Maybank GM Daily - 15 Oct 2014

FX

Global

US stocks ended mixed, breaking its bearish streak that lasted three sessions. Strong corporate earnings gave investors relief but the softer German ZEW and slippery oil prices still kept most market players cautious. The DXY index was on the upmove for much of Tue, last seen within striking distance of the 86-figure again. USD/JPY also held itself above the 107-figure throughout the last session. Treasuries were bid with 10-year yields softer around the 2.20% by NY close.       Australia’s Westpac consumer confidence edged higher to 94.8 from 94.0. The AUD is still on the downtick against the USD, last printed near the 0.87-figure. The rest of the session in Asia has inflation numbers and credit data from China. Singapore’s Aug retail sales and Philippines’ overseas remittances are also due. Hot from the wires, BOK lowered its policy rate by 25bps to 2.00%.       More data elsewhere as UK releases its ILO unemployment in late Asian trade today, followed by US’ empire manufacturing, retail sales as well as the release of the Fed’s Beige Book for Sep today.  Apart from data cues, expect a sense of cautiousness to belie market sentiments as the WHO warned that the Ebola infection rate could reach 10,000 a week. In the FX space, expect the firm dollar tone to continue to underpin USD/AXJs. Eye US data for a better feel of the dollar trajectory.

G7 Currencies

DXY – Tilting Higher. The DXY drifted towards the 86-figure this morning. Gains were against most majors, indicating flight to safety as global growth woes still weigh. Treasuries were bid as the yield curve bull flattened. Momentum on the intra-day chart has become bullish and the 18-SMA has crossed above the 40-SMAm indicating more upside extension. Next barrier is seen at 86.11 and a better empire manufacturing, retail sales and the Beige Book could take the greenback above this level. Support is seen at 84.5319.        USD/JPY – Rebounding. After drifting lower for the past two sessions and hitting a low of 106.68 yesterday, the USD/JPY is on the rebound, helped by a firmer dollar. Pair is currently sighted around 107.27 with directional cues still lacking as indicated by our intraday charts. For bullish extension to continue, we need to see a firm break of the 18-SMA at 107.34 to expose the next hurdle at 108.107.83, marked by the 40-SMA on the 4-hourly chart. Support today is seen at 107.00 before the next at 106.50..        AUD/USD – Risks to the Downside. AUD/USD is back below the 0.87-figure despite the uptick in consumer confidence index to 94.8 in Oct from the previous 94.0. The firm dollar tone will continue to press the AUD towards the critical 0.8643-support. MACD shows little directional bias on the intra-day chart but a break of this 0.8643-support will trigger more offers towards the next at the 85-figure.  0.8820 is still the resistance for upticks.        EUR/USD – Sideways. The EUR/USD slipped back towards levels around 1.2640, weighed by the lackluster German ZEW. The negative cross-over of the 18-SMA and 40-SMA indicates a downward tilt. MACD also indicates bearish momentum. 1.2571 is still the support for downticks in this pair. Pair is still within the 1.2500-1.2800 range and is still likely to remain confined within. Interim barrier is seen at 1.2775.        EUR/SGD – Sideways. The EUR/SGD softened to levels around 1.6130 as we write this morning. Little momentum is seen on the 4-hourly MACD. RSI also flags ample room on both sides.  This cross has likely settled into sideway drift within 1.6020-1.6260 for now. Focus on US data today – empire manufacturing, retail sales and Fed’s Beige Book. Stronger indicators could keep the bearish pressure on this cross.

