Maybank GM Daily - 5 Aug 2014

FX

Global

Overnight session had few headlines, one of which was Banco Espirito Santo’s bail-out by Portugal with a near EUR5.0bn EU-backed package. US equities reversed out earlier losses into black thereafter. DJI was up +0.5%, S&P and NASDAQ were up 0.7% each. 10-year yields drifted lower to 2.48%.       RBA meets today to decide on policy rate. Markets do not expect any action from them. Their assessment of the economy will be watched, not least their view of the recent uptick in underlying CPI. Given their preference for rate stability for now, post-decision statement is unlikely to reflect a material change in their views. Expect the Statement on Monetary Policy on Fri to have more insights. Nonetheless, AUD players will take caution at this point.       In Asia, Philippines released Jul CPI, followed by China’s PMI-non mfg which is less market-moving. Key data of the day is Indonesia’s 2Q GDP which is usually released around noon (HKT). Early Asian starters are on the defensive as Kospi slipped into red. Nikkei was also in mild negative terrain. Expect USD/AXJs to remain within their respective ranges until fresh cues emerge. Beyond Asia, US Jun factory orders are due.

G7 Currencies

DXY – Shallow Dips. The dollar retained much of its strength and traded in tight ranges overnight, last seen around 81.329.The 4-hourly chart shows downside pressure though momentum is decelerating. This index needs to clear the 81.179-support for bears to extend. Otherwise, rangy trades within the 871.18-81.60 could extend with the upper bound the barrier to watch. US factory orders are due for Jun and could underscore a steady recovery in the local manufacturing scene. Risks at this point are tilted to the upside and any dips are likely shallow.       USD/JPY – Still Buoyant in Range. After rallying the past few sessions, USD/JPY is consolidating within 102.41/102.73 currently. Pair is currently sighted hovering around 102.60 with intraday MACD showing bearish momentum. Still dollar weakness could weigh on the pair today, capping any upside. Immediate barrier is around 103.09 ahead of 103.43. Support remains around 102.20.       AUD/USD – Capped. AUD/USD edged higher overnight and hovered around 0.9330, ahead of RBA decision. Firmer retail sales growth of +0.6%m/m underpinned. Intra-day chart shows upside momentum gained overnight for this pairing though bulls have faltered a little in early Asian trades. While RBA is not expected to move later this morning, the bid tone in the currency suggest that there could be less jawboning on the AUD after the upside surprise in the trimmed mean measure of inflation for 2Q. 0.9360 marks the next barrier for this pair. Expect any bounces to be short-lived. Support is seen around the 0.93-figure ahead of 0.9274. We retain our view that interest rate will remain steady until the second half of next year. The quarterly Statement on Monetary Policy (SoMP) will be more scrutinized for insights. Jul labour report is also due on Thu.       EUR/USD – Pressured by the cloud. Bears are still in control of the EUR/USD. Major data to watch today is Jun retail sales out of the Eurozone. Immediate support is seen at 1.34-figure ahead of the next at 1.3367. The ichimoku cloud has guided the pair lower and there are more room for downsides. Any upticks will meet barrier at 1.3432 ahead of the next at 1.3477.       EUR/SGD – Bearish Scope. EUR/SGD slipped to trade around 1.6717 by this morning, weighed by Asian strength. MACD forest on the 4-hourly chart has crossed the zero-line into negative terrain and price action also slipped into the thick of the cloud. At this point, there are more room for downsides with support now seen around 1.6670. Unexpected upticks could try and test the 1.6758-barrier again.

