Maybank GM Daily - 11 Nov 2014

FX

Global

      US equities edged higher into unchartered territories with DJI, S&P and NASDAQ closing with modest gains of 0.2%, 0.3% and 0.4% respectively. US treasuries came under pressure with 10-year yields higher around 2.36%. The greenback also tracked the yields higher and was seen around 87.80 this morning.

      Onshore markets in the US break for Veteran Day today and we expect thinner interest in the session. China will release its credit data as well as money supply figures for Oct anytime this week. Malaysia is due to release its industrial production later at mid-day.

      Hot from the wires, Philippines’ exports numbers accelerated to a growth of 15.7%y/y from the previous 10.5%. Elsewhere, Australia also released its NAB business survey which saw a slight deterioration in business confidence accompanied by a large improvement in business conditions. AUD steadied around 0.8630 against the USD.

      Focus on the APEC meeting in Beijing as trade pacts continue to be promoted. The meeting will be concluded today. Risk-on mood saw gains for most of regional currencies but with the DXY holding on to a firm tone, expect dips in the USD/AXJs to remain shallow. KRW and MYR are again the underperformers this morning with KRW down -0.4% against the USD while MYR slipped -0.3% against USD. The latter was likely weighed by oil prices which slid overnight.

G7 Currencies

       DXY – Shallow Dips. DXY index bounced overnight before reversing lower towards the 40-SMA on the 4-hourly chart as we write, printing 87.76. Despite the pullback, this index pared much of its bearish momentum and could remain in two-way trades within 86.96-88.20 for the rest of the session. Expect thinner interests with US players away for Veteran Day.

      USD/JPY – Supported. The USD/JPY is back on the uptick following the resurgence in the dollar and rise in UST yields overnight. Also helping was the better-than-expected rise in the current account surplus. Pair is currently edging within striking distance of the 115-figure again, hovering currently around 114.90. Pair is losing its bearish momentum, and an intraday bullish ichimoku cloud is forming below price action that suggests offers will likely to see strong support. Support today is seen around 114.06 before the next at 113.64. Bids are likely to meet immediate resistance around the 115-figure ahead of the next at 115.52 and then at 115.93 (1 Nov 2007 high). Current account rose to JPY963bn in Sep, while the trade balance dipped by JPY714.5bn – coming in better-than-market expectations of JPY537.7bn and –JPY782.5bn respectively.

      AUD/USD – Rangy. AUD remains sticky around the 0.8660-support and last printed around 0.8630 as further bid were capped by the greenback. This morning saw the release of NAD business surveys for Oct. Business confidence ticked lower to 4 from the previous 5 while business conditions rebounded to 13 from the previous 1. That did not inspire significant upsides for the AUD this morning. There is no clear direction for this pair at this point and we look for more rangy trades within 0.8550-0.8720.

      EUR/USD – Heavy. EUR slipped overnight but was able to steady around 1.2430, underpinned by broad dollar retreat this morning. Risk sentiments were rather positive this morning, taking the cue from overnight trades. MACD is back around the zero-line and we see ample room on both sides.  There is no significant release out of the continent today. A break of the support at 1.2350 could keep the pair on the course towards the next support at 1.2256.

      EUR/SGD – Risks on the Downside. The EURSGD slipped back towards the 1.6050-levels, reversing out the gains on Mon. Momentum indicators are not giving anything away today and this cross has been heavy. We do not rule out a drop below the 1.6008-support that could expose the next technical support at 1.5836. On the other hand, upticks need to break above the 40-SMA at 1.6106 for further bullish extensions towards 1.6252.

Regional FX

       The SGD NEER trades at 0.09% above the implied mid-point of 1.2917. The top end is estimated at 1.2658 and the floor at 1.3175.

      USD/SGD – Rangy. The USD/SGD appears stuck in its current trading range of 1.2806-1.2977, hovering close to the mid-point at 1.2909 currently. Intraday chart is showing little momentum in either direction, and rangy trades are likely today. Still with dollar on the rebound and short-term rates on the uptick, down moves could be limited. Any surprises in either direction could see the pair trade at a wider range between 1.2780-1.3000.

