Maybank GM Daily - 7 Jan 2015

FX

Global

Risk-off theme continues to dominate as global equities continue to see red again. Political uncertainty in Greece and oil rout continues to drive the weak sentiment. Dow was down another >100pts driven by energy and financial sectors; oil prices slid to fresh 5.5 year lows; sovereign bond markets rallied, in particular 10Y UST broke below 2%; VIX up above 21-levels.        The dollar was resilient overall, rising against most currencies including EUR, GBP, CHF, CAD, AUD and AXJs while falling against the JPY. USDJPY continue to decline towards 118 levels overnight on risk-off sentiment. JPY-crosses also took a hit following risk-off sentiment. In the AXJ space, Ringgit continues to be the weakest link declining to 3.58 levels on domestic concerns including fiscal challenges, vulnerability to further foreign fund outflow and 1MDB non-repayment of debt which heightened the risk of rating downgrade.        Day ahead in AXJ, focus on Malaysia trade data. In Europe, German Construction PMI, Retail PMIs from EC, GE, FR and EC, IT CPIs are on tap. In US, focus on FOMC minutes from the Dec meeting, MBA mortgage applications, ADP employment change and trade balance. Fed’s Evans will deliver a speech early Asia hours tomorrow.

G7 Currencies

DXY - Resilient. USD continues to stay resilient overnight. Except for falling against the JPY, the greenback stood firm against the EUR, CHF, CAD, AUD and AXJs. US ISM non-mfg data (released yest) was below market expectations. Day ahead focus on FOMC minutes from the Dec meeting, MBA mortgage applications, ADP employment change and trade balance. Eyes still on NFP on Fri. On the technicals, daily momentum still looks bullish but stochastics are suggesting tentative signs of pullback. Next Support sees 91.15, before 90.50; resistance at 92.50.        USD/JPY – Brief Respite. There is a brief respite for the USD/JPY after dipping lower towards the 118-handle overnight on safe-haven plays. Pair is currently rebounding slightly back towards the 119-figure, sighted around 118.79. This respite could be short-lived given anxieties over Grexit and global growth concerns that could see the pair once again head lower towards the 117-handle. Support today is around 118.06 (yesterday’s low) and a break here could see the pair head towards 117.30. Resistance is seen around 119.85 today.        AUD/USD – Fade Rallies. AUD rally yesterday off the back of China’s fiscal stimulus was short-lived; failed at 0.8158 before taking a turn lower towards 0.8080 this morning. No data for the day ahead. Still favor fading rallies towards 0.8135 intra-day. Support seen around 0.8030 levels. 4-hourly stochastics is falling from overbought area.        EUR/USD –Fade Rallies. Another day, another sell-off as EUR/USD took a dip to 1.1845 levels this morning, taking out the previous low at 1.1875. Cautious of option barriers every 20-30 pips below from here, given that the pair has not seen these levels in the past 9 years or so. 4-hourly technicals continue to suggest further downside. Day ahead sees German Construction PMI, Retail PMIs from EC, GE, FR and EC, IT CPI. We continue to hold a core bearish view of EUR/USD, and favour fading rallies towards 1.1950 intra-day.        EUR/SGD – Range. EURSGD continues to stay soft on weaker Euro. Range of 1.5820 – 1.5920 likely intra-day. 2-hourly stochastics are showing very tentative signs of rising from oversold levels, this suggest possible retracement but likely to be shallow as daily MACD still indicate bearish momentum.

Regional FX

       The SGD NEER trades at 0.62% below the implied mid-point of 1.3256. The top end is estimated at 1.3008 and the floor at 1.3542.

       USD/SGD – Rangy. The USD/SGD is on the uptick this morning, last sighted around 1.3354, though it remains in range-bound trades. Intraday MACD is showing little momentum in either direction, suggesting rangy trades could continue. Lacking fresh impetus so far, look for the pair to trade range-bound still within 1.3300-1.3390 today.

       AUD/SGD – Sideways. The AUD/SGD is on the slide this morning on the back of a firmer dollar tone, in line with the other majors. Cross is sighted around 1.0764 but still within its current trading range of 1.073-1.0888. Given the lack of directional clarity, cross is likely to trade sideways today within a tighter 1.0740-1.0825 today. Intraday momentum indicators are showing little directional clarity, suggesting the range-bound trade remains likely.