Regional FX

The SGD NEER trades 0.18% above the implied mid-point of 1.2790 and we estimate the top end at 1.2535 and the floor at 1.3045.        USD/SGD – Upticks. USD/SGD is climbing higher towards the 1.2780-level again this morning underpinned by a firmer dollar ton. Pair was last sighted around 1.2765 with intraday MACD still lacking any directional clarity. Pressured higher by a resurgent dollar today, a clean break of the 1.2780-resistance level could see the pair move towards the 1.28-figure. Support is seen at 1.2700 today.        AUD/SGD – Drifting Lower. AUD/SGD continues to drift lower this morning, seen around 1.1100 currently. Cross remains pressured downwards by AUD weakness, in line with the majors. Further bearish moves today could find support around 1.1062 before the next at 1.1026. Topside remains guarded by 1.1216 today. SGD/MYR – Bullish. SGD/MYR bounced towards the 2.57-figure this morning, before retreating to hover around 2.5662 currently. Cross continues to be pressured higher this morning by MYR weakness with upticks likely to meet resistance around 2.5700 ahead of the next at 2.5750. Dips though could see support nearby around 2.5547 before the next at the 2.55-figure.        USD/MYR – Upticks. USD/MYR bounced from its open this morning before softening from its peak of 3.2778 as we write. Last seen around 3.2760, pressure is to the upside although there seems to be interest to sell on upticks as well. MACD also indicates bullish conditions in this pair, underpinned by the USD upmove. Next support is seen at 3.2414, marked by the 200-DMA. Topsides to be guarded by 3.28-figure.1-month NDF is also on the rise and is now near the upper bound of the 3.2500-3.2880 range. Break here exposes the next barrier at the 3.30-figure. In news, Economic Planning Minister Abdul Wahid Omar said that Malaysia has enough measures to stop inflation from getting out of hand (BBG).        USD/CNY was fixed at 6.1455 (+0.0047), vs. previous 6.1408 (+2.0% upper band limit: 6.2709; -2.0% lower band limit: 6.0250). CNY/MYR was fixed at 0.5336 (+0.0044). USD/CNY – Bearish. Pa the 6.1264-suport and last printed 6.1235 this morning, weighed by the soft dollar tone and lower fixing. Next support is now seen at 6.1195. China releases its inflation numbers as well as credit data for Sep today.  PPI fell more than expected by -1.8%y/y compared to -1.2% previously. CPI also slowed more than expected to 1.6% from the previous 2.0%. Softening price pressures indicate room for more easing at home. PBOC lowered the 14-day repo rate again on Tue (from 3.5% to 3.4%) in a bid to tweak financing costs for domestic firms. More data release expected today: New yuan loans are estimated to remain steady around CNY 750bn while aggregate financing may creep higher to CNY1150.0bn in Sep. Consensus also expects a steady money supply M2 growth of 13.0%.        1-Year CNY NDFs – Rangy. The NDF steadied around 6.2460 this morning, unable to sustain a move above the 6.2470-barrier.  There is upside pressure in this pair and the 18-SMA has crossed above the 40-SMA. Bullish momentum is waning for this pair however and any downticks should meet support around 6.2350. USD/CNH – Sideways. USD/CNH traded sideways this morning, last seen at 6.1410. Strong support is seen at 6.1320 and the higher USD/CNY fixing could cushion downsides for intra-day trades. Momentum indicators are not showing much directional bias at this point. Recent price moves also offer little cues. Expect this pair to remain rangy within 6.1320-6.1480.  CNH trades at a wider discount to CNY. In news, Fitch expects dim sum bonds issuance to rebound in the last quarter of 2014.        USD/IDR – Upticks. The USD/IDR is rebounding this morning, last sighted around 12241, underpinned by both dollar strength and domestic economic and political factors. Pair is within striking distance of our resistance at 12280 with a firm break here exposing the next hurdle around 12375. Latest flow data showed foreign funds continue selling off both equities and debts with a net USD40.11mn in equities sold, and a net IDR2.73tn removed from their outstanding holding of debt between 8-10 Oct. Should this sell-off continue, the pair could come under further upside pressures today. Dips today should find support around 12200. The JISDOR was fixed at 12195 yesterday for the second straight session from Mon’s 12202, but is likely to be fixed higher today given the uptick in the spot this morning. In tandem with the spot, the 1-month NDF has rebounded back above the 12300-levels to 12330 at last sight with intraday MACD now showing bullish momentum.        USD/PHP – Mild Bullishness. The USD/PHP has broken out above the intraday ichimoku cloud and is sighted around 44.890 this morning. Pair though continues to trade well-within its 44.500-45.050 range. Intraday MACD is now showing bullish momentum building up, suggesting room for further upside ahead. Look for rebounds to meet resistance by 45.050 still, while dips should see support around 44.500. Yesterday, foreign funds sold a net USD25.6mn in equities but this could reverse given the positive moves in the Asian equity markets this morning, which could cap any upticks in the pair today. The 1-month NDF has been waffling this morning and is currently sighted slightly higher at 44.940 and is expected to remain rangy today given the lack of directional cues. Overseas remittances are due later today and are expected to have risen by 5.9% y/y in Aug, just a tad off Jul’s pace of 6.0%.        USD/THB – Sideways. The USD/THB is bouncing higher this morning in line with a resurgent dollar. Pair was last seen hovering around 32.510 ahead of the next at 32.640, just above the 40-SMA at 32.505. Further upmoves though sees the pair enter deeper into the intraday ichimoku cloud forming around price action, which would suggest sideway trades ahead. Hurdle to cross today is around 32.580, while 32.420 should be supportive. Foreign funds bought a net THB250.11mn of equities yesterday but sold a net THB2.64bn of debt, which if continues today would add upward pressure to the pair today.

