Maybank GM Daily - 3 Apr 2014

FX

Global

·         US ADP reported an addition of 191K to private employment for Mar. The Feb number was also revised higher to 178K from the previous 139K, lifting equities into positive terrain. Factory orders for Feb picked pace to 1.6%m/m from the previous 1.2%. Investors were heartened but the modest gains recorded by NY indices suggest that investors are still apprehensive ahead of NFP.

·         Fed speakers gave dovish comments overnight. President Bullard warned that policy makers may slow the pace of QE tapering if inflation eases too much. Earlier in Miami, President Lockhart said he does not expect a rate hike until second half of 2015.

·         Today US releases Feb trade balance and weekly initial claims. Asia ended Wed in a mixed bag with North AXJs plus IDR clocking gains against the USD. Positive sentiments overnight are likely to lead Asian indices higher. Early starter Nikkei is up +0.2%. A certain degree of caution belies the current optimism with some attention on ECB rate decision tonight.

·         There are few releases of note in between with the release of China’s PMI-non mfg. Focus at the moment is on AUD. Australia’s Feb retail sales came in softer than expected at +0.2%m/m while trade surplus narrowed less than expected to AUD1.200bn from previously revised AUD 1.392bn. AUD/USD slipped on the releases.

G7 Currencies

·         DXY – Sideways. Data boosted the index to a high of 80.277 but price moves are still within the narrow 79.92-80.30 band. Momentum indicators suggest that bias is still slightly to the upside now. Barring any unforeseen risk events, ECB rate decision and Draghi’s forward guidance could provide more impetus in the EUR, the anti-dollar. A failure to signal any near-term action could give EUR additional support. Otherwise, sideway gyrations is expected continue within this range. A break-out on either side exposes 79.654 as the next support while 80.524 marks the next resistance level.

·         USD/JPY – Downside risks. USD/JPY bulls took a breather and hovered around 103.70, finding floor at 103.60. MACD shows that the pair has ran out of momentum at the current levels. There are more downside risks at the moment but failure to break the 103.59 could mean uptrend is still intact. Next support at 103.16.

·         AUD/USD – Shallow dips. Pairing slipped ahead of data releases this morning and remained on the backfoot after retail sales and trade surplus proved uninspiring. Last seen around 0.9215, pair is at the brink of testing the 23.6% Fibonacci retracement of the Mar upswing. We do not rule out further slides from the pair but next support is some distance away at 0.9147 (38.2% Fibonacci retracement of the Mar rally).

·         EUR/USD – Supported. Pair extended its early Wed pullback to around 1.3760 as we write, finding a tentative base around 1.3750. Topsides remain guarded by recent high of 1.3820. Asian investors are not likely to make aggressive bets at this point given ECB rate decision tonight. Failure to signal any near-term action could give EUR additional support. Next resistance at 1.3847.

Regional FX

·         The SGD NEER trades 0.32% above the implied mid-point of 1.2661 with the top end estimated at 1.2409 and the floor at 1.2914.   USD/SGD – Limited downside.  The USD/SGD climb higher was disrupted this morning with a slight reversal to 1.2616 on the back of mild dollar weakness. Still, risks remain to the upside and further downside moves are likely to be limited by 1.2600 nearby before 1.2587 (50.0% Fib retracement from the Oct-Jan upswing). 1.2644 (38.2% Fibo retracement) is seen as barrier today.

·         Singapore’s Mar PMI came in at 50.8 from 50.9 in Feb, indicating the manufacturing activities were modest despite being on the expansionary path for the past three months. More positively, electronics PMI rose to 51.6 in Mar from 51.2 in Feb, highlighting the ongoing growth momentum of the industry going into 2Q.

·         AUD/SGD – Bearish tone.  After climbing higher overnight, the cross is on the slide this morning on the back of AUD weakness. The cross is currently hovering around 1.1631 with momentum now taking a bearish tone. 1.1608 should provide support nearby before 1.1586 today, while 1.1704 should deter upside.  SGD/MYR – Bullish moves.  The cross broke out of its range-bound trading this morning with a bullish engulfing move on the back of MYR weakness. The cross climbed to a high of 2.5993 before easing to hover around 2.5980-level at last sight. Risks are now to the upside and a slow grind to test the 2.6000-level is possible. A sustained break of 2.6000 should expose the stronger barrier at 2.6023.

·         USD/MYR – More Upsides. Pair remained on the upmove with another gap-up and was last seen around 3.2770. Prices are on the downtick now but momentum indicators on the intra-day chart suggest that prices are likely to remain elevated. Support is now the 3.2725-mark, a rather strong one. We think price moves should be confined within 3.2725-3.2901. 1-month NDF hovered around 3.2830. RSI prints 70.2, tilting lower. MACD still indicates bullish momentum. Pair is thus still likely to remain lofty in the session.

·         USD/CNY was fixed higher at 6.1520 (+0.0027), vs. previous 6.1493 (+2.0% upper band limit: 6.2776; -2.0% lower band limit: 6.0314). CNY/MYR was fixed at 0.5301 (+0.0013).

·         USD/CNY – Directionless. Spot hovered around 6.2090, on the uptick after a day spent in tight swivels.  Fixing was higher, giving a lift to the pair. We expect the pair to remain in sideway gyrations, with upsides well guarded by 6.2110/6.2340. Intra-day offers could be slowed by 6.1902. China’s Li Keqiang announced a package to boost spending on railways, tax breaks for SMEs as well as redevelopment of more urban areas (China Daily). Elsewhere, Xuzhou Zhongsen is said to avert bond default on guarantor aid (BBG).

