Maybank GM Daily - 17 Feb 2015

FX

Global

        With the US on holidays yesterday, the markets were focused on the Greek debt negotiations. However, no compromise deal was forthcoming with the talks breaking down, heightening concerns about a Grexit. The markets reacted negatively to the news with equity markets ending in the red and sending the EUR/USD lower to towards the 1.13-region. Dollar strengthened as a result with the DXY up 94.20-levels overnight. Safe-haven plays kept the USD/JPY below the 119-handle.  RBA minutes released this morning suggested that the central bank was concerned about the “considerable uncertainty” on the timing of growth, possibly setting the stage for an earlier than expected rate cut in Feb.

        However, the softer risk appetite does not appear to have impact Asian equities significantly with most markets including Tokyo and Shanghai higher. Possibly accounting for this is the Chinese New Year rally, as most Asia markets will be close by Thu with China out by tomorrow. In Asia, it is a quiet data day with only the BI policy meeting to watch out for.

        Outside of Asia, we have US Empire manufacturing for Feb tonight and UK CPI. In Japan, the BOJ has begun its two day policy meeting in the lead up to its policy statement/Kuroda presser tomorrow.

G7 Currencies

      DXY – Upside Bias. DXY continues on the uptrend with the index currently sighted around 94.456, lifted by the weakness in the euro overnight. Intraday charts are showing a bias to the upside currently. Near term resistance is seen around 95.115 ahead of the next at 95.50, while support is seen around 93.900 today. Onshore markets will re-open today after closing for a holiday yesterday.

      USD/JPY – Bearish Bias. The USD/JPY slipped overnight as safe haven plays pressured the pair lower to around 118.31 currently. Intraday MACD is showing bearish momentum, while slow stochastics is signaling a tentative downturn. No surprises are expected from BOJ policy meeting/Kuroda presser on Wed, though further jawboning cannot be ruled out. Look for the pair to remain supported around the 118-handle today, though a firm break could expose the next support around 117.70. 119.00 should cap upside today. We continue to favor adding USD longs on dips.

      AUD/USD – Mild Bullish Bias. The AUD/USD erased its overnight losses after the release of the RBA minutes, which suggested that further rate cuts could come as soon as Feb given the “considerable uncertainty” on the timing of growth. Pair is hovering around 0.7782 with intraday charts showing a bias to the upside today. New resistance is now around 0.7850 with support around 0.7720 today.

      EUR/USD – Bearish Bias.  The EUR/USD came under pressure overnight after the Eurozone finance ministers and the Greek government failed to reach a compromise. The pair is still on the slide, sighted around 1.1332. With neither willing to budge from their respective position for now, Greek debt negotiation should continue to dominate for the rest of the week. Intraday charts are signaling a mild bearish bias with MACD falling.  Bearish moves could see the pair head towards the 1.12-handle with support seen around 1.1240. Preference is still for fading rallies.

      EUR/SGD – Range-Bound With Downside Bias. The EUR/SGD also came under selling pressure on the back of EUR weakness with the cross currently trading around 1.5370 at last sight. The lack of resolution on the Greek debt problem should keep the EUR under pressure with our intraday charts showing a bias to the downside today. Expect the cross to trade within its current trading range of 1.5280 – 1.5550 with a bias to the downside today.

Regional FX

        The SGD NEER trades around 1.76% below the implied mid-point of 1.3322. We estimate the top end at 1.3051 and the floor at 1.3594.

        USD/SGD – Consolidation. The USD/SGD is inching slightly lower this morning on safe haven plays. As well, an upwardly revised 4Q14GDP (2.1% y/y) and stronger-than-expected NODX (Jan: 4.3% y/y) is weighing on the pair. Pair is currently hovering around 1.3565, having lost most of its bearish momentum, suggesting range-bound trades ahead. With most Asian markets on a shortened week because of Chinese New Year, quiet trades are likely. Look for consolidative trades within 1.3520-1.3600 today.