Rates

Malaysia

Local government bond curve flattened at day end. Morning session saw buyers from the belly to the back end of the curve with the 10y benchmark MGS trading 2bps lower. Players also saw the auction on the retap on 15y MGS with an issue size of MYR2.5b. Successive yields ranged from a high of 4.15% to a low of 4.10%, and averaged 4.13%. Post-auction, the bond closed at 4.15% as players deemed the BTC of 1.73x as lukewarm considering the bullish sentiment. There was some profit taking in the evening but market closed the day still well bid.        There was heavy selling again across the IRS curve. 1y IRS traded at 3.73%, 2y at 3.75%, 4y at 3.84% and 5y at 3.89%. 3M KLIBOR unchanged at 3.75%.        The PDS market saw interest on GG spike when local government bonds rallied in the morning. Huge amount of Danainfra and BPMB went through, particularly 15y papers at 4.70-4.72 level. With the yield on the 15y MGS retap averaging 4.13%, 15y GG papers gave an attractive spread of about 60bps over the govvies. Buying interest also moved down the credit curve on selective names like UEM Sunrise and Kesas. We believe there are more sellers that have yet to surface, and the focus for this last quarter of the year would be on upcoming issuances in the MYR pipeline.

Singapore

      SGS market saw mixed interest. The day started with selling on 10y and 3/27 SGS before market went quiet. After lunch, belly bonds became soft and small giving interest came in. As recent data from the euro zone and UK were quite weak, we saw Treasury futures getting bought up frantically.

       Asian credit market feels weak and bid offers are going wider. Market has been asked for bids most of the day and was hit. Treasuries reached 2.20% and we saw a lot of shorts squeezed out. Sentiment is pretty much risk-off at the moment. It was investment grade papers’ turn to take the brunt of the selling. Spreads widened by 5-7bps. Most dealers are cautious and adopted a wait-and-see stance. New issue was Korea Reinsurance’s 5y 30 NC for a USD200m capped deal (rated BBB by S&P) with initial price guidance around 4.875%. The UK Government (rated AAA by S&P) opened a 3y CNH with price guidance of 2.75 +/- 5bps and size of about CNH3.5bn.

Indonesia

      Indonesia bond market moved slightly higher on yesterday trading session amid minimum sentiments. Bond auction surprisingly received a huge demand amounting Rp32.85 tn. Despite heavy trading volume and successful bond auction, bond price failed to rally higher. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.157% (-3.4bps), 8.354% (-4.3bps), 8.742% (-3.5bps) and 8.812% (-10.9bps) while 2-yr yield shifts down to 7.640% (-4.1bps). Government bond traded heavy at secondary market amounting Rp26,038 bn with FR0069 (5-yr benchmark series) as the most tradable bond. FR00070 total trading volume amounting Rp13,489 bn with 63x transaction frequency and closed at 100.125 yielding 8.354%.

       Indonesian government held a series of auctions yesterday and received a total of Rp32.85 tn bids versus its target issuance of Rp8.00 tn or oversubscribed by 4.1x. However, only Rp12.00 tn bids were accepted for its 9-mo which was sold at a weighted average yield of 6.76270%, 1-yr SPN at 7.02075%, 5-yr FR0069 at 8.14421%, 10-yr FR0070 at 8.31704%, 15-yr FR0071 at 8.74337% while 30-yr FR0067 was sold at 9.12930%. Incoming bid during the auction came in significantly higher by 65.36% compared to Sep 30th, 2014 conventional auction amounting Rp19.87 tn and were mostly clustered at the 10-yr benchmark series. Bid-to-cover ratio on during the auction came in at 1.21X – 6.46X. No bids were rejected during the conventional auction. Awarded average yield during the auction were in line with our indicative yield expect for the 9-mo SPN which came in lower than our expectation. Overall, the huge demand in our view occurs as investors might start loading Indonesia bonds ahead of Jokowi’s inauguration which is plan to take place upcoming Monday (Oct 20th). This is the only chance for investors to purchase Indonesia bond in bulk through primary market before the inauguration. Any bulk purchase in the secondary market would drive bond prices higher. Jokowi inauguration euphoria might also drive bond market positively this week yet chance of decline in price remains open. We suggest investors to be rather cautious in investing and not be overwhelmed in a sudden bond price hike due to the euphoria. On total, Indonesian government has raised approx. Rp398.4 tn worth of debt through domestic and global issuance which represent 92.60% of this year target of Rp430.2 tn.

       Corporate bond trading remains thin amounting Rp367 bn (vs average per day (Jan – Aug) trading volume of Rp657 bn). IMFI01BCN1 (Shelf Registration I Indomobil Finance Phase I year 2012; B serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp100 bn yielding 8.932%.