Maybank GM Daily - 14 Aug 2014

FX

Global

GBP/USD spiked at first towards the 1.6850-mark before slumping below the 1.67-figure after BOE cut 4Q 2014 annual wage growth forecast to 1.25% versus its previous 2.5%. This was despite acknowledging that slack is eroded faster than the MPC had anticipated.       In the New York session, dollar pulled back sharply at the release of the softer Jul retail sales advance which came in flat vs. an expected growth of 0.2%. Dollar touched a low of 81.35 before rebounding back to around 81.60 again. Equity markets were hardly spooked with DJI up +0.6%, S&P at +0.7% and NASDAQ at +1.0% by close. 10-year yields slipped to levels around 2.43% by Asia morning.       Jun machine orders swung to a growth 8.8%m/m in Japan, compared to the fall of -19.5% in May. Nikkei and Kospi are both in the black, setting a positive tone for the rest of Asia. BOK lowered its policy rate by 25bps as expected and kept equities buoyant. BI will decide on its policy reference rate later and most do not expect any moves today. China may release its foreign direct investment print for Jul any day before next Tue. Beyond Asia, more growth and inflation numbers from the Eurozone before the US’ initial claims come into focus.       Expect USD/AXJs to hold on to consolidation mode with a slight downside bias as dollar continues to trade sideways. MYR is the outperformer as we near the 2Q GDP release tomorrow.

G7 Currencies

DXY – Buoyant.  The DXY index hovered around 81.60 this morning, still guided higher by the intra-day chart. Momentum is slightly bullish with 81.7146 still capping topsides. Support is still seen around 81.53, ahead of the next at 81.35. Sideway trades should continue to dominate within the 81.30-81.70 range. After the disappointing Jul retail sales numbers on Wed, initial claims are up for release next.       USD/JPY – Grinding Higher. After easing following the climb to a weekly high of 102.54 overnight on the back of US data, USD/JPY is back on the uptick this morning as investors bet that the BOJ would hold its easing policy longer to counter the weak economy. The undershooting of core machinery orders (Jun: +8.8% m/m) compared to expectations (cons: +15.3%) underscores as well. Pair is currently sighted around 102.46 with risks now mildly to the upside. Should the breach of our barrier around 102.42 be sustained, further upside moves towards the next barrier around 102.62 is likely. Support is seen around 102.20 today.       AUD/USD – Capped. AUD/USD was indeed capped by the intra-day ichimoku cloud amid a lack of fundamental cues. The 4-hourly chart continues to guide the pair lower to sub-0.93-figures now. Bias is to the downside with 0.9262 still seen as the support. Break of the 0.9330-barrier is required for an upward extension. RBA Senior Manager Hancock speaks at 0940 (HKT).       EUR/USD – Downside Bias. EUR/USD made a short-lived rally on the back of the dollar retreat before retracing towards the 1.3360-levels by Asia morning. Pair is likely to remain on the downside bias ahead of more growth and inflation numbers out of Germany, France and Eurozone bloc today. Momentum indicators signal little momentum in this cross though price action indicates that the offered tone could continue but the 6-Aug low of 1.3333 is still a decent support for the pair ahead of the next at the 1.3316.       EUR/SGD – Pressured Lower. EUR/SGD continues to trace the EUR/USD and waffled around 1.6690 as we write.  This cross is still confined within the 1.6670-1.6760 range but bias is increasingly to the downside. The MACD forest tilts south in tandem with the RSI. 18-SMA has also crossed below the 40-SMA. A break of the 1.6670-support exposes the next support around 1.6640. Eye EU growth and inflation data later for better fundamental cues.