      AUD/SGD – Inching Higher. The AUD/SGD is back on the uptick underpinned by relative AUD strength after sliding lower overnight. Cross is hovering round 1.1150 at last sight with intraday momentum indicators showing upside bias. Cross continues to trade close to the middle of its current trading range and should remaining gyrating within 1.1026-1.1275 today with the bias tilted slightly to the upside. SGD/MYR – Buoyant.  After yesterday’s drop, the SGD/MYR is returning some of those gains underpinned by SGD strength and MYR retreat. Cross is edging higher around 2.5869 at last sight. Intraday MACD is showing little momentum in either direction, though RSI is inching closer to overstretched conditions. Uptick should continue to meet resistance around 2.5940, while dips should see support around 2.5750 today.

      USD/MYR – Buoyant. USD/MYR gapped up this morning and steadied around 3.3385 as we write on catch up action on overnight dollar upmove as well as the slip in oil prices.  Pair is likely to remain underpinned by dollar resilience and technical support for the day is seen around 3.3208 while topsides will remain guarded by 3.3511. The 1-month NDF also levelled off from overnight highs and hovered around 3.3475 as we write. Bearish momentum lessened overnight into Asia morning and intra-day trade is likely to remain tilted to the upside within 3.3385-3.3600. Sep industrial production is due at mid-day today and consensus expects a slower growth of 5.5%y/y compared to the previous 6.5%. Anything below this number could soften expectations for 3Q GDP, due later on Fri.

      USD/CNY was fixed at 6.1413 (+0.0036), vs. previous 6.1377 (+2.0% upper band limit: 6.2666; -2.0% lower band limit: 6.0209). CNY/MYR was fixed at 0.5445 (+0.0019). USD/CNY – Rangy. USD/CNY hovered around 6.1190 this morning, still within the tight band of 6.1083-6.1264 and risks are tilting to the upside. Intra-day tools also show bullish momentum. Expect sideway trades to continue with an upside tilt towards the upper bound at 6.1264. 

      1-Year CNY NDFs – Upside Risks. The NDF bounced this morning and hit a high of 6.2655 before levelling off to levels around 6.2625. Pair is still lofty and gaining bullish momentum. Support is seen around 6.2555 while further upticks are seen at 6.2725.  Trades are likely to remain tilted to the upside though with a lack of lead from the USD today, much of the intra-day action may have already been completed this morning. USD/CNH – Rangy. USD/CNH steadied around 6.1260 as gains remained capped by news of the Shanghai-Hong Kong Stock Connect, scheduled for its official launch on 17 Nov. PBOC also stated in a notice that China Securities Depository and Clearing Co. can borrow yuan funds from banks in Hong Kong for settlement of Hong Kong stock transactions done by domestic investors in case of emergency (BBG). We continue to expect this pair to extend its directionless trades within the 6.1130-6.1320. CNH trades at a discount to CNY.

      USD/IDR – Whippy. The USD/IDR is inching slightly lower this morning, helped by the uptick in global equities overnight. Pair is seen around 12164 at last sight with bullish momentum on the wane as shown by intraday MACD. Still, cautious trades are likely until fuel price subsidies adjustments are made and we should continue to see the pair trade range-bound within 11950-12280 today. Foreign funds were bullish yesterday, buying a net USD28.83mn in equities, and at the same time, adding IDR1.507tn to their outstanding holding of debt from Mon-Wed. Risks sentiments improved with foreign funds buying a net USD14.56mn in equities yesterday. They also added a net IDR0.96tn in debt to their outstanding holdings on 6 Nov. Positive sentiments today should see further foreign buying and this should weigh on the pair today. The 1-month NDF is edging higher this morning, sighted around 12235 with intraday MACD showing bearish momentum still. The JISDOR was fixed lower at 12138 yesterday from Fri’s 12149 and could be set lower again today given the spot’s down drift this morning.

      USD/PHP – Tilted Higher. The USD/PHP is edging higher this morning, boosted by the overnight resurgence in the dollar and rise in UST yields. Pair was sighted around 44.891 with intraday MACD showing increasing bearish momentum. Stronger exports for Sep should provide some support for the PHP today and cap USD/PHP upside today. We look for the pair to edge higher today but still within the confines of 44.820-44.050 today. Foreign funds sold a net USD1.1mn in equities yesterday, but improved sentiments today could see renewed buying, providing support for the PHP today. The 1-month NDF was seen trading lower this morning, hovering around 44.9430 with intraday momentum indicators showing the bias tilted to the downside today. Exports came in better-than-expected, rising 15.7% y/y in Sep from 10.5% in Aug, lifted by a 13.6% increase in electronics shipment.

