Maybank GM Daily - 6 Feb 2015

FX

Global

      US equities closed positive overnight, despite disappointing US data. Oil prices rebounded ~4.5% overnight on geopolitical tension. Greek development remains fluid, with the Germans and ECB continuing their hard stance against the Greeks. EUR/USD brushed off Greek concerns and rose near 1.15 overnight, taking cues from stronger than expected German Factory Orders. DXY dipped towards 93.58 on weaker than expected US data. GBP broke above 1.53 as BoE kept monetary policy unchanged. Ringgit rose against the USD, on oil price rebound.

      Overnight, European Commission upgraded Euro-area 2015 growth forecast to +1.3%, from +1.1% due to lower oil prices and weaker Euro. Near term inflation is expected to fall 0.1% in 2015, but upside pressure is expected towards end-2015. Denmark central bank cut rate again to -75bps overnight, matching the Swiss rate. This is the 4th cut in 3 weeks).

      Day ahead focus on US NFP (Jan); Unemployment rate (Jan); Fed's Lockhart Speaks on U.S. Economy in Naples, Florida. Market is looking for +230k; previous reading was +252k. Question is what is the impact on job layoffs in the oil sector as a result of rapid declining oil prices? An outside-consensus NFP of below 200k could see USD strength ease further. Elsewhere in Europe sees the release of GE IP (Dec); FR Trade (Dec); SP CPI (Jan).

G7 Currencies

      DXY – Buy dips. USD stayed under pressure to close around 93.58 levels as US trade deficit widened more than expected and Jan job cuts rose to 17.6% (from 6.6% previously). We have been calling all week for USD strength to ease towards 93; beyond that sees 92.50-75 as 1-way trade remains too comfortable. Daily MACD and Slow stochastic are bearish bias, suggesting further downside. We remain constructive of USD strength in the medium term and remains better buyer on dip. Day ahead eyes on NFP (Jan); Unemployment rate (Jan); Fed's Lockhart Speaks on U.S. Economy in Naples, Florida.

      USD/JPY – Sideways. The USD/JPY continues to hover near the middle of its current trading range of 116.80-118.00. The lack of fresh impetus as well as ahead of the US NFP tonight should keep the pair trading within these familiar ranges ahead. Any surprises on either side could see the pair trade in a wider 115.50-120.00. Intraday momentum indicators are showing a mild tilt to the upside today, suggesting dips could be short-lived. Buying on dips is still preferred.

      AUD/USD – Bearish bias. AUD/USD traded higher towards 0.7859 post-RBA monetary policy statement (out this morning) as RBA’s downgrade to 2015 growth forecast was milder than expected. RBA lowered growth and inflation forecast for 2015; commented that A$ giving less assistance to balanced growth than it could and reiterated that A$ remains above most estimates of fundamental value. Pair could be range-bound intra-day ahead of US payrolls tonight. 0.7750 – 0.7880 range expected intraday. Technicals suggest some upside bias intra-day. Still favor fading rallies.

      EUR/USD – Fade Relief Rally.  EUR/USD continued to whipsaw, this time rising near 1.15 overnight as markets ignored the hard stance Germans and ECB took against Greek debt. Market talks of SNB buying euros overnight also lent strength to the pair. Elsewhere, Denmark cut rates again for the4th time in 3weeks, matching SNB’s -75bps. Range of 1.1430 – 1.1550 likely ahead of NFP tonight. Fade rallies remains the name of the game. Day ahead sees GE IP (Dec); FR Trade (Dec); SP CPI (Jan).

      EUR/SGD – Range. EUR/SGD continued to consolidate within recent established range of 1.5280 – 1.5490 (between 23.6% and 38.2% Fibonacci retracement of 1.6389 – 1.4936). Daily MACD and stochastics continue to exhibit bullish bias. 1.5390 – 1.5540 intra-day ahead of US payrolls data.   

Regional FX

      The SGD NEER trades around 1.43% below the implied mid-point of 1.3254. The top end is estimated at 1.2985 and the floor at 1.3523.