Regional FX

The SGD NEER trades 0.16% above the implied mid-point of 1.2511. We estimate the top end at 1.2261 and the floor at 1.2761.        USD/SGD – Rangy. USD/SGD hit an overnight low of 1.2481 but failed to close below our support at 1.2489, before bouncing higher to close around 1.2495. This morning, the pair is back on the slide, hovering around 1.2490 at last sight, helped by easing concerns about Fed fund rate hike and easing geopolitical tensions. Pair trades now within a thin intraday ichimoku cloud, and a break of the cloud in either direction should set the tone for the pair ahead. For now, expect the pair to waffle, hovering range-bound within 1.2460-1.2521.        AUD/SGD – Downticks. AUD/SGD is still on the slide after hitting an overnight high of 1.1639 yesterday, though it remains above the 1.1600-handle. Cross is hovering around 1.1610 currently, dragged lower by AUD weakness and SGD strength this morning. Intraday MACD forest continues to hug close to the zero line, suggesting two-way actions are possible ahead. Support nearby is seen around 1.1590 before 1.1558 y, while 1.1640 continue to guard topside today.  SGD/MYR – Still Heavy. SGD/MYR slid below the 2.5500-handle this morning, still weighed by relative strength of the MYR. Cross is currently sighted around 2.5485, putting our support nearby at 2.5480 at risk. However, cross remains oversold even if the bias is still mildly to the downside. A firm break of the 2.5480-support could extend bearish control with new support at 2.5447. Topside remains guarded by 2.5630.        USD/MYR – Bearish. USD/MYR slumped towards the 3.1848-support and extended its slide to levels around 3.1840, taking advantage of the subdued dollar moves overnight. MYR is now underpinned by expectations of a decent number for 2Q GDP, out tomorrow at mid-day. Bounces to met resistance now at the 3.20-figure, ahead of the next barrier around 3.1945 ahead of 3.2075. 1-month NDF had been choppy overnight and was last seen around 3.1910. Bearish momentum is still slight. Expect dips to test next support around 3.1879.        USD/CNY was fixed higher at 6.1545 (+0.0012), vs. previous 6.1533 (+2.0% upper band limit: 6.2801; -2.0% lower band limit: 6.0338). CNY/MYR was fixed at 0.5177 (-0.0013). USD/CNY – Bearish pressure petering out. Pair retreated sharply on Wed and was back around the  6.1533-support (50% Fibonacci retracement of the Jan-Apr rally). Trades are likely to remain sticky around this level with MACD showing slight bullish conditions. 6.1644 caps interim bounces. Liquidity numbers for Jul surprised to the downside yesterday with new yuan loans well below consensus at a print of CNY385.2bn. Aggregate financing also diminished to CNY273.1bn compared to the previous CNY1974.5bn. The numbers raised concerns that the mini stimulus (monetary and fiscal) have run their course and were not as effective as thought after all. After the release, PBOC stated on its website that banks have become more careful about lending to sectors and that the central bank will fine tune policy at appropriate time. A former central bank adviser, Yu Yongding recommended a shift of medium-term monetary policy goal to only the basic interest instead of having a dual target of money supply and loan growth. Next data due is FDI for Jul.        1-Year CNY NDFs – Capped. The NDF bulls lost steam early Asia and drifted lower to levels around 6.2360, still under the intra-day ichimoku cloud. The MACD still shows paring bullish momentum for the pair Barrier is now seen around 6.2430. Any pullback to meet the support around 6.2295. USD/CNH – Heavy. USD/CNH slipped to trade around 6.1580, weighed by regional strength. Trend is still down for this pair, also guided by the 4-hourly ichimoku cloud where the upper bound is seen at 6.1661 ahead of the next at 6.1706. Intra-day indicators show decelerating upside momentum. More consolidation ahead for this pair with a likely heavy tone. CNH trades at a discount to CNY.        USD/IDR – Gapping Lower. USD/IDR gapped downs slightly at the opening to 11670 on easing geopolitical tensions and renewed speculation of Fed fund rate hike timing. Pair remains on the slide, hovering around 11662 currently, though intraday MACD is still showing bearish momentum. Foreign appetite for Indonesia assets were mixed with foreign funds purchasing a net USD34.38mn in equities on Wed, but a net IDR0.88tn and IDR0.34tn of debt was removed from their outstanding holding on Mon and Tue. With the pair now out below the intraday ichimoku cloud, moves lower is likely today. Offers continue to be limited by 11600, while bids are likely to be deterred by 11750 today. The 1-month NDF continues on its slide this morning, hovering around 11715 currently with intraday MACD showing mild bearish momentum. The JISDOR was fixed higher at 11683 on Wed for the first time in three days, though the fixing could be set lower today given the spot’s slide this morning. BI policy meeting decision later today is eyed but impact on the USD/IDR is likely to be limited. This is because we do not expect any changes to the policy rate today, in line with market expectations, as the central bank remained focus on taming the current account deficit for now.        USD/PHP – Downticks. USD/PHP is on the slide this morning, in line with its USD/AXJ counterparts. Pair is currently sighted around 43.817 with intraday MACD showing mildly bearish momentum currently. However, pair continues to trade in a tight range within 43.750-44.000 as in the past few sessions and we do reckon the same is likely today. Topside should continue to be capped by the 44-figure, while support remains around 43.750. 1-month NDF is wobbly this morning, sighted around 43.820 currently. Four-hourly MACD is showing mild bearish momentum, though RSI is just a tad off oversold conditions. Moreover, 1-month is currently in the thick of an intraday ichimocku cloud, suggesting range-bound moves are likely ahead.

