Maybank GM Daily - 14 Apr 2015

FX

Global

US equities eased overnight on concerns that US 1Q earnings could be affected as a result of strong USD, while China equities continue to climb higher on stimulus hopes after disappointing Mar trade data. USD closed largely unchanged in a session of 2 halves; EUR and GBP initially fell but managed to claw back some losses. AUD and NZD stayed soft off the back of disappointing China trade data. Oil remains firmed off the back of ongoing geopolitical concerns in Yemen        Released this morning, the MAS kept monetary policy status quo, in line with our call. MAS SGD policy statement suggests that the MAS is comfortable with current policy stance and has a bit of a hawkish slant which should remain appropriate given the medium term inflation outlook. MAS seem to signal it is confident of an economy recovery in 2H 2015 and beyond. Our view for now is that it is unlikely for the central bank to ease, unless growth over the next 6 months surprise significantly to the downside. We expect SGD to appreciate vs USD in the short term, supported by unwinding of some of the long USD positions. In the medium term, some of these gains could reverse, as we still expect the recent USD appreciation trend to continue. SG 1Q GDP surprised to the upside at 2.1% y/y vs. Cons. +1.7% vs. our forecast of +1.9% y/y.

       Day ahead brings Mar PPI and retail sales for US. For Europe, EC Feb IP; SP, IT Mar CPI are on tap. In Asia, focus on BI meeting which neither the market nor we expect any changes to policy rate. Intra-day USD could face some downside pressure; USD/AXJs likely to consolidate in recent ranges. 

G7 Currencies

DXY - Buy on Dips. Dollar closed largely unchanged at 99.50 in a session of 2 halves overnight. Day ahead could see possible retracement. Intra-day range of 99 – 100 could be likely. Daily stochastics is entering overbought territories. Over the medium term we remained convicted to our USD bullish bias; reiterate our house-view for the first rate hike to begin in Sep 2015, totaling 50-75bps for year ending 2015 and continue to favor buying USD on dips. Week ahead brings Mar PPI, retail sales (Tue); MBA mortgage applications; Apr Empire manufacturing; Mar IP, capacity utilization, Apr NAHB housing index; Fed’s beige Book (Wed); Mar housing starts, building permits, Apr Philly Fed Business Outlook (Thu); Mar CPI; Apr Univ of Michigan sentiment (Fri). Fed speaks for the week include Kocherlakota (Tue); Bullard and Lacker (Wed) and Lockhart, Mester, Rosengren, Fischer (Thu).        USD/JPY – Range; Bias to Fade Rallies. USD/JPY rally yesterday stopped short of 120.83 as double-top formation at 121.85 continues to act as resistance in the short term.  Momentum is lacking either side while stochastics appear to be turning lower. Day ahead ccould see 119.30 – 120.80 range with bias to fade rallies.        AUD/USD – Shallow Dips. AUD/USD is on the uptick around the 0.76-figure, weighed by China’s dismal trade number as well as dollar strength. Intra-day momentum tools indicate bearish conditions and we expect further recovery to be resisted by the 0.7658-level.  The NAB business surveys release could provide some form of distraction but eyes are on China’s GDP due Wed and Australia’s labour report on Thu. Consensus expects and average addition of 15k employment for Mar, similar to the month prior. Beyond the near-term, the daily chart indicates a bullish divergence and we expect further dips to be supported. First key support marked by 0.7550, ahead of the key 0.75-figure.        NZD/USD – Consolidate. NZD drifted lower towards 0.7422 yesterday off the back of disappointing China trade data yesterday.  MACD and stochastics are mild bearish bias on the daily chart. 0.7380 (61.8% Fibonacci retracement of 0.7190 – 0.7697) – 0.7480 (50 DMA) range likely to hold for the day. Dairy auctions in focus tomorrow morning.        EUR/USD – Fade Rallies. EUR/USD weakness continued the 6th consecutive session taking out 1.06 handle again for the second time in a month to trade a low of 1.0521 amid ongoing Greek concerns. Fade on rally call remains intact; intra-day range of 1.05 – 1.0650 expected. We continue to maintain our bearish EUR/USD view amid structural decline in Europe fundamentals, concerns over Greece ability to meet repayment schedules, and diverging monetary policies between US and EU. Week ahead sees EC Feb IP; SP, IT Mar CPI (Tue); ECB meeting; GE FR Mar CPI; EC Feb trade (Wed); IT Feb trade (Thur); EC Mar CPI; ECB Feb current account (Fri). ECB officials will attend the IMF Spring meetings in Washington (Fri – Sun).        EUR/SGD – Bearish Bias. EUR/SGD continued to trade to fresh multi-year low of 1.4392 this morning on stronger SGD amid MAS policy unchanged (releaed this morning). Pair is likely to drift lower; intra-day range of 1.43 – 1.45 range expected.