        AUD/SGD – Sideways. The AUD/SGD continues to trade near the middle of its current trading range of 1.0445-1.0640. RBA minutes out this morning have reversed the losses to the AUD and are also helping to lift the cross back above the 1.05-handle. Cross is currently sighted around 1.0546 with intraday MACD showing little momentum in either direction. Expect the cross to trade sideways within 1.0445-1.0640 today.

        SGD/MYR – Rangy. The SGD/MYR is back on the climb higher this morning on the relative strength of the SGD this morning. Last sighted around 2.6432, cross is has lost most of its bullish momentum. With a shortened-trading week, cautious trades are likely and cross should trade range-bound within 2.6270-2.6520 today.

        USD/MYR – Sideways. The USDMYR is on the bounce this morning and is currently sighted around 3.5840, underpinned by dollar strength. Pair has lost most of its bullish momentum, while slow stochastics is signalling mild bearish bias. With the trading week shortened because of Chinese New Year celebrations, cautious trades are likely ahead. Expect the pair to trade within a tighter range of 3.5380-3.6300 today.

        USD/CNY was fixed at 6.1330 (+0.0057) vs. previous 6.1273 (+2.0% upper band limit: 6.2582; -2.0% lower band limit: 6.0127). CNY/MYR was fixed at 0.5690 (+0.0005). USD/CNH – Bullish Bias. USD/CNH headed higher towards the 6.28-handle following the higher fixing in the USD/CNY this morning. Pair is currently hovering around 6.2726 with intraday MACD showing bullish momentum though the pair is overstretched currently. With China closed for Golden Week holidays from tomorrow until 24 Feb, further upside moves could be capped today. Topside is likely to be guarded by 6.2820, while dips should be limited by 6.2525.

        USD/IDR – Rangy. The USD/IDR is crawling higher this morning, lifted by the firmer dollar tone overnight. Pair continues to be pressured higher also by lacklustre economic fundamentals and on-going domestic political concerns. Pair is currently sighted around 12762 with slow stochastics still falling, suggesting that upside could be capped today. BI meets later today and change in policy rate is expected. Expect trades within 12700-12800 to hold today, barring surprises by BI.
Foreign funds bought a net USD48.53mn in equities yesterday but had removed a net IDR2.69tn in debt from their outstanding holdings on 13 Feb. The 1-month NDF continues to hover above the 12800-region, last sighted around 12854, with slow stochastics showing tentative signs of an upturn. The JISDOR was fixed lower at 12742 yesterday vs. Fri’s 12769 on Thu, but could be fixed higher today given the spot’s drift higher this morning.

        USD/PHP – Sideways. The USD/PHP is on the rebound this morning to 44.308 underpinned by dollar strength after edging lower yesterday on the back of a strong pick-up in remittances in Dec of 6.6% y/y. Pair has entered into an intraday ichimoku cloud, suggesting sideway trades are likely ahead. Upticks are likely to meet resistance around 44.460 while 44.110 should be supportive today. Portfolio flows remain supportive of the PHP with foreign funds buying a net USD9.99mn in equities yesterday. The 1-month NDF inched lower to 44.270 this morning with slow stochastics signalling bullish bias.

      USD/THB – Rangy.  The USD/THB is inching slightly higher on the back of deteriorating global risk appetite and firmer dollar tone overnight. Expectations that the BoT is unlikely to cut policy rate at its Mar meeting following a rebound in the economy could be capping upside today. Pair is sighted around 32.603 currently with bullish momentum on the wane and slow stochastics on the uptick. Given risk-off, look for the pair to remain in choppy trades ahead within 32.500-32.670 today. Foreign appetite for Thai assets was mixed yesterday with these funds selling a net THB1.51bn in equities and buying a net THB1.89bn in debt.

Rates

Malaysia

§  Local government bond market was unexpectedly quiet ahead of the festive period. Players were seen reducing positions on the 5y and 10y MGS benchmarks as both bonds traded 3bps and 5bps higher, while the rest of the benchmarks remain untraded.

