Maybank GM Daily - 13 Jan 2015

FX

Global

US equities declined, led largely by energy sector. Oil weakness continued to persist, falling to fresh 5.5-year lows as oil producers showed little signs of cutting output and large downward revision on oil forecast by large American investment bank (WTI: $65/bbl from $80/bbl prev and Brent: $70/bbl in 2015 from $90/bbl previously). Commodity-linked currencies CAD, AUD, NZD were all a touch softer. USD strength faded into NY close, tracking the fall in US equities. USD/JPY below 118-handle this morning.        No significant data was released overnight. Fed’s Labor Market Conditions Index showed improved in Dec. Fed’s Lockhart reiterated that low oil prices is a benefit for US economy and sees rate hike justified by mid-2015. Banque de France Governor Noyer fuelled ECB QE expectation by commenting the Greece’s election is not an obstacle to ECB QE this month. Japan data released this morning –Nov current account surplus surprised to the upside; Dec bank lending was largely unchanged from previous.        Day ahead in Asia, focus on China trade data (10am SGT) and is likely to drive sentiment intra-day. Italy IP; UK CPI, PPI and RPI; US JOLTs are also due for release China New CNY loans and M2 data are likely to be released sometime between today and Thu. Fed’s Kocherlakota will speak on US economy outlook in NY.

G7 Currencies

DXY – DXY – Consolidation.  USD reversed small gains overnight, taking its cues from the sell-off in US equities into closing. DXY opened around 92.03 this morning. Intra-day range of 91.65 – 92.5 likely to hold. Key release today includes JOLTs data. Fed’s Kocherlakota is due to speak later tonight.        USD/JPY – Downside Pressure. Onshore markets re-opened after yesterday’s holiday with the USD/JPY coming under downside pressure again as concerns about global growth led to safe haven plays. As well, better-than-expected current account surplus (Nov: JPY433bn vs. est. JPY139.5bn) also weighed on the pair. Pair is currently hovering around 118.27, within sight of the 118-figure, which has provided firm support so far. A firm break below 118-figure could extend bearish control with the next support seen at 115.50. Continue to favor buying on USD dips. We have current account, trade data and machinery orders on tap this week.        AUD/USD – Range. AUD failed to hold on to gains (high of 0.8255) overnight as weak oil prices weighed on commodity currencies. Day ahead China trade data likely to drive sentiment.  Range still seen at 0.8050 - 0.8250.        EUR/USD – Range with bias downside. EUR’s bounce was short-towards 1.1870 overnight. Little data in the day ahead for the Euro-area.  We continue to hold a core bearish view of the EUR/USD, on expectations of ECB QE sometime soon. Intra-day rebound towards 1.1950 levels seen as opportunity to fade into.        EUR/SGD – Range. Pair was stuck in tight range of 1.5755 – 1.5820 yesterday. Day ahead range likely to be confined to 1.5750 – 1.5860.  Decline in the pair paused temporarily as EUR enjoyed a brief respite. Momentum indicator continues to suggest some bearish momentum, while stochastics are suggesting possible mild rebound. Still prefer to look for bounces towards 1.5860s to re-establish shorts.

Regional FX

       The The The SGD NEER trades at 0.91% below the implied mid-point of 1.3222 with the top end estimated at 1.2955 and the floor at 1.3489.

       USD/SGD – Wobbling. The USD/SGD hit a high of 1.3372 this morning before retreating back to the 1.3340-region. Pair is currently wobbling around that region with intraday MACD showing little momentum in either direction. With fresh impetus lacking for now, rangy trades within 1.3300-1.3390 is likely today.

       AUD/SGD – Capped. The AUD/SGD climbed to a high of 1.0992 before retreating to hover around 1.0890-levels currently. Cross is edging higher to around 1.0893 with slow stochastics showing waning overbought conditions. Further upside moves could be capped as such with 1.0920 acting as barrier today. 1.0855 should be supportive today.

       SGD/MYR – Upside Bias. The SGD/MYR continues to edge higher on the back of the relative weakness of the MYR, sighted around 2.6765 currently. A firm break of 2.6760, which we have identified as barrier, could see an extension of bullish control with the next hurdle seen around 2.6810. Support today is likely around 2.6600. 

       USD/MYR – Range. Pair traded higher towards 3.57 levels tracking the weakness in oil prices. 1s NDF traded higher this morning around 3.58500 levels. Spot resistance still seen around 3.5850 levels; intra-day technicals are not showing much signals either side. Pair likely to continue to take cues from oil prices and USD moves. 3.56 – 3.58 range in focus. No key data release for the week.

       USD/CNY was fixed at 6.1195 (-0.0038), vs. Previous 6.1233 (+2.0% upper band limit: 6.2444; -2.0% lower band limit: 5.9995). CNY/MYR was fixed at 0.5799 (+0.0040). USD/CNY – Downside bias. USD/CNY traded around 6.2050 levels, tracking the lower USD/CNY setting. Focus on Dec trade data, M2, new loan growth which are due for release sometime between 12–15 Jan. Pair is likely to remain biased to the downside. 6.18 (200 DMA) – 6.2050 range in focus.

       USD/CNH – Downside bias. Pair traded lower around 6.20-levels and is likely to maintain its bearish bias towards 6.1900 (38.2% Fibonacci retracement of 6.1113 – 6.2397). Momentum and stochastics are supportive for further downside.

       USD/IDR – Edging Higher. The USD/IDR is edging slightly higher this morning, sighted around 12610 currently. Slow stochastics are now dipping from overbought areas, suggesting a possible pullback of the pairing ahead. Look for topside to be curbed by 12650 today while 12500 should be supportive. Foreign funds sold a net USD5.40mn in equities yesterday, putting upward pressure on the pair. The 1-month NDF was sighted higher at 12675 this morning with intraday MACD showing waning bearish momentum. The JISDOR was fixed lower at 12568 on Mon from 12640 on Fri, but could be fixed higher given the spot’s drift higher this morning.

