Maybank GM Daily - 20 Jan 2015

FX

US equities ended Fri session higher thanks to Uni. Of Mich Consumer Confidence which rose to 11-year high. Positive risk sentiment was also attributed to IEA forecast cut for non-OPEC oil production and soft CPI numbers which suggests the Fed could delay rate hike. Oil and copper recovered lost grounds. USD/JPY enjoyed a rally to close around 117.50; EUR remained weak traded fresh 10-year low of 1.1460. AUD and NZD were marginally firmer. Gold is back up above 1270 levels this AM.       Markets kicked off the week on a quiet note overnight, ahead of ECB meeting on Thu. US markets were closed for Martin Luther King Hols. Europe equities were marginally higher with the Euro Stoxx up 0.58% and the DAX by 0.73%. USD was mixed overnight, gaining marginally against the JPY and AUD, falling against the EUR. In a surprise move overnight, Denmark cut rates by 15bps to -20bps and insisted it had the tools to defend its peg to the Euro, following speculation it may do what the SNB did. In the commodities space, oil and copper eased while gold was largely unchanged.       In Asia, Chinese regulators surprised the markets when it suspended three top brokerages from opening new margin trading accounts for three months on financial market stability concerns as well as a crackdown the shadow banking sector. The result was a plunge in Chinese equities yesterday with the Shanghai Composite Index down by 7.7%. The equity markets have since rebounded and are currently higher this morning.       For today, we have US Fed’s Powell speaking on Libor and NAHB housing market (Jan) due, while in the Eurozone, GE PPI (Dec), GE ZEW (Jan) and IT Trade (Nov) are watched. In Asia, a slew of China data is due including 4Q GDP, IP and retail sales.

Global

G7 Currencies

DXY – Consolidation. USD closed relatively unchanged overnight amid quiet session as US market was closed for Martin Luther King holiday. A daily close above 92.50-70 levels is needed for a continuation of the rally towards 94-levels. Meantime consolidation likely to take hold today. While we remain constructive of the medium term USD bull trend, long USD trade is increasingly looking too comfortable and very much one-way, and could be due for a pullback. Stochastics are currently falling from overbought levels. Day ahead brings NAHB housing market data. Fed’s Powell is also due to speak later.       USD/JPY – Still Consolidating Higher. The USD/JPY remains on the uptick this morning, helped by gains in equities, hovering around 117.80. Intraday momentum chart is showing the bias to the upside, suggesting potential for further upticks ahead. Look for 116.80 to provide support today and 118.85 to cap upside. Though BOJ policy decision tomorrow is not expected to throw up any surprises, the post-decision press conference by the governor could provide some indication on the BOJ’s thoughts on the 2% inflation target. Any surprises in either direction could see the pair trade in a wider range of 115.50-119.00.       AUD/USD – Range-bound. AUD traded a touch weaken within lackluster range of 0.8196 – 0.8244 overnight. Copper and oil were softer overnight. Momentum is bullish bias but stochastics are showing very tentative signs of falling from overbought areas. Expect 0.8150-0.8250 range intraday. Little data for release in Australia this week. Eyes on China data dump today which could have some impact on the AUD.       EUR/USD – Fade Rallies. The pair rebounded marginally towards 1.1640s overnight as markets head into ECB (Thu). Trading was relatively quieter and calm after the panic last week. Elsewhere, Denmark cut rates by 15bps to -20bps and insisted it had the tools to defend its peg to the Euro, following speculation it may do what the SNB did.  Day ahead sees GE Dec PPI and GE Jan ZEW. Intra-day range of 1.1450 – 1.16 expected.       EUR/SGD – Range. The pair retraced more than 200 pips higher towards 1.5470s on combination of Euro pullback and SGD weakness, despite quiet session overnight.  Possible pullback intra-day, as pair looks oversold. Daily stochastics is now rising from oversold levels. 1.54 – 1.56 range expected intra-day.

