Maybank GM Daily - 15 Apr 2014

FX

Global

·         US stocks rebounded on Mon, lifted by better Mar retail sales at a print of 1.1%m/m vs. 0.7% in the month prior. DJI recorded 0.9% gain, S&P was up +0.8% and NASDAQ at +0.6% by close. Sentiments were also lifted by stronger-than-expected Citigroup earnings. 10-year yields edged higher to around 2.65%. VIX index eased 5.4% in the session to 16.11. Across the Atlantic, ECB continued to jawbone the exchange rate. President Draghi stressed on the use of more monetary stimulus should EUR appreciate further. Elsewhere, tensions in Ukraine rose as pro-Russian activists attacked a police station in East Ukraine. An increasing list of sanctions on Moscow could also increase caution amongst global investors.

·         For now, Asian markets rejoice the better US data. Nikkei was up +1.0% as we write in early trade. RBA will release its Apr Minutes later in the morning. That should hold AUD players’ attention. Later in the afternoon, Singapore’s retail sales are due followed by Germany’s ZEW Survey.  Thereafter, US data will be in focus again along with other earning reports. Empire manufacturing is scheduled for release followed by a speech by Fed Chair Janet Yellen.  We expect the Fed Chair to retain the dovish-but-hopeful tone that characterized recent Minutes.

·         Thailand is still away for Songkran, to return tomorrow while the rest of China’s Mar data awaited. Liquidity numbers and FDI may be released anytime. Positive sentiments could keep a lid on USD/AXJs.

G7 Currencies

·         DXY – Upward tilt. Dollar ground higher on Mon and was last seen around 79.75 this morning. Momentum indicators suggest that the pair could extend its bullish momentum for a while now though upsides may meet resistance at 79.920. Empire manufacturing is due while Fed Chair Yellen could be watched for fresh insights on the Fed monetary policy.

·         USD/JPY – Two-Way Interests. USD/JPY rebounded along with the greenback and hovered within striking distance of 102.00. Bids were slowed by the 102-figure  but still maintaining a bullish momentum. A break here exposes the next barrier at 102.20 and then at 102.47. 101.66 supports the pair now. 

·         AUD/USD – Rangy. Pair is facing resistance at 0.9450 and hovered around 0.9410 as we write. Momentum is lacking on either side and we expect pair to remain rangy within 0.9364-0.9450. Eyes are on RBA Minutes to be released soon.

·         EUR/USD – Downside risks. EUR/USD slipped and remained sticky around the 1.3818-level for much of overnight session and still thereabouts this morning. A decisive move exposes the next support at 1.3771. Topsides guarded by 1.3857. Germany ZEW survey is due today and could dictate the direction of the pair. From the consensus polled by BBG, there are expectations for further deterioration in economic sentiments.

Regional FX

·         The SGD NEER trades 0.40% above the implied mid-point of 1.2592 with the top end estimated at 1.2341 and the floor at 1.2843.   USD/SGD – Climbing.  Dollar strength continues to lift USD/SGD this morning. Pair is currently hovering around 1.2540 with momentum still bullish and the RSI close to overbought territory. With a short week ahead, some re-positioning/profit-taking should continue with the next target still at 1.2568 (31 Mar low). Still, with no change in the current policy stance and risks to the downside, upticks could reverse. Support today is around 1.2518.

·         AUD/SGD – Wobbly.  The cross took out our weekly barrier at 1.1801 yesterday and remains above that level this morning. Pair is currently wobbly, hovering around 1.1808 at last sight. Risks though remain to the upside and the cross just off overbought conditions. Price action today should see the pair hover within the confines of 1.1765/1.1840.  SGD/MYR – Rangy.  The cross is wobbly this morning, hovering around 2.5954 currently. 4-hourly MACD forest just above the zero line, suggesting little momentum in either direction this morning. We continue to expect the cross to trade range-bound between 2.5854/2.6019 today.

·         USD/MYR – Capped. Pair bounced above the key-barrier that we have been eyeing at 3.2495 and was last seen around 3.2575, supported by mild dollar gains. Higher UST yields likely to weigh on sentiments in the local bond markets and investors may stay defensive. 1-month NDF on a bullish momentum, suggesting the same for spot prices as well. The 1-month NDF was last seen around 3.2620. We are still wary of selling interests and keep a close watch on barrier at 3.2637 and support levels at 3.2495 and 3.2400.

·         USD/CNY was fixed higher at 6.1571 (+0.0040), vs. previous 6.1571 (+2.0% upper band limit: 6.2828; -2.0% lower band limit: 6.0364). CNY/MYR was fixed at 0.5234 (-0.0011).

·         USD/CNY – Bullish Risks. PBOC fixed the USD/CNY mid-point reference rate higher again today. Spot bounced to around 6.2260 and bullish momentum has increased. Further bids to meet next resistance nearby at 6.2305 while the 6.2097-mark could slow offers. Local press has started to report defaults by soybean importers after failing to secure credit.

·         1-Year CNY NDFs – Fresh Highs. The 1Y NDF touched eight-month high, encouraged by the higher fixing. Intra-day chart shows accelerating bullish momentum with 6.2560 markng the next barrier for the pair while 6.2458 support dips.

