Maybank GM Daily - 14 Jan 2015

FX

Global

Risk sentiment was mixed overnight as US equities ended the session lower amidst “seesawing” moves while EU equities were higher on hopes of ECB QE. VIX was up above 20-levels. Commodity market was unsettling, as oil prices dipped briefly below US$45/bbl; and WTI-Brent spread has narrowed to nearly zero (levels not seen since Jul 2013).  Copper and iron ore declined to multi-year lows. Agricultural markets were also weaker, led by corn as USDA report forecasted a record harvest for 2015. USD was mixed, gaining against the EUR, but fell against the AUD, JPY and GBP.        On data release/events overnight - US JOLTS Nov job openings continued to rise, beating expectation. Despite a weaker than expected UK CPI, BoE Carney’s comments on “no need for more stimulus” was sufficient to see a huge reversal in the GBP back to above 1.5160s.        Day ahead in Europe sees EC, SP IP; IT, FR CPI. For US, retail sales, import prices data are on tap. The US Fed will also release its Beige Book. In Asia, focus remains on oil prices and MYR weakness; recent ranges in most AXJs likely to hold intra-day.

G7 Currencies

DXY – Consolidation.  USD was mixed overnight – firmed against the EUR but weaker against the JPY, GBP and AUD. DXY now at 92.25 levels and is likely to consolidate around 92.25-50 levels; stochastics remains at overbought areas and could hint at possible pullback soon.  US JOLTS Nov job openings continue to rise, beating expectation. Day ahead focus on Fed’s Beige Book, Dec retail sales and import prices.        USD/JPY – Bearish Bias. The USD/JPY broke below the 118-figure as haven plays continued on concerns about global growth. Pair is hovering around 117.63 this morning with slow stochastics continue to show oversold conditions. With the bias to the downside for now, new support is seen around 17.30 before the next at 116.80. Rebounds are likely to be met by barrier around 118.25.        AUD/USD – Range. AUD quietly crawled higher on better than expected China trade data yesterday..  Range still seen at 0.8100 - 0.8200. 4-hourly momentum is bias downside. No major data today; focus on employment numbers Thu.        EUR/USD – Range with bias downside. EUR continued to trade heavily and is now near its 9.5 year lows of 1.1770s. Day ahead brings EC, SP IP; IT CPI. Trading to the short side still remains a comfortable trade on ECB QE expectation. Intra-day range of 1.17 – 1.18 expected.        EUR/SGD – Sticky downwards. Pair continues to slide lower; traded lows of 1.57 levels overnight. Downside bias remains intact but likely to be slow grind down. 1.5650 – 1.5750 intra-day range expected.

Regional FX

       The SGD NEER trades at 0.77% below the implied mid-point of 1.3231. The top end is estimated at 1.2965 and the floor at 1.3498.

       USD/SGD – Range-Bound. The USD/SGD edged lower overnight after climbing to 1.3369 but is currently wobbling this morning. Pair is hovering around 1.3335 with intraday charts showing little directional clarity for now. We continue to expect 1.3300 to limit downside today and for 1.3390 to curb topside.

       AUD/SGD – Slow Grind Higher. The AUD/SGD is edging higher this morning on the back of the relative strength of the AUD. Cross is sighted around 1.0901 with a move towards the recent high of 1.0992 a possibility. The grind higher could be gradual as slow stochastics are showing only a slight tilt upward after falling over the past few sessions. 1.0855 continues to provide support.

       SGD/MYR – Downside Bias. The SGD/MYR broke through the historic high of 2.6935 but has since retraced on the back of the relative strength of the MYR. Pair was last sighted around 2.6843 with intraday MACD showing waning bullish momentum. Price action should be bias to the downside today with trades within 2.6770-2.6954 (historic high) likely. 

