Maybank GM Daily - 1 May 2014

FX

Global

·         After three consecutive sessions of rallies, sentiments were mixed on the back of mixed economic signals ahead of NFP tonight. DJIA and S&P were down by 0.13% and 0.01% even as internet stocks bounced higher as reflected in the 0.31% gains in NASDAQ. UST rallied led by the long end despite mixed data with the 10-year yield dipping 3bp to 2.613% overnight.

·         It was a heavy data day in the US. ISM manufacturing PMI Final rose 54.9 in Apr from 53.7 previously and vs. expectations of 54.3 – the strongest so far this year, while Mar personal income and spending rose 0.5% and 0.9% (the most in almost 5 years) in Mar vs. expectations of 0.4% and 0.6%. Core PCE rose 0.2% m/m as expected. Initial claims though rose to a nine-week high of 344K (up 14K) compared to expectations of 320K.

·         We also had FOMC on Wed, which saw the Fed reinforced the view that the U.S. economy on the growth track despite weak 1Q data. Looking past the weak 1Q GDP print, the Fed’s policy statement gave a mostly upbeat assessment of the U.S. economy's prospects, while it continued to roll out another cut in its bond-buying stimulus.

·         Elsewhere in Asia, China released Manufacturing PMI yesterday and it showed factory output increasing to 50.5 in Apr from 50.3 in Mar but less than the 50.5 expected by market.

·         Meanwhile in Eastern Europe, Russia threw cold water on Ukraine’s proposed poll to maintain unity and its territorial integrity, calling a sham that would deepen the crisis. China is still away on its three-day break for Labour Day. The rest of Asia is back and should trade mixed following the mixed session in the US. Underlying caution, ahead of NFP,  could USD/AXJs trade mix today.

G7 Currencies

·         DXY – Range-bound. The greenback continues on the uptick, supported growing confidence about the US economy despite weak 1Q data. Dipping from a low of 79.414, the dollar has rebounded and is now hovering around 79.532, a stone throw’s away from 79.547-barrier. With NFP upcoming later tonight, the index is likely to trade within the confines of 79.268/79.268 today. A strong print should see the pair trade at the upper end of our forecast range while a disappointing data could see the index hover towards the bottom of the range.

·         USD/JPY – Still sideways. USD/JPY is wobbly this morning, hovering around 102.35 - little change from yesterday’s close. There was little fresh impetus with the BOJ still mum about further monetary easing at its 30 Apr meeting. With the Golden Week beginning this weekend and ahead of NFP tonight, investors are likely to stay on the sidelines. We reckon that the pair should trade sideways within the 102.03/103.68 range today, barring risks events.

·         AUD/USD – Wobbly. Pair continues on its slide, around 0.9269 this morning on the back of dollar strength. Intraday MACD is indicating flattish momentum with the MACD forest hovering at the zero-line. We reckon 0.9218 continues to provide support today and a break of that support level could trigger aggressive offers towards the next support at 0.9154. Topside is likely to be curbed by 0.9328.

·         EUR/USD – Bearish risks. Pair bounced above the 1.3879-barrier before reversing lower to around 1.3870 and continues to edge lower this morning to 1.3860. Bullish momentum is waning with the intraday MACD forest hovering just a tad above the zero line. Nearby support is likely at 1.3840 today before 1.3825, while we continue to eye 1.3879 as barrier.

Regional FX

·         The SGD NEER trades 0.58% above the implied mid-point of 1.2604. We estimate the top end at 1.2354 and the floor at 1.2855.   USD/SGD – Downside risks.  The USD/SGD is inching higher this morning, last seen around 1.2533. Risks though are still to the downside, though intraday MACD forest is showing waning bearish momentum. Ahead of NFP tonight, we expect the pair to still be in consolidative trade between 1.2518/1.2542 today.