Asia ex Japan Currencies

The SGD NEER trades around 0.75% below the implied mid-point of 1.3511. We estimate the top end at 1.3239 and the floor at 1.3783.        USD/SGD – Bearish Bias. The USD/SGD plunged more than 1 big figure to a low of 1.3597, from above 1.37 levels amid MAS policy announcement to keep monetary policy status quo.  This is in line with our call.  Specifically there is no change to the policy slope, width of policy band and MAS maintain modest and gradual appreciation of S$NEER policy band, in line with our view. 1Q GDP surprised to the upside at 2.1% y/y vs. Cons. +1.7%  vs. our forecast of +1.9% y/y. MAS SGD policy statement suggests that the MAS is comfortable with current policy stance and has a bit of a hawkish slant which should remain appropriate given the medium term inflation outlook. MAS seem to signal it is confident of an economy recovery in 2H 2015 and beyond. Our view for now is that it is unlikely for the central bank to ease, unless growth over the next 6 months surprise significantly to the downside. We expect SGD to appreciate vs USD in the short term, supported by unwinding of some of the long USD positions. In the medium term, some of these gains could reverse, as we still expect the recent USD appreciation trend to continue. Key level at 1.3660 (50 DMA) needs to be watched; a sustained daily close below the level could see near term downside pressure in the pair. 1.3570 – 1.3660 range in focus intra-day. 4-hourly momentum and oscillator indicators are indicating a bearish bias.        AUD/SGD – Turning Bearish. AUD/SGD slumped on China’s trade numbers but the cross regained its foothold at 1.0360 at mid-day on Mon before breaking the level again this morning. Last seen around 1.0350, conditions have turned increasingly bearish for the cross after MAS left its monetary policy unchanged.  1.0243 marks the next support level to watch.        SGD/MYR – Bullish. SGDMYR was squeezed to a high of 2.7202 this morning as market players unwound their short SGD positions on the back of MAS’ decision.  RSI flags overbought conditions but MACD exhibit increasing bullish momentum in this cross. The cross is back to trade around 2.7115 and we expect the cross to retain an upside bias today. The high of 2.7202 has turned into a resistance and may be retested. Support is seen at 2.6713.        USD/MYR – Buy on Dips. As we mentioned yesterday, the pair consolidated with mild upside bias with a range of 3.65 – 3.70, following a technical correction last week. Day ahead USD/MYR could face some short term downward pressure, inflicted by bearish USD/SGD. Intra-day range of 3.6750 – 3.72 likely with bias to buy on dips. We continue to reiterate our view for Ringgit weakness off the back of soft oil prices, risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus remain unchanged.        USD/CNH – Consolidative. This pair was capped by the 6.2292 resistance and was on the downtick this morning, last seen around the 6.22-figure. Daily momentum tools show increasing bullish momentum and we suspect that dips could be shallow. 6.2060 should deter aggressive bears, ahead of the key support seen at 6.1900 (200 DMA); a decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of 6.1113 – 6.3021). USD/CNY was fixed 12 pips higher at 6.1407 (vs. 6.1395). CNYMYR was fixed 42 pips higher at 0.5910 (vs. 0.5868). An editorial by China Securities Journal stated that the China’s QFII and RQFII quotas could be raised this year. Liquidity numbers for Mar are up next and could be released as early as today. Retail sales, industrial production and urban FAI are due tomorrow along with the much scrutinized GDP figure for 1Q.        USD/IDR – Upside Bias. The USD/IDR edged lower to 12985 along with most of other USD/AXJs as dollar bulls take a breather. Expect two-way moves today within 12850-13050 as intraday, daily and weekly tools show little bias on either side. Key event of the day is BI’s rate decision in late afternoon. We do not expect the central bank to move today as inflationary pressure is likely to remain in check and the economy is still improving. Foreign funds sold a net USD52.80mn in equities yesterday and IDR0.32tn of government debt on 7 Apr (latest data available). USDIDR is likely to remain supported should the investors take the risk-off cue from the US. 1-month NDF hovered around 13120 this morning, softening from its overnight highs. JISDOR was fixed higher at 12945 yesterday from Fri’s 12910 and we expect little change in the fixing  today.        USD/PHP – Range-bound. The USD/PHP slipped to 44.630 from its open at 44.675, in line with its regional peers. Expect dips to remain supported as dollar retains much of its strength. Lacking fresh impetus, we continue to expect range-bound trades within 44.300-44.800 in the week ahead. Foreign funds sold a net USD19.00mn in equities yesterday.