       SGD/MYR – Slow Grind Higher. The SGD/MYR continues to its upward move with a massive jump this morning. Cross is currently hovering around 2.6809 from yesterday’s close of 2.6700 on the back of continued MYR weakness. Intraday MACD is still showing bullish momentum, though the cross remains overbought. Look for a push towards the 2.69-handle, though upside is likely to be capped by the historic high of 2.6935. Dips today are likely to be supported by 2.6600. 

       USD/MYR – Upside Bias. Ringgit continues to suffer declines as USD/MYR surged to fresh multi-year highs of 3.58 levels this morning. Oil price weakness and ongoing domestic concerns including fiscal challenges, vulnerability to further foreign fund outflow and 1MDB non-repayment of debt which heightened the risk of rating downgrade. 1s NDF traded around above 3.6050 levels this morning. Technicals still favour further upside; and the clean break of 3.55 overnight suggest the pair is on track to re-visit 3.60 before the not-too-distant 3.64. Day ahead focus on trade data.

       USD/CNY was fixed at 6.1269 (+0.0013), vs. previous 6.1256 (+2.0% upper band limit: 6.2519; -2.0% lower band limit: 6.0068). CNY/MYR was fixed at 0.5792 (+0.0039). USD/CNY – Range. Despite a stronger USD against most currencies, the CNY appears relatively resilient. 1m interbank repo rate continue to ease towards 4.5% levels from its peak of above 7% in Dec. Expect the pair to remain in recent range of 6.20 – 6.23 intra-day, with mild downside bias. Daily MACD shows mild bearish momentum. Focus still on the slew of China data scattered throughout the week with CPI and PPI on Fri and trade data on Sat.

       1-Year CNY NDFs – Range. 1-yr NDF continue to ease towards 6.3150 levels this morning.  MACD suggests mild bearishness and stochastics are falling, suggesting further downside bias in play. 6.29 – 6.33 range likely to be in play intra-day.  

       USD/IDR – Bullish Bias. Despite the positive domestic environment, the USD/IDR continues to tick higher, lifted by global growth concerns and anxiety over the breakup of the euro zone. Foreign funds again sold a net USD34.92mn in equities yesterday and this sell-off is likely to continue today, putting upside pressure on the pair. Pair is sighted hovering around 12718 with intraday momentum indicators still showing bullishness, though the pair is edging closer to overbought territory. Immediate resistance is around 12750 with a break of this level exposing the next barrier around the 12800-handle. The 1-month NDF spiked above the 12800-handle this morning, spotted around 12822, with intraday stochastics still showing overbought conditions. The JISDOR continued to be fixed higher at 12658 yesterday from 12589 on Mon and a higher fixing is again likely given the spot’s uptick this morning.

       USD/PHP – Upside Bias. The USD/PHP is inching higher this morning, underpinned by a firm dollar. Pair is currently hovering around 45.000 with our four-hourly charts still showing bullish momentum. Foreign reserves data for Dec is eyed today and a jump here on the back of strong remittances inflows could cap upside to the pair today. In contrast, foreign funds were net sellers of USD23.5mn in equities yesterday, and a further sell-off today could again put downside pressure on the pair. Barrier today remains around 44.050 ahead of the next at 45.150, while support is seen around 44.915 today. The 1-month NDF is edging higher at around 45.100 this morning with intraday MACD now showing little momentum in either direction.

USD/THB – Upticks.  The USD/THB is on the bounce higher this morning, sighted around 32.870, underpinned by a firmer dollar tone. The net buying by foreign funds of THB6.18bn in debt, which offset the net sale of THB4.0bn in equities yesterday, if it continues, could cap upside to the pair today. Intraday momentum indicators continue to show a bearish bias, which suggests limited upside. Look for topside to meet resistance around 32.965 ahead of the 33-figure, while downside should see support nearby around 32.810 before the next at 32.760 today.