Regional FX

The SGD NEER trades 0.59% above the implied mid-point of 1.2528 with the top end at 1.2279 and the floor at 1.2777.       USD/SGD – Two-Way Moves. USD/SGD is wobbling this morning and is currently edging lower around 1.2458. Intraday MACD forest is still hugging close to the zero line, suggesting two-way trades are likely today. Key support remains around 1.2450 with barrier still at 1.2502. Jul PMI surprised on the upside, coming in at 51.5 (Jun: 50.5) above market expectations of 50.7, helped by an uptick in domestic and export orders, production and inventory. The electronics sector also exceeded expectations, rising to 52.4 in Jul (Jun: 50.7) vs. consensus’ 50.7.       AUD/SGD – Rangy. AUD/SGD edged higher this morning before easing to hover around 1.1619 currently on the back of AUD weakness. Intraday MACD forest is still hugging close to the zero line, suggesting trades in either direction are possible today. Cross is likely to trade range-bound within 1.1590/1.1640 ahead.  SGD/MYR – Downticks. SGD/MYR is again on the downtick, continuing the moves from yesterday. Cross is currently trading around 2.5616 with intraday MACD showing mild bullish momentum dissipating. Bids are currently being deterred by the thin intraday ichimoku cloud though a firm break of the cloud could see the pair headed towards 2.5547. Offers are seen around 2.5730 still.       USD/MYR – Losing bullish momentum. USD/MYR tested past support around 3.1933-support and hovered around 3.1925 in early trades today. MACD indicates a loss of bullish momentum in this pair and risks have tilted lower. Our traders have also noted a flush of dollar in the markets yesterday with no sign of reversal as well. For bonds, curve bull steepened with the help of foreign interest as well. Support is seen around the 40-SMA on the 4-hourly chart around 3.1828. The downtick is in line with most of Asia and investors are pricing in another decent print in the trade numbers on Wed for Jun. Barrier for today is seen around 3.2014. 1-month NDF is also on the uptick, on its way to test the support around 3.1780, near the 40-SMA on the 4-hourly chart. A clean break here exposes the next at 3.1880. Downside momentum is accelerating.       USD/CNY was fixed at 6.1655 (-0.0020), vs. previous 6.1661 (+2.0% upper band limit: 6.2913; -2.0% lower band limit: 6.0446). CNY/MYR was fixed at 0.5182 (-0.0005). USD/CNY – Downside Bias. Pair waffled around 6.1770 this morning and trades closer to the mid-point. The pair trades in tandem with majority of USD/AXJs. The 18-DMA is still seen well below the 40-DMA. Expect bids to be limited by the 6.1860-resistance. Next support remained at 6.1699 ahead of the next, some distance away at 6.1533 (50% Fibonacci retracement of the Jan-Apr rally). At home, an editorial by the People’s Daily said economic growth will slow to “medium high speed” from “high speed” as the country adjusts to a higher quality of development. PBOC extended a CNY1 trillion 3-year-loan to a state development bank (BBG).       1-Year CNY NDFs –Consolidation. The NDF was trapped in the intra-day ichimoku cloud, last seen around 6.2465 this morning. MACD forest on the 4-hourly chart shows bearish momentum though 18-SMA is still above the 40-SMA. Expect consolidative trades with 6.2625 seen as a viable barrier for the pair, though an interim one is seen at 6.2520. Pair tests could drift lower towards the next support around 6.2430. A break out on either side widens range-trading to 6.2370-6.2575. RSI shows near oversold conditions. USD/CNH – Heavy. USD/CNH was little moved on Mon, still traded around 6.1740, within striking distance of the 6.1706-support. A break here could trigger aggressive offers towards the next at 6.1591. MACD shows little momentum and 18-SMA shifts closer towards the 40-SMA, indicating likely more sideway trades. Barrier remains around 6.1850 for intra-day trade, ahead of 6.1900. CNH trades at a slight premium to CNY.       USD/IDR – Downticks. USD/IDR is correcting after yesterday’s move higher. Pair is currently sighted around 11732 with risk still to the upside as indicated by intraday MACD. Currently the pair remains trapped inside the intraday ichimoku cloud and rangy trade is possible today. Immediate barrier is around 11835 ahead of 11950, while nearby support is around 11650 before 11500. Support for the IDR strength continues to come from foreign funds, who bought a net USD76.21mn in equities yesterday. The 1-month NDF is edging lower this morning, hovering around 11778 from yesterday’s close of 11805. Intraday MACD is showing increasing bearish momentum. After being closed for the past week, the JISDOR re-opened yesterday and was set higher at 11747 compared to the last close of 11591 on 25 Jul. Jul CPI came in slightly higher than market expectations of 4.40% at 4.53% y/y in Jul, helped by the higher base of comparison last year because of the fuel price hike. The trade balance returned to a deficit of USD305mn in Jun (May: USD70mn), though this was better-than-market expectations of an USD387mn deficit. Exports rose 4.45% y/y, beating market expectations of -1.0%, while imports rose 0.54% y/y (consensus: -4.0%). On tap today is 2Q14 GDP and market is expecting steady growth of 5.20% y/y, little changed from 1Q, though our economic team is slightly more bullish, expecting 5.28% growth.

      USD/PHP – Correcting. USD/PHP continues to retreat this morning, hovering around 43.590 at last sight. Bullish momentum is waning, though the intraday ichimoku cloud below could limit downsides today. Still, higher inflation in Jul suggested that the BSP pre-emptive interest rate hike was timely, and continued hawkish bias could provide support for the PHP ahead. Support nearby is seen around 43.528 before 43.421. Immediate barrier today is around 43.750 ahead of 44.000. 1-month NDF is on the downtick, hovering around 43.610 currently with intraday MACD showing slight bearish momentum. Headline inflation rose 4.9% y/y in Jul (Jun: 4.4%), coming in higher than consensus’ 4.6% on the back of higher food prices.

       USD/THB – Waffling. USD/THB is again waffled this morning around 32.155. Intraday MACD is now showing increasing bearish momentum, which could cap upside with 32.245 likely to guard topside today.  32.050 continues to limit downside today. Foreign buying was mixed yesterday with a net USD1.06bn of equities bought yesterday but a net USD5.44bn of debt was sold, supporting the pair higher. Continued sell-off today could exert further upside pressure on the pair.

