Maybank GM Daily - 15 Apr 2015

FX

Global

      US equities gained overnight as Fed tightening expectation eased on disappointing US retail sales and PPI data. It was a different fate for the greenback as USD closed broadly weaker; EUR managed a stage a rebound above 1.07 at one point on better than expected Euro-area IP. USD/JPY slipped to a low of 119.07. AUD and NZD drifted higher off the back of USD weakness. Oil firmed off the back of US crude oil inventories rising less than expected and ongoing geopolitical concerns in Yemen.

      Focus today on China 1Q GDP (Cons. +7% y/y). Growth is likely to have slowed as that probably led to recent roll out of easing measures. China activity data is also due for release this morning (10am SGT) - Mar industrial production (Cons. +7% y/y); Mar retail sales (Cons. +10.9% y/y); YTD FAI (Cons. +13.9% y/y). This set of activity data will be of keen interest as it will be free from Chinese New Year distortion.

      Day ahead for the majors brings Mar IP, capacity utilization, Apr NAHB housing index; Fed’s beige Book for US.  Fed speaks today include Bullard and Lacker. For Europe, ECB meeting is of keen focus as ECB Draghi is expected to take questions on the options ECB may have should they run out of eligible bonds for purchase; GE FR Mar CPI; EC Feb trade are on tap. In Asia, focus on BI meeting which neither the market nor we expect any changes to policy rate. Intra-day range-trading likely to take hold; we remain better buyers of USD on dips. USD/AXJs likely to consolidate in recent ranges.

G7 Currencies

      DXY - Buy on Dips. USD closed lower overnight after retail sales and PPI failed to meet expectation. Fed's Kocherlakota (non-voter for 2015) reiterated comments that raising rate this year would be "inappropriate" amid too low inflation. Day ahead may see consolidation in the range of 98.50 - 99.50. Daily stochastics is showing tentative ssigns of falling from 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 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 Bullard and Lacker (Wed) and Lockhart, Mester, Rosengren, Fischer (Thu).

      USD/JPY - Capped. USD/JPY is rebounding this morning after heading towards the 119-figure overnight on dollar weakness. Lingering effects of the jawboning by Abe advisor Hamada yesterday is likely to be felt, capping the pair's upside in the near term.  Given the double-top formation at 121.85, that level should continue to act as resistance in the short term. Intraday momentum indicators are showing bearish bias. Intraday trading range seen within 119.00 - 120.15.

      AUD/USD - Shallow Dips. AUD/USD still hugs the 0.76-figure this morning, a tad offered ahead of China's GDP release at 1000 (SGT) and not helped the least by mild dollar recovery.  The AUD/USD pairing is still on the downtrend and we expect the recent low at 0.7533 to support intra-day offers. Australia's labour report will be watched next on Thu. Consensus expects and average addition of 15k employment for Mar, similar to the month prior. Break of the initial support at 0.7533 will expose key 0.75-figure. Beyond the near-term, the daily chart indicates a bullish divergence and we expect further dips to be supported.

      NZD/USD - Consolidate. NZD rebounded overnight, tracking AUD strength amid broad USD weakness. The pair traded to the soft side on RBNZ Spencer's speech; low of 0.7487 was traded early this morning. RBNZ deputy Governor Spencer in a speech (still ongoing at time of writing) said action needed to reduce housing imbalance; new supply in Auckland falling short of expectations; new macro tools are being assessed. Support at 0.7480 (50 DMA) remains in focus; break below targets 0.7440 levels (50% Fibonacci retracement of 0.7192 - 0.7697). Remain better sellers on rallies towards 0.7560-80 levels intra-day.

      EUR/USD - Fade Rallies. EUR/USD rose to trade as high as 1.0707 overnight on better than expected Euro-area IP data amid broad USD weakness. Fade on rally call remains intact; intra-day range of 1.0550 - 1.07 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 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 - Consolidation. EUR/SGD traded fresh multi-year low of 1.4357 yesterday, driven by SGD strength following MAS no move yesterday. Weekly momentum remains bearish bias; but short term could see a bounce towards 1.4330-50 levels. We remain bearish in the pair and remain better sellers on rallies. 

Asia ex Japan Currencies

      The SGD NEER trades around 1.23% below the implied mid-point of 1.3494. We estimate the top end at 1.3220 and the floor at 1.3767.

