around the 102.90-barrier as we write.

·         In the week ahead, US Mar NFP is key and the ADP report will keep investors on their toes. The dollar needs more evidence on growth for an uplift. Before that, market players will be watching China’s official and HSBC version of PMI-mfg closely, released together on April’s fool day. We are sure that any deterioration on that front will not be taken lightly in Asia. Within a few hours, RBA will announce its policy decision. The central bank has not been shy about its preference for stable interest rate. That said, AUD/USD, at 0.92 as we write, is unlikely a comfortable level for the central bank. Unless we are sure of robust numbers for retail sales, trade and business sentiments, Glenn Stevens may attempt to jawbone the AUD lower. ECB also makes its policy decision, two days later on Thu. Draghi might mention about using EUR as tool for ensuring stability. At that point, we can be sure that 1.40-figure will seem further away than before.

·         In ASEAN, Indonesia observes Saka New Year (aka Day of Silence), a market holiday.  Thailand and Indonesia are due to release their trade and inflation data. Malaysia’s trade will wrap up the week. These indicators are likely to be eclipsed by releases from the US and China, notwithstanding unexpected spikes in geopolitical tensions. All in all, USD/Asians should see another choppy week.

G7 Currencies

·         DXY – Upside Risks. The index is still on the upmove and was last seen around 80.20. Risks are to the upside given the steady bullish momentum on the daily MACD chart. Still, the 80.227-barrier slows bids. The index needs a daily close above the 80.227-resistance level for bulls to remain in control. NFP is due at the end of the week. Expectations are skewed to the upside but could be adjusted according to the ADP release at mid-week. We are not forgetting the EUR. Recently, Draghi has made a rather rare comment (of late) on the importance of exchange rate in price stability. More EUR declines to boost dollar bulls. Next barrier seen at 80.52. Support at 79.92 ahead of the next at 79.65.

·         USD/JPY – Tilting Higher. Pair has been sticky around the 102.90-barrier since last Fri, though softened a tad this morning after the fall in the Feb industrial production. There is still tankan tomorrow. We see range-trading widened with some risks to the upside. Daily MACD shows a slight increase in bullish momentum, garnered in the past two sessions. Volatility to persist given the line-up of risk events this week. 103.12 is the next barrier, top of the Ichimoku Cloud. 101.20 marks the floor for the week while next resistance level is seen at 103.43.

·         AUD/USD – Up. Pair came within striking distance of the 0.93-figure before softening to around 0.9250. Still, the daily chart shows a steady MACD forest. Despite the mild pullback, pair still retains bullish momentum. This week has RBA, housing approval, retail sales and trade. AUD’s upturn is not in sync with it fundamentals and we see much downside risks to the data. Topsides guarded by 0.9300/0.9369. Offers to be slowed by minor support at 0.9207 ahead of 0.9130.

·         EUR/USD – Bearish momentum. Last seen around 1.3750, decline is now slowed by support at 1.3694.  1.3774 is still an upside barrier to reckon ahead of the next at 1.3800. Despite the downside risks, RSI prints near oversold at 35. Dips are thus likely to be shallow, supported by 1.3664.

Regional FX

·         The SGD NEER trades 0.62% above the implied mid-point of 1.2653 with the top end estimated at 1.2402 and the floor at 1.2905.   USD/SGD – Downside risks.  After last week’s downturn on the back of positioning ahead of the MAS meeting in mid-Apr, the USD/SGD is on the uptick hovering around 1.2602 currently. With risks still tilted to the downside, and further positioning ahead of the MAS meeting possible, price action this week should see 1.2560 provide support nearby this week ahead of 1.2529 (61.8% Fib retracement from the Oct-Jan upswing). 1.2644 acts as barrier for the week. Mar PMI is on tap on Wed.