       USD/PHP – Downticks. The USD/PHP is on the slide this morning, helped by the softer dollar tone. Pair is hovering around 44.870 with slow stochastics falling from overbought conditions, suggesting a pullback is possible. In the near term, we expect further dips to see support around 44.700 and for any rebound to meet resistance around 45.050. Foreign funds bought a net USD300.9mn in equities yesterday and should this continue today could weigh on the pair today. The 1-month NDF is trading around 44.950 this morning with the 1-mon have lost most of its bearish momentum.

       USD/THB – Range-Bound.  The USD/THB is retracing this morning after hovering around the 32.900-region overnight. Pair is currently sighted around 32.848, but continues to trade well-within the broad trading range of 32.720-33.150. Slow stochastics are now on the uptick from oversold conditions; suggesting a possible rebound. The impeachment proceedings against former PM Yingluck will be watched with interest as a guilty verdict next week could reignite political tensions and possibly even violence. For the near term, look for pair to remain in range-bound trade within a tighter 32.810-32.965. Yesterday, foreign funds sold off a net THB2.28bn in equities, and bought a net THB0.51bn in debt, which supported the USD/THB.

Rates

Malaysia

      The local government bond market saw continued buying sentiment yesterday as MYR opened stronger. Buying was seen mainly on 15y MGS 4/30, 10y MGS 7/24, and 7y MGS 9/21. Yields dropped 7-10bps before profit takers came in and pushed the yield higher. At day end, these benchmarks closed 4-5bps lower, while 3y MGS 3/17 closed unchanged and 5y MGS 10/19 closed 2bps higher from previous close. BNM announce the new 7.5y GII 7/22 with an issue size of MYR4b. Tightest quote on WI was 4.30/25%, flat with current 10y GII 5/24, but nothing was traded.

       The IRS market had some reprieve with local banks collecting on some paid positions at these levels. 3y and 5y IRS traded 3.87% and 3.96% respectively. However, foreign selling/receiving pressure remains. Bond swap spreads worked yesterday with lower bond yields and almost unchanged IRS levels. 3M KLIBOR unchanged at 3.86%.

       Overall, local PDS saw better buying yesterday at the belly of the curve, in line with govvies tightening at this point of the curve as well. We saw some buying interest for financials with HLB 24 being traded at 5.16% before tightening 8bps lower in the last trade, and Ambank 15 and HLB 20 traded about 1-2bps lower than MTM levels. In the AA curve, YTL Power 18 traded about 3bps lower in early trading before tightening by about 30bps in the last trade and had the highest transacted volume at MYR45m. We also saw a return of buying interest for familiar names as Dana 24 and Plus 24 were picked up, which we think could potentially see spread tighten by about 3-5bps.

Singapore

      SGS outperformed SGD IRS to close where it opened at yields about 6bps lower. SGD IRS closed about 2.5bps lower from last Friday. We continue to see demand in SGS from the belly of the curve onwards and any dips were bought into. Funding rates were relatively stable, if not slightly softer in the shorter end of the curve. We prefer to stay received ahead of ECB’s policy meeting.

       Asian credits traded slightly weaker. There was no Treasuries as Japan was out in the morning. We saw some selling in Korean names, especially after The Export-Import Bank of Korea (KEXIM) announced its plan on issuing 5y and 10y USD papers at spreads of +105bps and +120bps respectively. We found that there is little pickup from the existing KEXIM curve and any tightening of the price guidance would wipe out the pickup. Another issuance of note is China Construction Bank International, with a guarantee from CCB Hong Kong, issuing 5y USD paper at T5+195bps. We believe the supply from Chinese financial names will be overwhelming this year, giving investors plenty of choices to pick from but we think it will be more worthwhile to look at USD papers compared to CNH due to the more volatile funding of the latter. Indon benchmark traded slightly better yesterday after the Indonesian government announced a revised budget that shows a decrease in the budget deficit.

Indonesia

      Local currency bond market closed with a positive note. Bond prices surged on the opening before slowing down and start moving in the other direction. Last week positive sentiments have helped the market yesterday as there were minimum sentiments in the market. Bond yield bull flattened with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.614%, 7.828%, 8.132% and 8.116% while 2-y yield shifts down to 7.456%. Government bond traded heavy at secondary market amounting Rp13,257 bn with FR0068 (20-yr benchmark series) as the most tradable bond. FR0068 total trading volume amounting Rp3,185 bn with 262x transaction frequency and closed at 102.477 yielding 8.116%.

       First sukuk auction in 2015 with an indicative target issuance of Rp1.5 tn. DMO will conduct their first sukuk weekly auction this week with four series to be auctioned which are SPN-S14072015 (Coupon: discounted; Maturity: 14 Jul 2015), PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020), PBS007 (Coupon: 9.000%; Maturity: 15 Sep 2040) and PBS008 (Maturity: 15 Jun 2016). We believe that the auction will be oversubscribe by 2x – 3x from its indicative target issuance while our view on the indicative yield are as follows SPN-S14072015 (range: 6.65% – 6.75%), PBS006 (range: 7.99% – 8.10%), PBS007 (range: 8.91% – 9.01%) and PBS008 (range: 7.10% – 7.20%).

       Corporate bond trading traded thin amounting Rp486 bn. BNGA01SB (Subordinated I Bank CIMB Niaga year 2010; Rating: AA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp150 bn yielding 10.904%.