      USD/SGD – Sell On Rally. The USD/SGD rebounded off 1.3470 (38.2% Fibo retracement), climbing to 1.3684 on Fri. Pair has since eased off towards 1.3660-levels with the softer dollar tone. Range-bound trades seem likely ahead given that daily MACD is showing bearish momentum, though slow stochastics is indicating upside bias. MAS is poised to release its exchange rate policy decision tomorrow at 8am, and we continue to reiterate our long-standing view that MAS will hold its key policy variables unchanged as it adopts a "wait-and-see" approach as the economy remains supported and disinflationary pressures have been pretty much factored in during the inter-meeting move in Jan. Also released tomorrow will be GDP flash estimates for 1Q15, where we are looking for growth of 1.9% y/y vs. cons 1.7%. Favor fading rallies in the pair towards 1.3730 for a move back towards 1.3450 (100DMA)

      AUD/SGD – Two-way Trades. AUD/SGD bumped into resistance around 1.0526 (50% Fibonacci retracement of Mar-Apr downswing) on Fri and softened this morning, weighed by the heavy AUD in anticipation of the Chinese data due later. This cross was last seen around 1.0465, testing the first support around 1.0459 (38.2% if the Mar-Apr downswing), ahead of the 1.0376. Topsides continue to be guarded at 1.0526 ahead of the 1.0592.

      SGD/MYR – Consolidation. This cross inched higher to levels around 2.6880 this morning as some market players start to long SGD ahead of the MAS policy decision tomorrow. Prices are still caught within the consolidative zone within 2.6660-2.7115. Daily momentum indicates slight bearish momentum and we expect upticks to be on tight leash.  We notice that the ross has double-topped on the 2Apr and we look for a decisive close below 2.6713 for a greater pullback towards 2.6488.

      USD/MYR –Resumption of Mild Uptrend. Technical pullback saw USD/MYR traded a low of 3.6235 (9 Apr). Daily momentum and oscillators are suggesting early signs of bullish bias. Pair could consolidate with mild upside bias; range of 3.65 – 3.70 expected intra-day. 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 ended Fri, hardly changed within that session, last priced around 6.2180. Still, daily momentum tools exhibit increasing bullish momentum and next resistance around 6.2292 (38.2% Fibonacci retracement of the Oct–Mar rally). 6.2456 marks the upper bound of the consolidative range that the pair now trades in. RSI reads 65.7. Key support still 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 25 pips higher at 6.1395 (vs. 6.1370). CNYMYR was fixed 22 pips higher at 0.5868 (vs. 0.5846). Over the weekend, State Council approved a reorganization that will keep China Development Bank Corporation, Export-Import Bank of China and Agricultural Development Bank focused on providing policy-driven funding (BBG). In a move to increase supervision over credit risks, thee capital adequacy requirement of the three major banks are set higher than the basel III requirement at 10.5%. Premier Li reiterated that downward pressure on economy is increasing (CCTV). His words are likely to increase upside pressure on the USD/CNH, putting the 6.2292 resistance at risk.

      USD/IDR – Bearish Bias.  The USD/IDR is bouncing higher this morning, tracking the dollar moves on Fri, sighted around 12945 currently. Short-term technical are suggesting some downside, possible towards the 12850 levels, given that both daily MACD and slow stochastics are bias to the downside. BI meeting tomorrow is unlikely to see any changes given that BI governor reiterated late Fri that monetary policy will stay in tight bias. Support is seen around 12850, while resistance is around 13000 this week. Foreign funds bought a net USD58.95mn in equities last week, but removed a net IDR0.64tn on 6-7 Mar. 1-month NDF is back above the 13000-level this morning with both intraday MACD and slow stochastics showing bearish bias. JISDOR was fixed lower at 12910 on Fri from Thu’s 12973 and a higher fixing is possible given the spot’s drift higher this morning.

      USD/PHP – Range-Bound.  The USD/PHP gapped slightly higher at the opening this morning to 44.575 from Fri’s close of 44.385, playing catch-up with its regional peers. Pair is edging towards the 44.650-levels with daily MACD and slow stochastics indicating downside bias. Lacking fresh impetus, we continue to expect range-bound trades within 44.300-44.800 in the week ahead. 1-month NDF continues to trade near the middle of its current trading 44.400-45.230 range with daily MACD still showing no strong momentum and slow stochastics showing only bullish bias.

      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 32.550-region amid quiet trades. Pair is currently trapped within an ichimoku cloud, suggesting range-bound trades ahead. In a quiet week ahead domestically, we expect rangy trades within 32.500-32.640 to hold in the week ahead. Last week, foreign funds purchased a net THB2.72bn and THB3.64bn in equities and government debt, which weighed on the pair.

      The SGD NEER trades around 0.87% below the implied mid-point of 1.3498 with the top end estimated at 1.3226 and the floor at 1.3770.