·         AUD/SGD – Still bullish.  Cross on the uptick on the back of SGD weakness this morning. Cross is currently hovering around 1.1621 with risks still to the downside. Topside today is likely to be guarded by 1.1650, while downsides should be limited around the 1.1600-figure.   SGD/MYR – Edging higher.  Cross bounced above the 2.6066-barrier this morning but as since eased to hovering around 2.6061. Intraday MACD forest is now showing increasing bullishness with RSI edging close to overbought conditions at 71. A sustained break of the 2.6061 should expose the next hurdle at 6.6103. 2.5974 should be supportive today.

·         USD/MYR – Capped. Pair is edging higher this morning following a resurgent dollar. Currently hovering around 3.2660, risks though are still pointing to the downside, which suggest that upside could be capped. We reckon that 3.28 remains a good resistance in the interim, while support is seen at 3.2495. The 1-month NDF surged to hit a high of 3.2736 before retracing to hover around 3.2716 currently. MACD now shows little momentum in either direction.

·         USD/CNY was fixed lower at 6.1580 (0.0024), vs. previous 6.1556 (+2.0% upper band limit: 6.2837; -2.0% lower band limit: 6.0373) on Wed. CNY/MYR was fixed at 0.5250 (-0.0021) on Wed.

·         USD/CNY – Quiet. Onshore markets are closed for the Labour Day Golden Week and re-opens on Mon. Pair is currently hovering lower around 6.2595 this morning. Support today is still likely at the 6.2305-mark. 1-Year CNY NDFs – Little momentum on either direction. Pair is edging slightly higher this morning amid quiet trades with the pair hovering around 6.2510 currently. MACD is showing little momentum in either direction currently and we expect the pair to trade range-bound between 6.2475/6.2560 today.

·         USD/CNH – Range-bound. USD/CNH is bouncing higher this morning following dollar strength and lower-than-expected China PMI print.  Last seen around 6.2554, the 4-hourly chart continues to show slight bearish momentum. We expect quiet trade today ahead of NFP and the Golden Week holidays in China with the pair likely to hover 6.2450-6.2636 today.

·         USD/IDR – Consolidative trades. Onshore markets re-opened today with the USD/IDR on the slid following better-than-expected CPI data and trade surplus. The pair is currently hovering around 11536 with risks to the downside and RSI printing close to oversold territory at 31. For bearish to regain control, we need to see a sustainable break of the key 11500-level to expose the next support at 11475. Otherwise, we expect the pair to remain in consolidation between 11500/11584 today. The 1-month NDF is edging higher this morning, last sighted around 11572 vs. yesterday’s close of 11565 with momentum still bearish as indicated by the intraday MACD forest. The JISDOR was fixed lower at 11532 on Wed after two consecutive higher fixing. Indonesia’s CPI for Apr came in at 7.25% y/y, a moderation from Mar’s 7.32%, in line with market expectations. Trade data released this morning showed a trade surplus of USD0.67bn for Mar compared to expectations of USD0.52bn in Feb. Exports rose 1.24% y/y in Mar, while imports fell 2.3% y/y.

·         USD/PHP – Upticks. The USD/PHP is edging lower this morning unlike it peers, hovering around 44.540 currently. Momentum is still bearish but is waning. Continued foreign buying in equities like they did on Wed should weigh on the pair today (foreign funds bought a net USD32.1mn on Wed). Support remains at 44.421, while 44.641 should curb topside today. 1-month NDF is edging higher this morning at around 44.550 from yesterday’s close of 44.470 with intraday chart showing slight bullish momentum. 

·         USD/THB – Bullish.  Markets re-opened to see the USD/THB climb to 32.410 on the back of dollar strength. Also political tensions are increasing as Constitutional Court case over the Thawil transfer comes to close next week. Even the setting of 20 Jul for the general elections has not calmed tensions. Risks are still to the upside with the pair still in overbought conditions this morning. On Wed, foreign interests were again mixed with a net THB1.87bn in equities purchased but a net THB5.23bn of government bonds were sold, which lifted the pair higher.   With our barrier at 32.370 breached, the next hurdle is seen at 43.480, while 32.137 continues to limit downsides.   Thailand’s Apr CPI came in higher than expected at 2.45% y/y vs. market’s 2.25% and compared to 2.11% in Mar due to rising fresh food and fuel costs. Core inflation also accelerated, rising 1.66% y/y in Apr from 1.31% in Mar and higher than market’s 1.40%.