      USD/THB – Oversold. USD/THB broke below the intraday ichimoku cloud yesterday, taking out several of our support levels, though the pair is currently wobbling. Last sighted lower around 31.948, pressure is to the downside today given easing Fed rate hike concerns and speculation of a China stimulus package. Still, dips are likely to be shallow as domestic political concerns remain and 2Q GDP on Mon is eyed. RSI is also indicating oversold conditions. 31.880 should provide strong support ahead with resistance likely around 32-figure today. Foreign funds picked up Thai assets yesterday with a net THB3.68bn and THB8.98bn in equities and debt bought yesterday.

Rates

Malaysia

      Prices on local government bonds softened ahead of the 7y MGS reopening auction. Volumes decreased with bids shying lower. Higher IRS levels coupled with rangebound USDMYR pair so far is pointing to better sellers on the MYR bonds. Players don’t seem to be in a rush to buy bonds especially with the upcoming GDP data release a day after the 7y MGS auction. There will be more supply on this MGS 9/21 series via switches early next month. With current bids lacking conviction to move especially on the 10y benchmark, auction bids might come in much higher than the 3.80% levels.

      IRS was moving higher driven by offshore IRS which added another 2bps. No trades were reported but levels were generally quoted 1-2bps higher. The 5y spread onshore-offshore spread has now widened to about 8bps, as onshore payers were reluctant to pay up. 3M KLIBOR was unchanged at 3.61%.

      In the PDS market, buying interest remained. Moving down the credit curve, BGSM, Kesturi and IJMs were sought after. GGs have solid two way interest but nothing much was traded.

Singapore

      SGS underperformed the IRS throughout the day with heavy selling across the curve with yields higher by about 6bps after lunch time. Bids slowly surfaced towards the end of the day but did not help much. SGD IRS ticked up 3bps by the end of the day. The movements appeared to be driven by position paring ahead of tonight's retail sales. Selling interest in the SGS may persist if the US Treasury futures move higher in yields and we might then see more unwinding at the front end of the curve.

      In the Asian credit market, USD Asian names performed well rallying almost 3-5bps tighter. Malays, Thai, Korean and India names all tightened. CCB Asia announced a Basel lll Tier-2 USD issuance for 10NC5 tenor. The closest comparable is probably the ICBC 2023c2018 paper, currently trading at around T5+250bps. The new CCB Asia final guidance stood at T5+280bps.

Indonesia

      Indonesia bond market closed higher on yesterday’s trading session. There weren’t any justification regarding yesterday bond price’s increase beside normal correction related to last week prices decline and easing pressure of global issues as 2Q current account deficit is expected to widen to more than 4.00% of GDP compared to Q1 14 CAD of 2.06% of GDP. This deficit however will be offset by a larger surplus of capital and financial account thus resulting in a surplus BoP. Meanwhile on today’s reference rate publication, we see that central bank would maintain their monetary policy rate at 7.50%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.021% (-0.2bps), 8.247% (-0.8bps), 8.659% (-1.0bps) and 8.916% (-0.6bps) while 2-yr yield shifts down to 7.670% (-2.7bps). Trading volume remains thin amounting Rp6,717 bn from Rp4,108 tn with FR0070 (10-yr benchmark series) and VR0020 (7-mo variable rate) as the most tradable bond. FR0070 total trading volume amounted Rp977 bn with 22x transaction frequency and closed at 100.822 yielding 8.247% while VR0020 total trading volume amounted Rp920 bn with 3x transaction frequency.

      DMO conducted sukuk bond issuance namely SDHI 2029 B series amounting Rp2.86 tn with 15yr tenor paying fixed coupon of 8.62% per year. The issuance was conducted through private placement and is a non tradable bond. SDHI 2029 B will mature by Aug 13th, 2029. Till the date of this report, Indonesia government have receive financing amounting Rp25,3 tn through private placement.

      Corporate bond trading volume remains thin amounting Rp462 bn (vs average per day (Jan – Jun) trading volume of Rp677 bn). BNGA01CCN2 (Shelf registration I Bank CIMB Niaga Phase II Year 2013; C serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounting Rp112 bn yielding 10.1582%.