       USD/MYR – Upside bias. Pair traded higher towards near 3.60 levels yesterday tracking the weakness in oil prices but opened around 3.5790 levels this morning tracking NDF moves overnight. 1s NDF traded around 3.5950 levels this morning. Spot resistance still seen around 3.60 psychological levels, before 3.63.. Intra-day range of 3.5800 – 3.6100 expected. No key data release for the week.

       USD/CNY was fixed at 6.1205 (+0.0010), vs. Previous 6.1195 (+2.0% upper band limit: 6.2454; -2.0% lower band limit: 6.0005). CNY/MYR was fixed at 0.5807 (+0.0008). USD/CNY – Downside bias. USD/CNY continued to trade lower towards 6.1960. China trade data released yesterday was better than expected. Focus on M2, new loan growth which are due for release sometime between today/tomorrow. Next week sees a slew of growth/activity and GDP data for release. Pair is likely to remain biased to the downside. 6.18 (200 DMA) – 6.2000 range in focus.

       USD/CNH – Downside bias. Pair traded lower towards 3.1940 this morning. Next support seen around 6.1900 (38.2% Fibonacci retracement of 6.1113 – 6.2397); before 6.1860 (200 DMA). Momentum and stochastics are supportive for further downside.

       USD/IDR – Downside Bias. The USD/IDR is on the slide this morning, helped by the softer dollar tone. Pair is sighted around 12580 currently with intraday MACD still showing bearish momentum. With momentum to the downside, downside moves today is likely to be limited by 12500, while rebounds should meet resistance around 12650 still. Foreign funds sold a net USD29.32mn in equities yesterday, but added IDR1.2tn to their outstanding holdings of debt on Mon (latest data available). The 1-month NDF has come off to hover around 12633 this morning with the 1-month having lost all of its bearish momentum. The JISDOR was fixed higher at 12608 on Tue, up from 12568 on Mon from 12640 on Fri, but the fixing could be lower today should the spot’s drift lower be sustained.

       USD/PHP – Bearish. The USD/PHP continues to edge lower, helped by the softer dollar tone as well as expectations of lower inflation on the back of oil. Latest flows data showed that foreign funds bought a net USD32.32mn in equities yesterday and continue purchases today could add downward pressure on the pair today. Pair is sighted around 44.680 with slow stochastics still on the downtrend, suggesting further moves low remains possible. With our support at 44.700 taken out, new support is seen around 44.500. Any rebound is likely to meet barrier at 44.915 today. The 1-month NDF is hovering around 44.740, little changed from yesterday’s close with intraday charts indicating a downside bias.

       USD/THB – Rangy.  The USD/THB is wobbling this morning after attempting to break firmly below 32.810, which we had identified as barrier, and is currently in a holding pattern around that region.  Intraday MACD is showing little momentum in either direction, suggesting rangy trades remain likely. Intraday range of 32.720-32.905 is likely today. Recent flows data showed that foreign funds continued to be net sellers of equities (THB2.028bn) but were net buyers of debt (THB0.51bn), which if the same pattern emerges today, is likely to keep weigh on THB.

Rates

Malaysia

      The weak MYR did not deter incoming flows into the local government bond market. Benchmark yields came off 2-10bps across the board, except for the 3y MGS 3/17 which traded 2bps higher. Daily volumes for the 7y MGS 9/21 was just over MYR1b, but trades done on bonds below 5y were minimal. Buyers appeared keen on the new 7y GII 7/22 as it was seen flat with the current 10y GII 5/24. WI were last dealt at 4.25% and last quoted at 4.25/22%.

       IRS levels were bashed down which coincided with the lower MGS yields. 5y IRS dealt at 3.93-3.95%. Long end basis widened (more negative) by 10bps, which is a small move compared to the movements in the IRS and bond yield. 3M KLIBOR remained at 3.86%.