      USD/SGD – Supported. The USD/SGD is wobbling this morning, currently edging slightly higher at 1.3450, pulled in two directions by EUR weakness and JPY strength. With our support at 1.3460 taken out, interim support is seen around the lower bound of the intraday ichimoku cloud at around 1.3437 before the next at 1.3420. Upticks today should meet resistance around the 1.35-figure ahead of the next at 1.3555. Intraday momentum indicators are showing a bias to the downside ahead. US NFP later tonight will be eyed for directional cues.

      AUD/SGD – Range-Bound. The AUD/SGD continues to trade range-bound even as it edges higher underpinned by AUD strength this morning. Cross is sighted around 1.0526 currently with intraday MACD still showing bullish momentum, though slow stochastics has flat-lined, suggesting that further upside moves today may capped. Still with US NFP ahead, expect the pair to remains in range-bound trades within 1.0325-1.0640 today.

      SGD/MYR – Bearish. The SGD/MYR slipped lower this morning on the back of a rebound in the MYR following gains in oil prices. Cross hit a low of 2.6314 before rebounding slightly to around 2.6380 with intraday momentum indicators showing a bias to the downside ahead. With a couple of our support levels taken out this morning, new support is seen around 2.6270. Rebounds today should be capped around 2.6520.

      USD/MYR – Downside Bias. USD/MYR traded down to low of 3.5390 (1s NDF was at 3.5460) this morning, tracking the 5% rise in oil prices overnight. Pair is still bias downside. Intra-day expect 3.53 – 3.57 range (23.6% - 38.2% Fibonacci retracement of 3.3478 – 3.6375). Remain buyers on dips.

      USD/CNY was fixed at 6.1261 (-0.0105) vs. Previous 6.1366 (+2.0% upper band limit: 6.2511; -2.0% lower band limit: 6.0060). CNY/MYR was fixed at 0.5661 (-0.0099). USD/CNH – Range. USD/CNH traded a low of 6.2355 tracking the lower USD/CNY fix this morning. As we mentioned the pace of CNY depreciation is likely to slow off the back of RRR cut on Wed. USD/CNY traded lower 6.2375 on the open. We remain convicted to our view for USD/CNY, USD/CNH to be higher on a combination of drivers including further intensification of USD strength, ongoing domestic growth, debt, capital outflow and liquidity concerns. Intra-day MACD and stochastics are bias for further downside. We will look for better levels lower (6.22; 6.20) to buy USD/CNH.

      USD/IDR – Gapped Lower. The USD/IDR gapped slightly lower this morning at 12618 from yesterday’s close of 12635, helped by the softer dollar tone overnight and slightly better-than-expected 4Q14 GDP print. Pair continues to edge lower, currently sighted around 12609 with intraday MACD now showing mild bearish momentum. Further downside though could be limited given US NFP later tonight. Look for the pair to consolidate and trade within Trades today should remain within 12550-12700 today. Inflows yesterday were unexciting with foreign buying just a net USD7.05mn in equities, but had removed a net IDR0.67tn from their outstanding holdings of debt on Wed. The 1-month NDF is climbing higher this morning at 12675 with momentum indicators showing a bias to the downside. The JISDOR was fixed higher at 12653 on Thu from Wed’s 12609 and could be fixed lower should the spot drift even lower.

      USD/PHP – Tilted Higher. The USD/PHP is on the uptick this morning, possibly on the back of EUR weakness. Pair is sighted around 44.180 currently with intraday momentum indicators showing a bias to the upside today. With NFP ahead, cautious trades are likely with the 44-figure still providing key support and resistance around 44.280. After two days of inflows, foreign funds sold a net USD0.76mn in equities yesterday, weighing slightly on the PHP. The 1-month NDF is on the rise, sighted around 44.23 this morning, with both intraday MACD and slow stochastics rising mildly.

      USD/THB – Rangy.  The USD/THB is edging lower this morning, helped by a softer dollar overnight and some support from flows. It was a mixed day yesterday with foreign funds purchasing a net THB0.92bn in debt yesterday, but selling a net THB011bn in equities. Pair though is still is in range-bound trades within familiar ranges. Intraday MACD is showing little momentum in either direction currently, suggesting rangy-trades should continue ahead. Expect moves within 32.500-32.670 to hold today.