      USD/SGD – Capped. After plunging more than 1 big figure yesterday following MAS policy announcement, the USD/SGD is on the mild rebound ahead of China GDP release this morning. With the key level at 1.3660 (50 DMA) broken, further downside pressure in the near term cannot be overlooked, and this could cap the pair’s upside today.  Expect 1.3570 – 1.3660 range to remain in focus intra-day. 4-hourly momentum and oscillator indicators continue to indicate a bearish bias.

      AUD/SGD – Bears losing Steam. AUD/SGD is sticky around 1.0360 though bias is still to the downside as indicated by the 4-hourly chart. With prices now below the ichimoku cloud, intra-day moves are likely to remain heavy. The daily chart however shows that bears are losing steam and we are likely to witness buying interest on dips. 1.0243 marks the next support level to watch. On the flipside, 1.0386 marks the first resistance.

      SGD/MYR – Bulls Dominate in Unchartered Territory. SGDMYR gapped up this morning but aggressive bids were capped by the recent high of 2.7202 and cross was back to levels around 2.7180. RSI continues to flags overbought conditions but MACD exhibit strong bullish momentum in this cross. Expect bias to remain on the upside though bids are facing resistance. Support is seen at 2.6975.

      USD/MYR – Buy on Dips. USD/MYR opened largely unchanged this morning at around 3.70 levels. Pair could take cues from moves in other USD/AXJs; focus on China data dump for the day. Daily momentum and oscillators are mild bullish bias. Intra-day range of 3.6850 – 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. The 6.2292-barrier (38.2% Fibonacci retracement of the Oct-Mar rally) proved to be a formidable one. This pair ended Tue with an inside day and that could signal renewed bearish interest in this pair. Still, dips are likely to remain supported should China’s growth is in line with consensus’ 7.0% (slowest quarterly expansion seen since 2001). Pair was last seen around 6.2140 and further offers could be supported by 6.2023. Beyond the near-term, 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 Oct-Mar rally). USD/CNY was fixed 67 pips lower at 6.1340 (vs. 6.1407). CNYMYR was fixed 2 pips higher at 0.5912 (vs. 0.5910). Liquidity numbers were out yesterday with more new yuan loans made at CNY1.18bn compared to Feb’s CNY1.02bn. M2 money supply missed expectations at 11.6%y/y, raising expectations of a RRR cut. Retail sales, industrial production and urban FAI are due today along with the much scrutinized GDP figure for 1Q at 1000 (local time in Singapore). At home, China desires for yuan to be in AIIB currency basket.

      USD/IDR – Limited Downside. The USD/IDR continued its retreat, playing catch-up with its regional peers after the dollar softened overnight. Also weighing on the pair was yesterday’s BI decision to keep policy rate pat at 7.50% to check inflationary pressures. Still, further downside could be limited given the rebound in the dollar and expectations of a weak China GDP print today. Look for range-bound trades within 12900-13050 intraday. Both intraday MACD and slow stochastics are indicating bullish bias. Foreign funds again sold a net USD39.66mn in equities yesterday, which weighed on the pair. 1-month NDF is hovering around 13090 this morning, coming off from its intraday high of 13135 with intraday MACD showing no strong momentum ahead. JISDOR was fixed higher at 12979 yesterday from Mon’s 12945 and another lower fixing is likely given the spot’s dip lower this morning.

      USD/PHP – Two-Way Moves. The USD/PHP is on the retreat towards the 44.500-levels, playing catch-up with its regional peers. Still, we continue to expect pair to be supported as dollar has retained much of its strength. Some support for the PHP could come when overseas remittances data for Feb is released (cons. 4.5% vs. Jan’s 0.5%) later today. These should support two-way moves within 44.350-44.700 intraday. Intraday MACD is showing bullish momentum, but slow stochastics is indicating no strong bias. 1-month NDF continues to trade within its 44.400-44.850 range, hovering around 44.650 currently with both 4-hourly MACD and slow stochastics indicating bearish bias. Foreign funds sold a net USD8.3mn in equities yesterday.

      USD/THB – Sideways.  A shortened week for the USD/THB as onshore markets remained closed for Songkran holidays and re-opens on Thu. Pair is holding steady below the 32.500-levels currently amid quiet trades. Lacking fresh impetus, pair is likely to track the dollar ahead. Intraday MACD is showing bearish bias but slow stochastics is indicating little bias in either direction, suggesting sideways trades are likely ahead. With our support at 32.500 taken out overnight, new support is seen around 32.420 before the next at 32.350. Rebounds if any is likely to be curbed around 32.580.