       Local PDS market got a slight boost from the rally in govvies as we saw high grade AAA names such as Plus 24 and Suria 24 being picked up at 4.63% and 4.72% respectively. These represent spreads of 64bps and 73bps which are levels that we like. We think there is more value in picking up Suria 24 given the 9bps spread between the two companies. At current levels, we prefer to pick up Suria 24 with a target value estimated at 4.67%. Apart from these trades, we saw interest in high grade short dated papers with Aquasar 15 and 16 recording MYR40m and MYR45m of traded volume respectively.

Singapore

      SGS outperformed slightly yesterday with buying interest dominating the entire day from the 2y all the way to the 30y benchmark. On this move, SGD IRS continued to soften and bond swap spreads widened by about 1bp. With continuing risk off sentiment theme in the market, we may see SGS continue to outperform in conjunction with SGD funding rates slowly softening. One of market’s key concern is that crude oil might continue to fall which raises concerns on deflationary and the macro recovery as a whole. We look to remain a little more received towards ECB next week.

       The Asian credit market saw Chinese High Yields (HY) trade better yesterday after Kaisa’s announcement of receiving a waiver on its loans from HSBC which market viewed as credit positive. KWG Property, Longfor, Kaisa, Country Garden, all bidded better. Elsewhere, sovereigns mostly traded better due to the rally in Treasuries. Reuters reported that the CIMB-RHB-MBSB merger will be called off with the official announcement coming as early as Wednesday. We do not see much negative impact to the credit name itself. Market however started selling Malaysian financial names which could lead to some good pickups as spreads have gotten fairly attractive. RHBCMK 2019 is being offered at T5+165bps which is flat with AMMMK 2019.

Indonesia

      Bond market continues its rally backed by foreign inflows. Positive news came from central bank comments on an expectation of lower January inflation. DMO now plans to increase its 2015 initial target issuance to Rp460 tn from Rp430 tn to boost the capital of state owned enterprises. However, this new additional supply can’t be consider as negative for bond market since DMO plans to fund this through global issuance rather than domestic issuance. This also means that the proportions of domestic - global issuance have changed to 75%:25% from its initial of  80%:20%. Based on the news we received, DMO also plans to change its Global Sukuk issuance which normally occur in 2H of each year to 1H 15 as an anticipation of FFR hike. We see this strategy to be appropriate at current point. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.600%, 7.705%, 8.103% and 8.136% while 2y yield shifts down to 7.435%. Government bond traded thin at secondary market amounting Rp7,939 bn with FR0070 (10-yr benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,816 bn with 83x transaction frequency and closed at 104.327 yielding 7.705%.

       Indonesian government conducted their first sukuk auctions yesterday and received a total of Rp13.75 tn bids versus its target issuance of Rp2.00 tn or oversubscribed by 6.9x. However, only Rp6.87 tn bids were accepted for its 5mo SPN-S which was sold at a weighted average yield of 6.32812%, 1.5y PBS008 at 7.46064%, 6y PBS006 at 7.89882% while 26y PBS007 was sold at 8.62196% bond. Incoming bid during the auction could be consider spectacular noting that the incoming bids were larger than incoming bids during sukuk auction in 2014. Highest incoming bid that DMO received during sukuk auction in 2014 was Rp5.69 tn (25 Feb 14). Incoming bids were mostly clustered on the front end series. Bid-to-cover ratio during the auction came in at 1.04X – 11.20X. No bids were rejected during the auction. Amid huge incoming bids, we see the successful of the auction as a result of new issuance of PBS008 which is a 1.5y tenor sukuk. Front end tenor issuance during sukuk auction has always received a good demand throughout 2014. Large absorption at PBS008 shows that DMO would like to create market liquidity for the new asset in the secondary market. On total, Indonesian government has raised approx. Rp72.43 tn worth of debt through domestic and global issuance which represent 16.8% of this year target of Rp431 tn.

       Corporate bond trading traded heavy amounting Rp1,351 bn. WSKT01CN1 (Shelf registration I Waskita Karya Phase I Year 2014; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp250 bn yielding 10.397%.