Maybank GM Daily - 16 Apr 2014

FX

Global

·         US indices had a choppy session on Tue after CPI came in firmer than expected. Inflation picked pace to 0.2%m/m in Mar from the previous 0.1%; accelerating to 1.5% on the year compared to Feb’s 1.1%. The upside surprise lifted equities though empire manufacturing capped topsides. The print of 1.29 missed the consensus of 8.00. DJI closed at +0.6%, S&P at +0.7% and NASDAQ at +0.3%. Fed Chair Janet Yellen also spoke overnight, flagging more stringent liquidity and capital requirements for the biggest banks on short-term and wholesale funding. This was to minimize risk on liquidity run on money market funds that was deemed to have contributed to the financial crisis, according to the Fed Chief. She will speak again tonight at the Economic Club of New York.

·         Expect Asian equities to tread in caution before China’s GDP is released at 10.00am (HKT). The Mar liquidity numbers were out yesterday. Money supply M2 continued to slow to 12.1%y/y from the previous 13.3%, softer than expected. New yuan loans on the other hand, beat expectations at CNY1050bn, up from previous CNY644.5bn. Aggregate financing was also much higher at CNY2070bn from the previous 938.7bn. The latest data showed little deterioration in credit growth on the whole.

·         China’s 1Q GDP will be in focus and its release will be accompanied by urban FAI, retail sales and industrial production. There are wide expectations for growth to miss the annual target of 7.5% given the lackluster data for 1Q so far. A softer number could weigh on Asia but risk appetite has been resilient so far given some lingering hopes for stimulus. Regardless, that would still leave CNY as one of the underperformers.  On the side, UK ILO unemployment may move the GBP in late Asian afternoon

G7 Currencies

·         DXY – Bullish tilt. Dollar remained on an upward tilt within 79.688-79.920. 18-SMA and 40-SMA are at the brink of a positive cross-over. The index has already gained bullish momentum on the MACD and likely to retain much of its current momentum as the greenback makes its way above nearby barrier at 79.920. A break here exposes the next at 80.180.

·         USD/JPY – Upside bias. USD/JPY had been choppy. A pullback to a low of 101.50 was immediately reversed out overnight and pair has now ground higher to around 102.00-figure.  Pair has now entered a congestion area within 102.00-102.47. Bias is still to the upside according to intra-day momentum indicators.

·         AUD/USD – Turning Bearish. Pair is now pressing on the 0.9335-support, garnering more downside momentum overnight and as we write. A sustained move below this level could trigger more offers towards the 0.9256. We see plenty of room for bears to run. Topsides now guarded by 0.9380, near the top of the Ichimoku cloud on the 4-hourly chart.

·         EUR/USD – Downside risks. EUR/USD chopped around the 1.38-figure overnight, paring bearish momentum. Even so, we think there could be more downsides to come should the pair make another move under the 1.3787-support. Germany ZEW survey was mixed as expectations of economic growth deteriorated while the assessment of current situation was solid. 18-SMA and 40-SMA at the brink of a negative cross-over and we look for a pullback towards 1.3770 in this session.

Regional FX

·         The SGD NEER trades 0.48% above the implied mid-point of 1.2596. We estimate the top end at 1.2345 and the floor at 1.2847.   USD/SGD – Range-bound.  Since the MAS policy statement, the USD/SGD has been trading range-bound between 1.2518/1.2550. Pair remains on the uptick, hovering around 1.2538 at last sight. 4-hourly MACD forest is showing bullish momentum still but is waning and hovering close to the zero line. Given the short week, some re-positioning/profit-taking is likely and the pair should continue to hover around current levels between 1.2518/1.2560.

·         Singapore’s retail sales came in worst-than-expected, falling 9.5% y/y in Feb vs. market’s expectation of 3.6%. This comes after retail sales rose by 0.1% in Jan. Excluding auto sales, retail sales fell by a more moderate 3.6% y/y in Feb from Jan’s 9.2%.