·         USD/CNH – Uptrend intact. Pair touched 13-month high, last seen around the 6.23-figure. 6.2216 supports the pairing on dips but bulls are in control now. Intra-day MACD shows steady upside momentum and could be the start of an uptrend. 6.2353 marks the interim barrier.

·         USD/IDR – Risks still to the upside. The USD/IDR saw some temporary respite this morning, sliding to 11430 from 11438 in contrast with the rest of the region. Momentum is still bullish with the immediate target seen at 11471 (last Fri’s high) ahead of 11500. 11400 should support today. The 1-month NDF continues to edge closer to the 11500-level, currently hovering higher at 11493 from 11485 yesterday with risks still to the upside. The JISDOR was fixed lower at 11444 on Mon from Fri’s 11450.

·         USD/PHP – Upticks. USD/PHP continues to push higher this morning, underpinned by continued dollar strength. Last sighted around 44.535, risks are still bias to the downside but waning. Next target is 44.641 ahead of the stronger 44.700-barrier. Support is seen around 44.280 today. The 1-month NDF continue to climb higher, hovering around 44.580 this morning from yesterday’s close of 44.530 with bearish momentum waning.

·         USD/THB – Still supported.  Onshore markets remained closed for the Songkran holidays today and re-open tomorrow. With onshore markets closed, USD/THB trades have been relatively quiet. Pair is currently hovering higher at 32.293 at last sight with risks still tilted to the upside on our 4-hourly chart. Dollar strength and the protracted political crisis should still keep the pair supported and limit any downside. Support remains at 32.050, while resistance is seen at 32.480.

Rates

Malaysia

·         Yields on local bond market ended unchanged despite a weaker MYR which touched 3.2510 from 3.2355-75 at previous close while lower UST yields failed to boost momentum. Prices opened on the defensive side but remained supported. At market close, benchmark MGS ended unchanged in a lackluster market. Meanwhile, at today’s auction, GII 12/28 garnered a bid-to-cover (BTC) ratio of 2.773. The highest and lowest successful bid was 4.555% and 4.521% respectively while average bid was 4.547%. Post tender it was quoted at 4.557%-4.548% but with muted response; pre-tender it was traded between 4.55%-46%.

·         The rates market pretty much closed where it was from last week with no action from onshore rates. Belly rates (3-5 years) payers firmed up, probably noting that MGS prices' rally has stalled. Also, USDMYR rebounded close to its neckline. MYR IRS seems to be lacking in direction for now.

·         The PDS market has been quiet for the past couple of weeks. Post auction market failed to move even with good BTC on the 15-year GII. Players continue to focus on high-grade short papers.

Indonesia

·         Indonesia bond market was seen rather quite amidst closing higher as there were minimum positive sentiments moving the market. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifted down to 7.587% (3.2bps), 7.853% (1.6bps), 8.221% (0.1bps) and 8.397% (1.4bps) while 2-yr yield shifted down to 7.351% (0.9bps). Trading volume at secondary market was seen thin as trading volume amounted Rp4,471 bn (vs average per day trading volume of Rp7,602 bn). FR0068 (20-yr benchmark series) and SR006 (3-yr) was the most tradable bond during the day. FR0068 total trading volume amounting Rp1,001 bn with 65x transaction frequency and closed at 99.774 yielding 8.397%.while SR006 total trading volume amounted Rp846 bn with 172x transaction frequency and closed at 101.878 yielding 8.019%.

·         Indonesia Debt Management Directorate General (DMO) release bond ownership data as of April 11th, 2014. Foreigners were seen buying amounting Rp2.27 tn couple of days before the legislative election while banking and individuals recorded net sell amounting Rp2.98 tn between 7-8 Apr as which in our view is the continuation of SR006 sell off by retail investor to since SR006 is now available to be traded at the secondary market after a one month holding period. Foreign ownership stood at Rp370.39 tn (34.27% of total outstanding of government bond).

·         DMO to conduct conventional bond auction today with total indicative auctioned amounting Rp8 tn. Five series to be auctioned this week are SPN12150206 (Coupon: discounted; Maturity: 6 Feb 2015), SPN12150403 (Coupon: discounted; Maturity: 3 Apr 2015), FR0070 (Coupon: 8.375%; Maturity: 15 Mar 2024), FR0071 (Coupon: 9.000%; Maturity: 15 Mar 2029) and FR0068 (Coupon: 8.375%; Maturity: 15 Mar 2034). We see that upcoming conventional bond auction will remain receiving good demand and sees the indicative yield for certain series as follows FR0070 (range: 7.800% – 7.950%), FR0071 (range: 8.180% – 8.320%) and FR0068 (range: 8.340%  –  8.490%).

·         On the corporate bond segment, trading volume was seen heavy amounting Rp637 bn (vs average per day trading volume of Rp750 bn). JSMR01CCN1S (Shelf registration I Jasa Marga Phase I Year 2013 Seri S; C serial bond; Maturity date: 27 September 2018; Rating: idAA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp200 bn and was last traded at 98.250 yielding 9.3849%..

Rgds,

Maybank FX Research

Global Markets

Maybank