Regional FX

      The SGD NEER trades at 0.80% below the implied mid-point of 1.3263. The top end is estimated at 1.2995 and the floor at 1.3530.

      USD/SGD – Upside Bias. The USD/SGD is seen higher this morning, underpinned by the slightly firmer dollar tone. Also weighing on the pair today is the slew of China data out later this morning. Pair is currently sighted around 1.3357 with intraday MACD forest showing bullish momentum though the pair is currently overstretched. With the bias tilted to the upside, trades within 1.3300-1.3390 are likely today.

      AUD/SGD – Sideways. The AUD/SGD is edging lower this morning on the back of relative AUD weakness ahead of China data releases this morning. Last sighted around 1.0930, intraday momentum indicators are showing little directional clarity for now. Trades within 1.0860-1.0990 are likely should there be no surprises to the Chinese data. Any surprise could see a wider swing within 1.0730-1.1060.

      SGD/MYR – Rangy. The SGD/MYR is edging higher this morning ahead of PM Najib’s budget statement later this morning. Cross is currently hovering around 2.6849 though intraday charts are showing little momentum in either direction currently. Unless the PM surprises, cross is likely to trade range-bound within 2.6600-2.7006 today. 

      USD/MYR – Range. Pair traded higher towards 3.5780 levels; 1s NDF traded around 3.5900 levels this morning as market awaits PM Najib’s announcement on restructured budget. Many noises making its rounds including fear of capital controls. Any disappointment in addressing budget/fiscal deficit could see renewed selling interest in the Ringgit. 3.55 – 3.60 range intraday expected. Barring disappointment, weak ringgit pressure may see a breather.

      USD/CNY was fixed at 6.1226 (-0.0004) vs. previous 6.1230 (+2.0% upper band limit: 6.2476; -2.0% lower band limit: 6.0025). CNY/MYR was fixed at 0.5769 (-0.0030). USD/CNH – Range. USD/CNH reversed some of its Fri’s losses overnight trading down to 6.2250 from 6.24 levels. Competitive global monetary easing, china rate cut expectations, ongoing growth concerns will continue to drive mild CNY weakness in the near term. Day ahead has China growth/activity data – 4Q GDP, IP, retail sales, IP are due for release at 10am today. 6.20 – 6.24 intra-day range expected.

      USD/IDR – Gapped Higher. The USD/IDR gapped higher this morning to 12639 from yesterday’s close of 12618 on the back of a firmer dollar tone as well as in anticipation of China data out later this morning. Pair is currently sighted around 12668 with intraday MACD showing waning bearish momentum. Look for topside to be capped by 12750 and downside to be supported by 12600. Foreign funds added a net IDR1.12tn to their outstanding holding of debt on 16 Jan (latest data available) but sold a net US55.88mn in equities yesterday. The 1-month NDF jumped to 12751 this morning from yesterdays’ close of 12718 with intraday MACD showing bullish momentum though RSI is indicating overbought conditions. The JISDOR was fixed higher at 12612 on Mon from 12612 on Fri as expected, and is likely to fixed higher given the spot’s drift higher this morning.

      USD/PHP – Upside Bias. Onshore markets re-opened this morning after having closed for the past two sessions. The USD/PHP made up for lost time, climbing higher to 44.710 this morning with the pair having lost most of its bearish momentum. With the bias to the upside, look for resistance around 44.920 today. 44.500 should be supportive today. The 1-month NDF jumped to 44.810 this morning from yesterday’s close of 44.610 with intraday chart showing the upside bias ahead.

      USD/THB – Tilted Higher.  The USD/THB is edging higher this morning underpinned by a firmer dollar. Pair is sighted around 32.640 with MACD and slow stochastics tilted to the upside, suggesting potential for further upmoves ahead. For now, we look for the pair to trade between 32.500-32.720. Key risk remains the impeachment vote against former PM Yingluck on Fri with the breakout of protests over the verdict likely to see the pair trade in wider trading range of 32.420-32.965. Foreign funds continued to be net sellers of equities (THB1.0bn) but debt saw renewed interest with a net THB3.24bn purchased yesterday.