·         AUD/SGD – Downside risks.  Upside pressure has eased on the back of AUD weakness with the cross sliding lower to 1.1704 currently. With risks tilted to the downside, downside moves are likely to be limited by 1.1685 ahead of 1.1662 today. But China GDP release today if it outperforms could see a reversal with topside likely to be curbed by 1.1765 today.  SGD/MYR – Rangy with upside risks.  The cross is edging higher this morning on the back of MYR weakness. Last sighted around 2.5931, risks are still to the upside. Next target is 2.5973 before the stronger hurdle at 2.6019. Support remains around 2.5854.

·         USD/MYR – Rangy. Pair bounced from Tue’s low of 3.2415 back to around 3.2508 this morning, backed by mild dollar strength. Bias is slightly tilted to the upside given the bullish momentum on the intra-day chart though pair is trapped within the 3.2400-3.2566 range

·         (the 18-SMA and 40-SMA  levels respectively). Overnight rise in the UST 10-year yields are likely to keep bond markets on the backfoot as well as MYR. 1-month NDF was also choppy and is likely to remain supported as well, last seem around 3.2570.

·         USD/CNY was fixed higher at 6.1589 (+0.0018), vs. previous 6.1571 (+2.0% upper band limit: 6.2846; -2.0% lower band limit: 6.0381). CNY/MYR was fixed at 0.5234 (-0.0011).

·         USD/CNY – Bullish Risks. USD/CNY was capped by 6.2305, on the uptick and bias is tilted to the upside. Break of the 6.2305 will expose the next at 6.2492 while support is seen at 6.2108 ahead of 6.1930. China’s 1Q GDP awaited, along with urban FAI, retail sales and industrial production for Mar.

·         1-Year CNY NDFs – Steady. The 1Y NDF edged higher at 6.2505, keeping in tight swivels within 6.2475-6.2560. Intra-day MACD has pared to flat ahead of GDP release. Directional bias is unclear and we look for a break of the 6.2560-barrier that could bring the pair towards the next resistance at 6.2647. Downsides are guarded by 6.2405, beyond the nearby support of 6.2475.

·         USD/CNH – Uptrend intact. Pair hovered around 6.2260 for the rest of Tue. Momentum is likened to 1-year NDF that has pared to zero, awaiting GDP. Risks are on both side with upticks now guarded by 6.2353 and support found at 6.2186.

·         USD/IDR – Slow grind higher. The USD/IDR is back on the uptick following mild dollar strength overnight. Pair is currently sighted hovering around 11450. Our four-hourly MACD forest is indicating waning bullish momentum, suggesting a slow grind higher is likely. Moreover, sentiments have improved after the PDI-P received the support of the National Democratic Party to support front-runner’s Jokowi’s bid for the presidency. Still, foreign funds’ appetite for Indonesian assets was mixed yesterday with a net USD51.6mn in equities purchased but a net IDR0.69tn in government bonds e sold. Next target remains at 11471 (last Fri’s high) ahead of 11500, while 11411 is supportive today. The 1-month NDF again is on the uptick, edging to just a tad below the 11500-level at 11499 currently with momentum still bullish. The JISDOR was again fixed lower at 11434 on Tue from yesterday’s 11444.  Indonesia’s central bank deputy governor hinted that policy rate could ease in 2015 as inflationary pressures moderate. He expects inflation to slow to 5% in 2014 and then to 4.5% in 2015.

·         USD/PHP – Increasing bullish momentum. USD/PHP resumed its uptick this morning, hovering around 44.535 at last sight, underpinned by continued dollar strength. Risk are now tilted to the upside with immediate barrier likely at 44.580 (yesterday’s high). A sustained break of this level would expose the next barrier at 44.641. Support nearby is at 44.495 ahead of the next at 44.421. Foreign funds bought a net USD17.2mn in equities yesterday, helping to keep the PHP supported. The 1-month NDF is currently hovering around 44.560 this morning, little changed from yesterday’s close with risks still to the upside.  Philippines’ overseas remittances rose 5.6% y/y in Feb, slower than Jan’s 5.9% and disappointing market, which was expecting 7.5%. This was the slowest growth recorded since Mar 2013 when remittances rose by just 4.2%.