Rates

Malaysia

      Local government bond market continued to see bearish sentiment as USDMYR broke the resistance level of 3.5470, as seen by our FX team. The morning session saw buyers on the front ends while better sellers were seen on the belly to the back ends. Throughout the day, market was rife with negative news on 1MDB and falling oil price. In a Bloomberg news, Fitch stated that it is monitoring 1MDB developments for any spillover to the government. These led to govvies weakening towards the closing. The WI for 15y MGS 4/30 closed +2bps higher from previous close. While last done was at 4.53%, last quoted was seen at 4.59/55%. We anticipate today’s auction to be filled by local end investors and the PD network with very minimal offshore participation.

       IRS crashed as foreign banks received massively, likely due to higher spot while bonds still seem weak. 3y IRS traded at 3.89% and 5y IRS at 4.08%-4.04%. 3M KLIBOR unchanged at 3.86%.

       Volume remains thin in the local PDS market as investors digested news on 1MDB. This and falling oil price weighed on the market. We saw some bids yesterday but bid-ask spreads remain wide, and some trades done in the high grade space at the belly of the curve. Prasa 21 tightened by 2bps from the first trade to 4.50% and KLCC 24 tightened 3bps from previous close to 4.70%. With the bearish sentiment weighing on Malaysia’s financial market, we think that buying activity in the PDS space would likely be driven by government linked entities given the recent MOF directive.

Singapore

      SGS market had a pretty active day as it opened with a flurry of buying on the 10y benchmark up to the 30y, taking yields lower by 6-8bps. Although we saw good two way flows in the afternoon, risk-off sentiment, which seems to be linked to WTI falling below USD50/barrel, continued to dominate the market until closing. SGD IRS opened with some support at 2.30%, but risk-off sentiment drove it below 2.30% and ended about 10bps lower from previous close. We prefer to remain in a neutral position as we approach NFP this Friday.

       In view of the oil price and Treasury movements, the Asian credit space opened with selling seen on oil & gas names. Kaisa was the focus again amid concerns over its downgrade and upcoming coupon payment on 8 Jan 2014. Chinese property names overall traded 2-3pts lower due to the movement in Kaisa. Elsewhere, tech names traded better with good two way flows. Buying was seen on some low beta Malaysian names like Cagamas, Sime Darby and PETRONAS. The Philippines (BBB) is issuing new 25y USD paper with guidance at the 4.20% level.

Indonesia

      Indonesia bond market closed within the red territory as incoming bid during the auction yesterday slumps compared to the incoming bids during first auction in 2014. Average awarded yield during the auction which came in higher than previous day close have made bond prices to adjust downwards. There were not anything fancy during the day as market was moving with a slow pace. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.711% (-1.8bps), 7.977% (+1.8bps), 8.283% (+0.7bps) and 8.397% (+1.5bps) while 2-yr yield shifts up to 7.495% (+3.2bps). Government bond traded heavy at secondary market amounting Rp12,332 bn with FR0068 (20-yr benchmark series) as the most tradable bond. FR0068 total trading volume amounting Rp3,903 bn with 178x transaction frequency and closed at 99.776 yielding 8.397%.

       Indonesian government conducted their first weekly series of auctions yesterday and received a total of Rp22.88 tn bids versus its target issuance of Rp12.00 tn or oversubscribed by 1.9x. However, only Rp12.00 tn bids were accepted for its 3mo SPN which was sold at a weighted average yield of 5.99700%, 1y SPN at 6.91849%, 10y FR0070 at 8.03075% while 20-yr FR0068 was sold at 8.43958%. Incoming bid during the auction were lower compared to the first conventional auction in 2014 which managed to receive incoming bids of Rp29.61 tn. Incoming bids were evenly distributed among the offered Indonesia government securities. Bid-to-cover ratio during the auction came in at 1.14X – 6.63X. No bids were rejected during the conventional auction. We see that result of the auction as shabby and not quite happy with the result of this first auction hence we are still optimist that Indonesia government would be able to achieve its 2015 gross issuance target. Most of the awarded weighted average yield was within our indicative yield. On total, Indonesian government has raised approx. Rp15.00 tn worth of debt through domestic and global issuance which represent 3.5% of this year target of Rp431 tn.

       Corporate bond trading was seen moderate amounting Rp591 bn. SANF01CN2 (Shelf registration I SAN Finance Phase II Year 2014; Rating: idAA-) was the top actively traded corporate bond with total trading volume amounted Rp117 bn yielding 10.362%.