§  Another quiet day in the IRS market with hardly any quotes and no trades. IRS from the 3y point and above moved up 1-2bps. 3M KLIBOR unchanged at 3.79%.

§  Local PDS space saw strong buying interest ahead of the Chinese New Year (CNY) holidays, but volume was thin with wide bid-offer spreads quoted. GGs and AAAs are still in demand with Aman 5/21 and 10/21 trading at 4.33% and 4.38% respectively. BGSM was sought after for its 2016 to 2019 maturity. GG names like Danainfra and Govco were the active ones, trading in decent volume. Asia will be out for CNY and we expect to only see volume resume in March.

Singapore

§  SGS yields opened about 3bps higher while SGD IRS was around the same level and trading was fairly light. The 30y SGS reopen size was announced at SGD1.8b but MAS will take back SGD200m, leaving a net SGD1.6b for PDs to bid. This size is slightly larger than expected and we expect to see the curve steepen. Following the auction announcement, the longer end SGS yields closed 6-7bps higher. We think this would set the tone for the coming days until the auction next Wednesday.

§  Asian credit market saw sovereigns subdued yesterday as the US Treasury market was out on President's Day. It appears sovereigns are still rather supported with Indons trading up and Phillips mostly unchanged. Kaisa Group was in the headlines again with its stock being suspended yesterday and Kaisa bonds traded 1pt lower. Noble Group also traded lower on the back of a research report claiming manipulation of its financials. There are still buying interest in Chinese property names and O&G names look firmer as well.

Indonesia

§  Indonesia bond market moved higher on the note of better January trade balance as well as huge demand at auction. January trade balance came in at US$0.71 bn. Surplus trade balance in January 2015 was caused by the decreasing imports faster than exports. Exports in January stood at US$13,300.9 million, falling by 9.0% m-o-m while total imports reached US$12,591.5 million, fell by 12.8% m-o-m. Indonesia central bank will conduct its monthly RDG meeting. Our economist sees that BI will halt its reference rate at 7.75%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.092%, 7.252%, 7.451% and 7.657% while 2y yield shifts down to 6.918%. Heavy volume at secondary market remains to be traded heavy at government segments amounting Rp15,574 bn with FR0068 (20y benchmark series) as the most tradable bond. FR0068 total trading volume amounting Rp5,522 bn with 96x transaction frequency and closed at 107.366 yielding 7.252%.

§  Indonesian government conducted their weekly auctions yesterday and received incoming bids of Rp36.09 tn bids versus its target issuance of Rp12.00 tn or oversubscribed by 3.0x. Incoming bids were lower by 10.3% compared to previous conventional auction, hence we see today’s incoming bids was relatively heavy. However, DMO only awarded Rp12.00 tn bids for its 1y SPN which was sold at a weighted average yield (WAY) of 6.24200%, 10y FR0070 at 7.26658% while 20y FR0068 was sold at 7.69798%. Incoming bids were mostly clustered at the 10y benchmark series. 1y. No bids were rejected during the auction. Bid-to-cover ratio came in at 2.55X – 4.51X. WAY awarded during the auction was lower compared to Friday yield closing by approx. 3 – 13bps. Huge incoming bids during the auction in our view occurred as investors sees that Indonesia government bond remains attractive specifically after a significant fall in LCY bond prices last week. Till the date of this report, Indonesian government has raised approx. Rp68.68 tn worth of debt through bond auction in 1Q 15 which represents 87.5% of the 1Q 15 target of Rp78.50 tn. Hence we see that, bond issuance in 1Q 15 would exceed its initial target. On total, Indonesian government has raised approx. Rp122.05 tn worth of debt through domestic and global issuance which represent 26.5% of this year target of Rp460 tn.

§  Corporate bond trading traded heavy amounting Rp953 bn. BTPN02B (Bank BTPN II Year 2010; B serial bond; Rating: AA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp185 bn yielding 10.461%.