Rates

Malaysia

      Local government bonds consolidated yesterday around current levels, though buying on the 15y MGS 4/30 persisted. All eyes are on the national budget revision to be announced by the Prime Minister today and players are also looking to Dec 2014 CPI which will be released on Wednesday at noon.

      IRS levels were quoted higher, but only offshore traded higher on profit taking. 3y IRS traded at 3.835%. 1y to 3y rates are still heavily offered (want to receive) as players were in paid positions in the short end due to the previous rate hike and high KLIBOR. 3M KLIBOR stayed at 3.86%. There is a lot of noise in the market, an announcement of a revised budget and a fair mix of squaring activity going on.

      In the local PDS space, the buying spree continued on AAA and GG names with Danainfra 2024 and Plus 2024 trading at 4.48% and 4.60% respectively. The Prime Minister is to announce the budget revision today. We believe that the buying would resume, particularly on the 7y to 10y bucket given that the recent move on govvies have made the spreads attractive, especially in the AAA space.

Singapore

      SGS market had a relatively quiet session. The SGD IRS curve was marked higher by 6-7bps at open, tracking the rise in USD rates on the back of a rebound in US stocks on Friday. Likewise, SGS prices were weaker at open, but subsequently moved higher when Treasury futures staged a comeback intraday. Yields were pushed down from opening levels, but SGS eventually settled at around 2-4bps cheaper. Bond swap spreads improved at the belly and the short end.

      The Asian credit market seemed quiet on the surface and the US was out yesterday. Investors are on a cautious note as more news surface. Russia was downgraded by Moody's from Baa2 to Baa3, which now matches S&P’s and Fitch’s ratings. Elsewhere, the Chinese government suspended the country’s big three brokerage firms from adding margin-trading accounts. We saw some trading on Citics and Haisec post-announcement. The property space was a little quiet, except for Kaisa on rumours about the company seeking third party financing with a guarantee from the government.

Indonesia

      Bond prices continue to climb on the first day trading session in this week. Positive sentiments due to gasoline, diesel, LPG 12 kg and cement price remains enveloping Indonesia bond market. However, bond auction which is schedule to be held today have hinder any significant hike in bond prices yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.485%, 7.779%, 8.001% and 8.064% while 2y yield shifts down to 7.362%. Government bond traded with a heavy volume at secondary market amounting Rp10,937 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,541 bn with 124x transaction frequency and closed at 104.862 yielding 7.625%.

      DMO will conduct their conventional auction today with three series to be auctioned which are SPN12160107 (Coupon: discounted; Maturity: 7 Jan 2016), FR0070 (Coupon: 8.375%; Maturity: 15 Mar 2024) and FR0068 (Coupon: 8.375%; Maturity: 15 Mar 2034). We believe that the auction will be oversubscribe by 2.0x – 2.5x from its indicative target issuance while our view on the indicative yield are as follows SPN12160107 (range: 6.85% – 7.00%), FR0070 (range: 7.50% – 7.65%) and FR0068 (range: 7.95% – 8.10%). Till last week, Indonesian government has raised approx. Rp18.9 tn worth of debt through bond auction in 1Q 15 which represents 24.0% of the 1Q 2015 target of Rp78.5 tn. On total, Indonesia government has raised approx. Rp65.6 tn worth of debt through domestic and global issuance which represent 15.8% of this year target of Rp460.0 tn.

      Corporate bond trading traded moderate amounting Rp522 bn. BNGA02SB (Subordinated II Bank CIMB Niaga Year 2010; Rating: AA_(idn)) was the top actively traded corporate bond with total trading volume amounted Rp263 bn yielding 10.964%.