      USD/THB – Range-Bound. The USD/THB is on the slide this morning after edging higher yesterday, in line with positive sentiments radiating from gains in global equities. Pair is seen hovering around 32.800 with intraday momentum indicators showing little directional clarity currently. We continue to expect the pair to trade range-bound within its current trading range of 32.585-32.966 today. Improved risk appetite overnight should carry over today and we could see foreign funds buying Thai assets again today like they did yesterday with a net THB0.82bn and THB0.72bn in equities and debt purchased. This should add downward pressure on the pair today.

Rates

Malaysia

      Local government bonds had a slow start to the week and traded mixed amidst thin volume. Players will look to the next auction which is the 10y MGS 7/24 retap and we expect an issue size of MYR3.5b. The current outstanding amount is MYR7.5b. We noted better buyers on the 10y MGS 7/24 again, despite the upcoming retap and the bond trading rich. Continued flows into this bond will likely cause the curve to flatten further as the market seems to be light on it.

      There were no trades reported in the IRS market yesterday and the curve ended a tad lower on the longer tenure. 3M KLIBOR remained at 3.77%.

      Local PDS market was thinly traded yesterday, after last Friday’s large volume, probably due to investors being on the sidelines ahead of the upcoming MGS retap. However, AAA names such as Aman 24 and Rantau 19 were well bidded. On the shorter end of the curve, we note that investors started buying up higher yielding AA rated papers in the construction and infrastructure sectors, such as Gamuda, Kesturi, and Litrak. Demand for SEB at the longer end remained robust with SEB 29 recording about MYR20m trade volume, continuing the buying trend from the last trading session.

Singapore

      SGS prices were driven up by risk-averse sentiments after last Friday's lower than expected NFP print. The bonds opened higher by about 3-4bps from previous close which prompted selling interest from the 10y SGS up to 30y bonds for profit taking. SGS prices eventually ended about 2bps higher. SGD IRS mirrored the risk-off sentiment with a sharp price drop of about 4bps on opening and closed around 3bps lower. Bond swap spreads ended about 1bp tighter compared to last Friday.

      In the Asian credit space, we saw more selling yesterday morning. Real money demand supported Chinese financial names, such as the recently issued BCHINA T2 and the BCHINA AT1. Sovereigns were marginally up due to the move in Treasuries. COFCO Land opened book for its 5y USD issuance guiding at T+220 (+/-5bps). The paper looked rather cheap as the guarantor, COFCO Land Holdings, is owned by COFCO Corp, which in turn is a wholly state-owned-enterprise in China. We foresee the market to continue focusing on new issues. In view of the US holiday today, it should be a rather quiet trading day.

Indonesia

      Indonesia’s government bonds seemed somewhat nervous before an announcement of the US’ non-farm payroll and unemployment rate. Most of the government bonds’ yields rose in last Friday. The bond players still waited the labour market condition in the US although they received positive domestic news in the form of higher foreign reserves from US$111.20bn in Sep-14 to US$111.97bn in Oct-14. Higher record of foreign reserves can be a harbinger for Indonesia’s better fundamental situation under the new President Joko Widodo. Foreign investors believed the new President can make a structural change that can bring Indonesia to be better country.

      Meanwhile, the corporate bond’s trading activity retreated by declining total volume from Rp677 billion to Rp443 billion. Bank Panin’s 10.5% of coupon rate due 2017 booked the highest volume by Rp50 billion.

      Corporate bond update: PT Bumi Resources Tbk missed the interest payment on its US$700 million of 10.75% senior secured notes due 2017, at the end of its grace period on 6 November 2014, which constitutes an event of default under its bond indenture. The company plans to make the payment of interest by 28 November 2014. However, Bumi's failure to make the interest payment on its 2017 notes is yet another event of default which highlights Bumi's financial stress and the complexity of its ongoing balance sheet restructuring, Moody's Vice President and Senior Analyst, Brian Grieser, said.