Rates

Malaysia

§  The MGS curve steepened today on the back of foreign flow buying the MGS 2017s maturity while the belly of the curve remained unchanged. The benchmark 3y 3/17 dipped 4bps on suspected rollover maturity this month extending to the 2017s maturity bucket. We think this type of rollover might continue into next week. BNM via the PD network announced a bilateral switch auction which is expected to be held in the second week of September. Repurchase stocks will be the MGS 2/15 and the MGS 9/16 while the replacement stocks will be MGS 7/19, MGS 4/26s, MGS 4/30, MGS 9/21 and MGS 7/24.

§  The IRS saw better receivers in the 5y point as MGS got bidded up, but no trades were reported. We also noted better paying in basis (tightening of cross currency spreads) in the 5y sector, seemingly markets still favor QE trades whereby global central bank policies should still support carry trades (yield play) and hence tightening of the CCS levels. 3M KLIBOR stayed unchanged at 3.60%.

§  In the PDS market, there was still decent buying interest in high grades like Danainfra, Prasarana, Manjung and Aman. Danainfra 2028 was given at 4.69% before market closes.

Singapore

§  SGS prices opened higher today with bidding interests coming in as the IRS levels continued to decline pretty swiftly dropping to about -7bp level from the opening at -4bp. Risk off sentiments seemed to dominate post nonfarm payrolls data as expectations were not met. At market close, SGS with 5 years or higher in tenors rose 4-5bps.

§  In the Asian credit market, spreads tightened in the sovereigns, IG and selective HY bonds. Syndicate bank India traded lower as news about the chairman was arrested over bribery surfaced. Indon and Philippines names traded better with buying came mostly from real money and the locals.

Indonesia

§  Indonesia’s June export surged by 4.00% m-o-m in June 2014 to US$15.42 bn compared to May 2013 export value. Oil and gas segment contributed the most to the overall export monthly growth by increasing 17.45% m-o-m valuing US$2.79 bn. On the other hand, Indonesia import surged by 6.44% m-o-m in June 2014 to US$15.72 bn contributed mostly by an increase in non oil and gas imports such as increasing imports of iron/steel goods (28.59% MoM), iron/steel (20.80% MoM), machinery/mechanical appliance (18.22% MoM), and automobiles and its parts (16.01% MoM). Indonesia June trade balance was recorded deficit of US$305 mn compared to a surplus of US$75 mn that occurred a month earlier due to higher import growth compared to export growth. The published trade balance result also was better than economist consensus of US$387 mn deficit.

§  July 2014 headline CPI came in at 4.53% y-oy or 0.93% m-o-m. The yearly inflationary pressure eases due to vanished impact of the June 2013 fuel price hike. Monthly inflationary pressure was predicted to increase as well with Indonesia celebrating the Ramadan festival. Yearly Core CPI slightly decline to 4.64%yoy from 4.81% in the previous month.

§  Indonesia bond market moved lower at the initial trading day after a full week Ramadan holiday last week. There was not much sentiment which could move the market yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.936% (+7.2bps), 8.121% (+8.3bps), 8.549% (+6.4bps) and 8.742% (+6.8bps) while 2-yr yield shifts up to 7.437% (+5.8bps). Trading volume was noted moderate amounting Rp8,226 with FR0068 (20-yr benchmark series) and FR0070 (10-yr benchmark series) was the most tradable bond during the day. FR0068 total trading volume amounted Rp1,563 bn with 36x transaction frequency and closed at 96.568 yielding 8.742% while FR0070 total trading volume amounted Rp1,525 bn with 45x transaction frequency and closed at 101.657 yielding 8.121%.

§  DMO will conduct its weekly auction today with five series to be auctioned today are SPN12141107 (Coupon: discounted; Maturity: 7 Nov 2014), SPN12150806 (Coupon: discounted; Maturity: 6 Aug 2015), FR0069 (Coupon: 7.875%; Maturity: 15 Apr 2019), FR0070 (Coupon: 8.375%; Maturity: 15 Mar 2024)   and FR0068 (Coupon: 8.375%; Maturity: 15 Mar 2034). Our view on the indicative yield for the auction are as follows SPN12141107 (range: 5.850% - 6.050%), SPN12150806 (range: 6.670% - 6.900%), FR0069 (range: 7.830% – 8.030%), FR0070 (range: 8.020% – 8.220%) and FR0068 (range: 8.640% – 8.840%).

§  On the corporate bond segment, trading volume was noted very thin amounting Rp46 bn (vs average per day (Jan – Jun) trading volume of Rp677 bn). BABP01CB (Bank ICB Bumiputera convertible bond Year 2010 Rating: idBBB-) was the top actively traded corporate bond with total trading volume amounting Rp20 bn.