·         USD/THB – Limited downside.  Onshore markets re-open today after a super-long weekend to celebrate Songkran with the USD/THB wobbling in the morning. Pair is hovering around 32.330 with MACD forest still bullish though waning. Still, dollar strength and the protracted political crisis should limit any downside. Support today is seen around 32.200 (17 Mar low) while 32.370 acts as barrier.

Rates

Malaysia

·         Local bond market opened on the defensive side in reaction to continuous weakening of MYR which touched 3.2580 from 3.2490-10 at previous close while higher UST yields further weighed on market sentiment.  Bargain hunting was seen as price edged lower. At market close, 7 and 10-year benchmark MGS ended a tad higher at 3.94% and 4.09% respectively.

·         In the IRS market, short-end rates moved marginally lower. 3-year traded at 3.75% and 5-year better bid at 3.97/3.96%. 3M KLIBOR looks like it would climb to 3.35% soon. Market stayed on the sidelines amid the tumultuous spot and global rates movements.

·         Volume remained slow in the PDS market. Market interest extended to the belly of the curve from high grades to AA. Kesturi 2027 was traded at 5.42%, with more selling interest surfacing on the long end of the curve. Market was lack of direction pending for primary deals.

Indonesia

·         Indonesian government held a series of auctions yesterday and received a total of Rp15,149.40 bn bids versus its target issuance of Rp8 tn or oversubscribed by 1.89x. However, only Rp8,000 bn bids were accepted for its 8-mo SPN which was sold at a weighted average yield of 6.14933%, 1-yr SPN at 6.34509%, 10-yr FR0070 at 7.83970%, 15-yr FR0071 at 8.21713% while 20-yr Fr0068 was sold at 8.39987% which was in line with our indicative range. Incoming bid at today’s auction fall significantly compared to April 2^nd, 2014 conventional auction amounting Rp26,179.30 bn and were mostly clustered at 10-yr notes and 20-yr bond. The. Bid-to-cover ratio on yesterday’s auction came in at 1.29X - 3.26X. No bids were rejected during the conventional bond auction yesterday. Till the date of this report, Indonesian government has raised approx. Rp19.46 tn worth of debt through bond auction in 2Q 14 which represents 29.48% of the 2Q 2014 year target of Rp66 tn.

·         Indonesia bond market remains quite and closed lower at the end of the trading session. Incoming bids during the auction was also quite disappointing despite of the oversubscribed results. There were minimum positive sentiments supporting the bond market. Being 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifted up to 7.591% (0.4bps), 7.879% (2.6bps), 8.245% (2.4bps) and 8.419% (2.1bps) while 2-yr yield shifted up to 7.375% (2.4bps). Trading volume at secondary market was seen heavy as trading volume amounted Rp11,373 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0071 (15-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp3,515 bn with 80x transaction frequency and closed at 103.358 yielding 7.879%.while FR0071 total trading volume amounted Rp1,491 bn with 56x transaction frequency and closed at 106.396 yielding 8.245%.

·         On the corporate bond segment, trading volume was seen heavy amounting Rp746 bn (vs average per day trading volume of Rp750 bn). ASDF02ACN3 (Shelf registration II Astra Sedaya Finance Phase III Year 2014; A serial bond; Maturity date: 14 April 2015; Rating: AAA(idn)) was the top actively traded corporate bond yesterday with total trading volume amounting Rp269 bn and was last traded at par yielding 9.59743%..

Rgds,

Maybank FX Research

Global Markets

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