Rates

Malaysia

·         Yields on local government bonds ended the session mixed. Prices opened on the defensive side ahead of the FOMC and US nonfarm payroll. However, fresh buying was seen on the 3-year benchmark MGS but yield traded unchanged while scattered buying was also seen on selected off-the-run MGS. At market close, 5 and 15-year benchmark MGS ended a tad lower at 3.62% and 4.42% respectively while 7-year benchmark MGS inched up 1bp to 3.92%..

·         The IRS market was very quiet ahead of the FOMC meeting with shorter tenure seeing better bid on the back of higher 3M KLIBOR fixing. There was only one trade reported on the 3-year point with the curve ended almost unchanged.

·         The PDS market on the other hand was generally more active with better buying especially on the high grades i.e. the GGs like Khazanah 18, 19 and 21 mostly traded close to MTM levels. Putrajaya 20 was traded tighter by 2 bps and good volume was seen on YTL Power 18 at 4.34%. Focus remained on the belly with caution going into the longer dated papers. This is a short week hence market will likely be subdued on Friday.

Indonesia

·         Indonesia bond market booked losses during yesterday’s trading session. Selling appetite was seen mostly on the 10-yr benchmark series. Investors might be avoiding holding position since Indonesia bond market will be off today due to Labor Day. This view might be legit since during the holiday, Fed might publish some unfavorable results. Moreover, on Friday, Indonesia statistic will release April inflation and March external balance data where our economist estimates that April CPI on monthly basis would experience a deflation of 0.07% and on a yearly basis; April CPI is estimate to reach 7.20% from 7.32% in March while March external balance is expected to remain surplus of US$0.72 bn which is slightly lower compared to February 2014 external balance of US$0.79 bn with a consideration that imports would climb faster than export due to seasonal factor such as more number of working days in March compare to February.

·         Yield curve bear steepening with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.646% (+1.5bps), 7.963% (+4.5bps), 8.434% (+4.8bps) and 8.574% (+3.6bps) while 2-yr yield shifted up to 7.392% (+0.2bps). Trading volume at secondary market was noted amounted Rp9,144 bn which was lower compared to previous day trading volume of Rp12,926. FR0068 (20-yr benchmark series) and FR0071 (15-yr benchmark series) was the most tradable bond during the day. FR0068 total trading volume amounting Rp1,662 bn with 142x transaction frequency and closed at 98.104 yielding 8.574% while FR0071 total trading volume was recorded amounted Rp1,569 bn with 67x transaction frequency and closed at 104.726 yielding 8.434%.

·         Indonesia Debt Management Directorate General (DMO) release bond ownership data as of April 29^th, 2014. Foreigners inflow continues entering Indonesia bond market by booking a net buy amounting Rp3,390 bn between 21 – 25 April. Foreign ownership stood at Rp376.28 tn (34.53% of total outstanding of government bond). Foreigner inflow was also seen during Sukuk Auction (Apr 22^nd).  Banks on the other hand noted net sell amounting Rp3,530 bn for the same period.

·         On the corporate bond segment, trading volume continue being thin amounting Rp423 bn (vs average per day trading volume of Rp750 bn). VRNA01ACN2 (Shelf registration I Verena Multi Finance Phase II Year 2013; A serial bond; Maturity date: 24 Dec 2016; Rating: idA) was the top actively traded corporate bond yesterday with total trading volume amounting Rp67 bn and was last traded at 102 yielding 10.950%.

Rgds,

Maybank FX Research

Global Markets

Maybank

DID: +65 63201379

Fax: +65 65369816

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