·         AUD/SGD – Rangy with upside tilt.  The cross is inching higher today after plunging from a high of 1.1742 to close at 1.1636 on Fri. MACD is still indicating bullish but waning momentum, suggesting upside could be capped this week. We look for the cross to trade rangy between 1.1542/1.1747 this week with risks still tilted to the upside.  SGD/MYR – Still rangy.  The cross was dragged lower this morning by SGD weakness, hovering around 2.5910 at last sight. With bullish momentum on the wane, the cross should continue in range-bound trade with 2.5820 providing support ahead of the 2.57-figure. 2.6023 should slow upside.

·         USD/MYR – Eye 3.2465. Pair broke below the 3.26-figure again this morning, and risks are increasingly to the downside according to the momentum indicators. 1-month NDF is on the uptick, recovering from its recent low of 3.2585. Mar has been a volatile month and the 6-Mar 3.2465 low could be revisited by spot prices soon. RSI also prints 29.6. That is still a strong support and we are wary of a rebound at the point. 3.30 is the barrier for the week ahead of 3.3168.

·         USD/CNY was fixed higher at 6.1521 (+0.0031), vs. previous 6.1490 (+2.0% upper band limit: 6.2777; -2.0% lower band limit: 6.0315). CNY/MYR was fixed at 0.5276 (-0.0035).

·         USD/CNY – Steady. Spot hovered around 6.2130 this morning, supported by the higher fixing. The resilience of the CNY stemmed from rumours of more stimulus looming ahead. Nonetheless, pair has pared much of its bullish momentum on the daily MACD chart. We expect the pair to remain choppy, with upsides well guarded by 6.2340. Offers could be slowed by 6.1900 ahead of 6.1730. Over the weekend, Premier Li Keqiang urged reforms and structural tweaks to maintain economic growth. Finance Ministry has allowed social investment in urban infrastructure in a statement posted on its website this morning.

·         1-Year CNY NDFs – Supported. The 1Y NDF is steady around 6.2250 this morning, moving in tandem with spot. Pair is poised to trade within the wide range of 6.1920-6.2475 this week. Choppy action ahead with PMI-mfg, that could give further confirmation of a slowdown. More rumours of stimulus to keep upticks guarded.

·         USD/CNH – Upside Risks. Pair swiveled around the 6.20-figure for the past few sessions. CNH is still trading at a premium to CNY. Investors are likely assured by rumours of additional spending by the government that could prevent a hard landing of the China’s economy, concomitantly giving support to CNH and CNY. Mar data will be focused. Break of resistance at 6.2127, to give way to expose next barrier at 6.2200. 6.1938 to slow offers.

·         USD/IDR – Still range-bound. The USD/IDR remained in a tight trading range between 11340/11500. Today, the onshore market is closed for the Saka New Year and will re-open tomorrow. Last week, foreign funds bought a net USD174.44mn in equities that helped to keep the IDR supported. With Indonesian going to the polls next Wed (9 Apr) to elect a parliament, some volatility could be expected. A sustained break of 11300 is need for bears to take control, while 11500 continues as barrier for the week. This week, Mar CPI and Feb trade are on tap. The 1-month NDF is inching higher at 11380 to start the week with risks still biased to the upside. The JISDOR ended the week at 11395, fixed lower than the 11554 for Thu.

·         USD/PHP – Still rangy.  The USD/PHP continues to trade sub-45.000 levels this morning, last sighted around 44.760. Last week, foreign funds purchased a net USD135.3mn in equities that supported the PHP. Bullish momentum is waning with the MACD close to the zero line, suggesting little momentum in either direction in the week ahead. Price action should see rangy trades with 44.495 limiting downsides, while 45.154 cap topside. The 1-month NDF remains below the 45.000-level for the fourth straight session, hovering around 44.76 at last sight with MACD just below the zero line. Mar CPI is on tap on Fri.

·         USD/THB – Bullish risks. The USD/THB is wobbling this morning after failing to close around the 32.000-level last week. The pair is sighted at 32.507 with risks still to the upside. Nonetheless, foreign funds continued to pile up Thai assets buying a net THB5.3bn and THB 6.7bn in equities and bonds last week, helping to cap upside. The massive anti-government protests on Sat and the low turnout for the Senate elections are unlikely to restore investor confidence any time soon. We continue to expect further upside with a sustained break of 32.605-barrier to expose the stronger hurdle around 32.666, while 32.400 should support for the week. A rash of data for Feb will be eyed today, including current account and trade data, while Mar CPI is due on Tue.