Rates

Malaysia

      Local government bond curve bear flattened by 5-6bps on the back of lukewarm interest on the newly issued 5.5y MGS 10/20 yesterday. The belly of the curve was weak as better sellers were seen on the 5y and 7y tenors. Successful bids for the auction came in at a high of 3.671% with low of 3.644%. We did not see any foreign flow in the auction and suspect the bulk of the issuance is held by local PD. Post auction, players preferred to reduce positions. We also saw sellers on the Islamic curve as the 5y GII 8/20s and 7y GII 7/22s ended 1-2bps higher from last close.

      Another quiet day in the IRS market. There no trades reported and levels hardly moved. 3M KLIBOR stayed at 3.73%.

      Local PDS volume came off as market was focused on the 5.5y govvy auction. The AAA and GG curves still saw balanced two way interests though nothing much traded. Players took the opportunity to move down the credit curve for names like TBEI and Kesturi. We saw some profit takers on short papers of under 1y, with offers at about 3.60-3.70% for 3m papers. We think the levels are rather decent and suggest to consider picking some up for short term carry.

Singapore

      MAS kept its policy stance of a “modest and gradual appreciation” SGD NEER unchanged yesterday, as expected. Post the policy decision, short dated SGS rallied as yields rose 7-9bps while long dated SGS yields rose by 3bps. The curve bull steepened slightly. 3M SOR dropped to 0.91%.

      The Asian credit space traded a tad softer given the heavy pipeline in the market. Sentiments leaned towards selling likely due to investors making room for new issuances. Issuers that opened books yesterday include: 1) Central China Real Estate (Ba3) looking to issue long 5NC3 USD with guidance of 9.125%, 2) China Communication Construction Co. (A3) looking to issue USD Senior PNC5 with guidance of 3.50%, 3) Formosa Plastics Group (BBB+) looking to issue USD 10y with guidance of T10+180, and 4) Haitong Securities (BBB) looking to issue USD 5y with guidance of T+220-225. There are a lot more lining up in the pipeline such as Cinda and PT Pelabuhan Indonesia III. The new issuance form Cinda led Chinese AMC to trade slightly wider. Tencent traded wider after news that its Chairman had cut his stake in the company, but BIDU and BABA were not really affected.

Indonesia

      Indonesia bond market closed lower with incoming bids during auction continues to diminish amid a maintained BI Rate. We believe volatility would be tight today yet with a positive tone. We expect the 10y benchmark series yield would move within 7.230% - 7.330%. Indonesia statistic will be publishing Indonesia’s March Trade Balance today where we see expect a surplus of US$0.52bn with export value to reach US$12.74bn while import value is expected to reach US$12.22 bn. Bank Indonesia Board of Governor decided to maintain its reference rate at 7.50% which is in line with our economist expectation. Aside from maintaining its reference rate, Bank Indonesia left their deposit facility and lending rate unchanged at 5.50% and 8.00% respectively. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.266%, 7.291%, 7.487% and 7.671% while 2y yield shifts up to 6.966%. Trading volume at secondary market remains heavy at government segments amounting Rp12,524bn with SR007 (3y) as the most tradable bond. SR007 total trading volume amounting Rp4,030bn with 1,453x transaction frequency and closed at 102.018 yielding 7.476%.

      Indonesian government conducted their conventional auctions yesterday and received incoming bids of Rp10.01tn bids versus its target issuance of Rp10.00 tn or came in similar to its target. Incoming bid during the auction was the worst (lowest incoming bids) since the start of this year. However, DMO only awarded Rp8.66tn bids for its 7mo SPN which was sold at a weighted average yield (WAY) of 5.99200%, 5y FR0069 at 7.24475% while 15y FR0071 was sold at 7.50983%. Incoming bids were mostly clustered on the 5y and 15y tenor. No bids were rejected during the auction. Bid-to-cover ratio came in at 1.11X – 1.22X. Foreign incoming bids during the auction were noted Rp3.60tn which was lower compared to Rp3.81tn bids during previous auction. Only Rp3.22tn (37.2%) was awarded to foreign buyers. The incoming bids were lower compared to our expectation while the awarded WAY was slightly higher above our expectation. However, we were not surprise with the result of the auction. On total, Indonesian government has raised approx. Rp191.4tn worth of debt through domestic and global issuance which represented 42.4% of this year target of Rp451.8 tn.

      Corporate bond trading traded heavy amounting Rp651 bn. APLN01CN3 (Shelf registration I Agung Podomoro Land Phase III Year 2014; Rating: _idA) was the top actively traded corporate bond with total trading volume amounted Rp122 bn yielding 11.251%.