·         1-Year CNY NDFs – Capped. The 1Y NDF rose to 6.2265from its open at 6.2210, lifted by fixing. Pair is near the next resistance at 6.2280. Bids are likely to be slowed by this resistance level. MACD shows decreasing bearish momentum while RSI jerked higher to 64.740. Further bids could next resistance at 6.2330.

·         USD/CNH – Higher in Range. Pair extended upsides to around 6.2080 as we write but nonetheless still within 6.1920-6.2190 range We do not think there is any impetus at the moment for a breakout and look for price moves to remain confined within this band.

·         USD/IDR – Upticks. The USD/IDR is inching higher this morning after closing below the 11300-level again yesterday. However, this move has not been sustained this morning with the pair climbing higher around 11320 currently. Downside risks are dissipating and could flip soon. With the parliamentary elections just round the corner, there could be some volatility ahead. Foreign funds continued to buy a net USD84.9mn in equities yesterday but have sold a net IDR1.89tn in bonds on 1 Apr. Support for pair today is at 11275 with immediate resistance still at 11340 before 11400. The 1-month NDF climbed to a high of 11380 overnight before easing to close at 11363 and is now on the grind higher at 11365 this morning. Momentum for the 1-month remains on the upside. After Tue fix at 11271, the JISDOR was set higher at 11303 yesterday.

·         USD/PHP – Bullish still.  The USD/PHP remains on the uptick with the pair currently sighted at 44.938. Momentum remains bullish, suggesting further upside today is likely though some support for the PHP could come from continued foreign fund interest as they did yesterday with a net USD31.4mn in equities purchased. 45.050 is seen as resistance today before 45.154 while 44.840 should support ahead of 44.700. The 1-month NDF slipped below the 45.000-level this morning at 44.980 currently though momentum is still to the upside.

·         USD/THB – Upside risks. After taking out our barrier at 32.400 on its upward climb yesterday, the USD/THB is wobbling this morning ahead of US data this weekend and on the back of the ongoing political saga. Foreign buying was mixed with a net THB115.6mn of equities sold but a net THB1.5bn in bonds purchased yesterday. Last sighted higher at 32.447, the risks are to the upside now with the pair possibly trading closer to the upper end of the 32.292/32.500 trading range today.

Rates

Malaysia

·         Local government bond yields ended mixed but under selling pressure. Many were on the sidelines ahead of US nonfarm payroll. Prices opened on the defensive side as MYR weakened to touch 3.2710 from 3.2600-25 while UST yields remained elevated during Asian trading hours further dampened market sentiment. At market close, 3-year benchmark MGS ended a tad lower at 3.60% while 10-year and 15-year benchmark MGS added 1bp to close at 4.13% and 4.50% respectively. Meanwhile, BNM announced the issuance of 7.5-year SPK with an issue size of MYR2.6 (including MYR1b private placement). WI was quoted at 4.30%-4.20% but with muted response.

·         Rates ended 1-2bps higher today on weaker bond sentiments. 5-year IRS traded twice at 3.98% maintaining its 16-17bps offshore/onshore spread.

·         The PDS market remained quiet with the main focus on high grades. Prasarana 2019 and 2028 traded at 4.04% and 4.93% respectively. In the corporate bond segment, short-end MCIL 17 traded in good volumes at 4.37-4.38%, a good ~100bps over MGS.

Indonesia

·         Indonesian government held a series of auctions yesterday and received a total of Rp26,179.30 bn bids versus its target issuance of Rp8 tn or oversubscribed by 3.27x. However, only Rp9.9 tn bids were accepted for its 3-mo SPN which was sold at a weighted average yield of 5.47829%, 1-yr SPN at 6.24800%, 5-yr FR0069 at 7.59992%, 10-yr FR0070 at 7.79851% while 20-yr FR0068 was sold at 8.38229%. Bid-to-cover ratios on today’s auction came in at 1.93X - 5.16X. No bids were rejected during the conventional bond auction today. DMO have sets Rp66 tn issuance target through auction in 2Q 14. During 1Q 14, DMO issuance through conventional auction were mostly clustered at FR0070 (10-yr benchmark series) amounting Rp22.1 tn. On total, Indonesian government has raised approx. Rp187.36 tn worth of debt through domestic and global issuance which represent 50.64% of this year target of Rp370.0 tn.

·         Indonesia bond market continues its rally yesterday with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield shifting down to 7.636% (2.7bps), 7.848% (1.5bps), 8.209% (3.5bps) and 8.399% (4.1bps) while 2-yr yield shifted up to 7.341% (3.4bps). Trading volume at secondary market decline despite remaining heavy amounting Rp9,754 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0068 (20-yr benchmark series) was the most tradable bond during the day. FR0070 total trading volume amounting Rp2,963 bn with 46x transaction frequency and closed at 103.581 yielding 7.848% while FR0068 total trading volume amounting Rp2,110 bn with 143x transaction frequency and closed at 99.759 yielding 8.399%.

·         Indonesia Debt Management Directorate General (DMO) release bond ownership data as of April 1^st, 2014. Foreign were seen as net seller amounting Rp760 bn during the period of March 24 – 27 while Insurance companies were recorded as net buyer with total net buy of Rp960 bn. Foreign ownership stood at Rp358.83 tn (33.45% of total outstanding of government bond).

·         On the corporate bond segment, trading volume decline to Rp584 bn on yesterday’s trading (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 2017; Rating: idAAA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp120 bn and was last traded at 94.75 yielding 9.49875%.

Rgds,

Maybank FX Research

Global Markets

Maybank