Rates

Malaysia

·         Government bonds market saw strong auction on the new benchmark 7.5-year MGS 9/21. Despite the large issue size bid/cover came in at a healthy 2.27x with high, low and average at 4.058%, 4.033% and 4.048% respectively. The bond rallied slightly as it closed the day at 4.02%. We noted some flows into the off-the-runs: 7/20, 3/20, and 3/23. We reckon the flows were easily filled as the previous day we saw better sellers. All eyes on the next month, with yet another month with 3 govvy tenders: new 7.5-year SPK, reopening of 15-year GII, new 5.5-year MGS.

·         Rates remained stable hovering within a 1bp range from yesterday's levels. 3-year traded at 3.75% but seemed like there's good resistance. 9M traded at 3.40%. 3M KLIBOR was unchanged at 3.33%. We reiterate our recommendation to initiate received positions at current level.

·         It was another quiet day in the PDS market. There was not much reaction in the market after the print of PTPTN. Market is still on selective buying mode. We heard there are more deals in the pipeline soon. End clients are expected to focus on primary issuances for the time being.

Indonesia

·         Indonesia February trade balance and March CPI data will be publish this Tuesday. Our economist sees that March CPI would continue easing down to 7.20% y-o-y from 7.75% y-o-y in February 2014 due to decline in food prices and appreciating IDR currency against USD. The fall in food prices was caused by two factors, namely the end of floods in some regions of Indonesia and the start of the harvest season. Our economist expectation on March CPI is better than average economist consensus of 7.35%. On a separate report, our economist sees February trade balance would record a surplus of US$430 mn or better compared to US$430 mn deficit in January as February export is expected to climb faster compared to February import. Feb export is predicted to climb to US$15.37 bn (vs Jan export of US$14.48 bn) while imports is expected to reach US$14.94 bn (vs Jan import of US$14.92 bn). Our economist prediction on Feb trade balance is higher than average economist estimate of US$43 mn.

·         DMO to conduct conventional bond auction in second quarter of 2014 on Tuesday, March 25th, 2014 with total indicative auctioned amounting Rp8 tn. Five series to be auctioned this week are SPN03140703 (Coupon: discounted; Maturity: 3 July 2014), SPN12150403 (Coupon: discounted; Maturity: 3 Apr 2015), FR0069 (Coupon: 7.875%; Maturity: 15 April 2019), FR0070 (Coupon: 8.375%; Maturity: 15 March 2024) and FR0068 (Coupon: 8.375%; Maturity: 15 March 2034). Our indicative yield for certain series are as follows FR0069 (range: 7.600% – 7.750%), FR0070 (range: 7.950% – 8.100%) and FR0068 (range: 8.450% – 8.600%).

·         Indonesia bond market continues being bullish on the note of better March CPI and February trade balance expectation as Indonesia central bank predict March inflation to be around 7.30% y-o-y and February trade balance would book a surplus of US$760 mn. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifted down to 7.707% (2.9bps), 8.045% (10.1bps), 8.459% (5.2bps) and 8.565% (8.5bps) while 2-yr yield shifted up to 7.356% (3.4bps). Trading volume at secondary market was surprisingly heavy amounting Rp20,481 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0069 (10-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp4,415 bn with 132x transaction frequency and closed at 102.222 yielding 8.045% while FR0069 total trading volume amounting Rp3,431 bn with 44x transaction frequency and closed at 100.685 yielding 7.707%.

·         On the corporate bond segment, trading volume was seen thin with total trading volume amounting Rp250 bn (vs average per day trading volume of Rp750 bn). BNGA01BCN1 (Shelf registration I Bank CIMB Niaga Phase I Year 2012; B serial bond; Maturity date: 30 Oct 17; Rating: idAAA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp78 bn and was last traded at 94.6 yielding 9.5491%.

Rgds,

Maybank FX Research

Global Markets

Maybank