      USD/THB – Rangy.  It is a very short week for the USD/THB as onshore markets are closed for Songkran holidays and re-opens on Thu. Pair is currently holding steady around 32.520-region amid quiet trades. Pair is testing the lower bound of the bearish ichimoku cloud on the daily chart and could see slight bearish risk. In a quiet week ahead domestically, we expect rangy trades within 32.500-32.640 to hold in the week ahead. Foreign funds sold a net USD7.7mn and USD124.5mn in equities and government debt yesterday.

Rates

Malaysia

       Local government bond prices opened softer in the morning as players were cautious with the USDMYR having moved higher. Nevertheless, we did not see any foreign outflow. The curve ended about 2bps higher amidst very thin liquidity. This morning will have the auction of the new 5.5yr MGS 10/20. Given current USDMYR levels, the auction may see weak demand.

       Nothing was dealt in an extremely quiet IRS market. IRS levels were relatively unchanged despite higher USDMYR and US Treasury (UST) yields. 3M KLIBOR unchanged at 3.73%.

      Local PDS market saw more sellers, mostly on GG and AAA names. The recent buying spree on the 10y curve seems a little overdone and now more profit takers are appearing. The 7y and 10y papers seem to be offering more value at this juncture. A decent amount went through on Plus 25 at 4.54%. Buying interest appear to be more subdued with news of new pipelines in the market.

Singapore

      SGS yields fell 2-3bps lower across the curve and SGD IRS also ended 1-3bps lower. Bond swap spreads widened slightly. Players will focus on MAS policy decision this morning. We expect no changes to the slope.

       In the Asian credit market, Chinese IG space continued to trade firmer while Chinese property bonds appear to have outperformed the rest. Kaisa Group re-appointed Kwok Ying Shing as its Chairman, and the paper traded up by about 8pts, giving confidence to other HY stocks. Standard Chartered is issuing 3y, 5y and 10y USD papers. Initial guidance seems decent though we prefer the 5y which is guiding at around T+100. Elsewhere INDON and PHILLIP traded a tad weaker on the back of UST selloff.

Indonesia

       Indonesia bond market closed slightly lower on the first trading day of the week. It was a rather quite market yesterday amid World Bank cuts Indonesia 2015 growth forecast to 5.20%. There will be weekly bond auction and Bank Indonesia Board of Governors meeting today. Our house expects Bank Indonesia to halt its reference rate at 7.50%, deposit facility rate at 5.50% and lending facility rate at 8.00%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.163%, 7.203%, 7.431% and 7.610% while 2y yield shifts down to 6.943%. Trading volume at secondary market remains heavy at government segments amounting Rp14,355 bn with SR007 (3y) as the most tradable bond. SR007 total trading volume amounting Rp6,176 bn with 2,441x transaction frequency and closed at 102.216 yielding 7.401%.

       DMO will conduct their conventional auction today with three series to be auctioned which are SPN12160107 (Coupon: discounted; Maturity: 7 Jan 2016), FR0069 (Coupon: 7.875%; Maturity: 15 Apr 2019), and FR0071 (Coupon: 9.000%; Maturity: 15 Mar 2029). We believe that the auction will be oversubscribe by 1.5x – 2.5x from its indicative target issuance while our view on the indicative yield are as follows SPN12160107 (range: 6.100% – 6.200%), FR0069 (range: 7.100% – 7.200%) and FR0071 (range: 7.370% – 7.470%).

       Corporate bond trading traded thin amounting Rp676 bn. BBIA01A (Bank UOB I Year 2015; A serial bonds; Rating: AAA(idn)) was the top actively traded corporate bond with total trading volume amounted Rp182 bn yielding 8.597%.