Rates

Malaysia

      Local government bonds saw another day of lower yields with foreign names buying the belly for the most part. The curve ended 2-4bps lower with the 10y MGS reporting a last done at 3.72 (-4bps from previous day). Trading volume remains high on the benchmarks with buyers seen collecting the very-long end bonds.

      IRS levels started the day lower on panic selling by foreign names possibly due to lower UST and MGS yields. Levels recovered 2bps towards the end of the day as selling was probably overdone. We prefer to be a payer as 0-3y IRS seems low even if KLIBOR should fall. 3y IRS was given at 3.695% and 4y IRS at 3.74% while 5y IRS traded down to 3.77% before rebounding back to 3.79%. 3M KLIBOR stayed at 3.85% though it seems it could decline given lower average contributions yesterday.

      Local PDS market saw activity pick up slightly with buying interest focused on HG papers maturing in 10 years. We saw Aman 5/24 tightening 3bps to 4.57%. Plus 24 also saw buying interest with MYR10m trades done at 4.56% before tightening 4bps to 4.52%. In addition, PTPTN 24 traded at 4.40%. We think the AAA and GG papers spreads of roughly 80bps and 67bps respectively over benchmark govvies are too wide when compared to other tenures and as such, papers with 10 years maturity would probably continue to drive trading volume in the coming weeks. In the AA space, buying was focused at the shorter end of the curve which provides investors with better yield pickup. Trades done include names such as Sparrow 16s, SEB 16s and Malakoff 15s.

Singapore

      SGS got given back after a series of buying frenzy in SGS 7/23 and SGS 9/24, but yields still ended the day 3-5bps lower. The SGS curve flattened slightly after a few days of steepening and it seems that there was some unwinding of positions ahead of Friday’s nonfarm payrolls (NFP) data release. Market seems to want to stay light before obtaining some clarity from the upcoming NFP print. Additionally, if WTI continues to fall it could add to risk off sentiment in the market.

      Asian credit market saw good trading volume on new issuances such as Tencent’s 5y USD1.1b at T5+162.50bps and 10y USD900m at T10+205bps, and Export Import Bank of India’s 5y USD500m at T5+155bps. Both of Tencent’s tranches traded stronger despite the treasury movement. EXIMBK last seen traded around 158/155 level, but with the movement in treasury, investors are still in the money. For sovereigns, market was fairly muted in view of the upcoming NFP release. BNP Paribas is the sole arranger for Qingdao City Construction, which is wholly-owned by Qingdao Sasac. It is proposing a 5y USD500m issuance at T5+370/375. We find that at the final pricing level, it is a tad too tight as the pricing should reflect the second tier Sasac keepwell structure as well as its weak fundamentals.

Indonesia

      Indonesia Bond market moved mixed within the day and closed lower. FY2014 GDP data which came in at 5.02% was lower than consensus expectation of 5.06%. This slowdown in growth was actually expected due to tight monetary program started by Indonesia central bank. Based on GDP expenditure approach, all components such as private consumption, government spending, investment and exports growth slowed. (For more details on recent Indonesia GDP release, please read: Economic and Market Research: Economy Posted at Slowest Pace since 2010). How this release would affect LCY bond market? In our view, investors will start to concern on Indonesia's economic growth slowdown. Furthermore, investors will look at issues related to the normalization of monetary policy by the Fed and the increasing tension between Greece Government and ECB which can lead to turmoil in global financial markets. In addition, due to massive purchase by investors in Indonesia bond market within last few weeks which have made bond yields fall rapidly or far below the benchmark rate (BI Rate), have opened the chance for profit-taking. Looking at the conditions mentioned above, we expect limited room for bond prices to continue its hike.

      Foreigners continue to be seen on the seller side. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 6.816%, 7.007%, 7.093% and 7.271% while 2y yield shifts up to 6.613%. Heavy volume at secondary market remains to be traded at government segments amounting Rp13,716 bn with FR0071 (15y benchmark series) as the most tradable bond. FR0071 total trading volume amounting Rp3,551 bn with 121x transaction frequency and closed at 116.811 yielding 7.093%.

      Corporate bond trading traded heavy amounting Rp958 bn. PNBN01SBCN1 (Shelf registration subordinated I Bank Panin Phase I Year 2012; Rating: idAA-) was the top actively traded corporate bond with total trading volume amounted Rp119 bn yielding 10.054%.