Maybank GM Daily - 20 Apr 2015

FX

Global

      US and EU equities declined on Grexit worries, lower than expected US headline CPI and disappointing US earnings. In FX, USD closed marginally weaker amid mixed US data. EUR, AUD, NZD, CAD benefitted. Oil prices fell on profit-taking while escalation of geopolitical tensions in Yemen is likely to keep price supported in the meantime.

      Week ahead see no major data release. Eyes on Eurogroup meeting (24 – 25 Apr). No progress is expected on Greece; German Finance Minister Schaeuble recently commented “no one expects a solution for Greece at the Eurogroup meeting and that the current (Greece) government has destroyed previous progress.” S&P has downgraded Greece by one notch to CCC+ (negative outlook). Last Fri fear of Grexit and Greece default escalated after Greece Finance Ministry acknowledged they were close to running out of funds to pay public sector wages and pension.

      Some of the economic releases in the majors we are watching this week include Australia RBA minutes on Tue; 1Q CPI on Wed (Cons. +0.1% q/q). A upside surprise to CPI inflation could pare back expectation of RBA rate cut and lend further support to AUD. For UK, the BoE minutes on Wed is likely to be a non-event – expect no change in MPC voting pattern (all 9 members voted to keep rate on hold for Apr). For EU, a slew of EC, GE, FR flash manufacturing/services/composite PMIs are due for release on Thu   and GE IFO (Cons. 104.5) on Fri which we expect to see cyclical uptick. For US, focus on Mar Existing home sales (Cons. +2.7% m/m) on Wed; Mar new home sales (Cons. -5.7% m/m) on Thu and Mar durable goods (Cons. +0.6%) on Fri. For AXJ, China is due to release its flash Apr manufacturing PMI (Cons. 49.4) on Thu; Singapore is due to release Mar CPI (Cons. -0.5% y/y) on Thu and Mar industrial production (Cons. -6.6% y/y) on Fri. A strong IP figure could lead to further upside to the SGD on the back of this week’s strong NODX and expectations of a 1Q GDP revision.

Currencies

      DXY – Bias Downside; Buy on Dips. USD ended the Fri session softer on mixed data - slightly weaker headline CPI inflation and better than expected Univ. of Michigan sentiment data. On technicals, the setup remains bearish with double-top formation formed near 100 levels. The 96.90 – 97.40 area is key to watch if DXY manage to hold; a break below could open way for further downside towards 95.50 levels (38.2% Fibonacci retracement of 95.50 – 100.39). Day ahead may continue to see consolidation; intra-day range of 96.90 – 97.80. Daily stochastics is falling from overbought territories; momentum is bearish bias. Week ahead brings Mar CFNAI (Mon); Mar  existing home sales ; Feb FHFA House Price index (Wed); initial jobless claims; Apr flash manufacturing PMI; Mar new home sales; Apr Kansas City Fed Manufacturing (Thu); Mar durable goods orders, cap goods orders (Fri).

      USD/JPY – Consolidation. USD/JPY rebounded towards 119.00-levels after drifting towards 118.57 on Fri, tracking dollar moves. But pair has since slipped lower towards 118.80. Daily momentum indicators remain bearish, suggesting the potential for moves lower towards 117.90-levels (23.6% Fibo retracement of Oct-Dec 2014). Any rebounds this week is likely to be capped around 119.50. Week ahead has tertiary industry index (Mon); Mar Trade (Wed); Apr preliminary Manufacturing PMI (Thu); BOJ Nakaso speaks (Fri); and local (mayoral and city assemblies) elections (Sun).

      AUD/USD – Bullish Divergence. AUD/USD gapped up to a high of 0.7843 before reversing lower towards the 0.78-handle this morning. The pullback shows strong resistance around 0.7842. Despite the pullback this morning, we still expect bullish bias and for the bullish divergence to play out as the USD bulls take a breather. A clean break of the barrier exposes the 0.80-figure. Support for the pair is seen at 0.7740. Main events to watch this week includes the RBA Minutes tomorrow and a likely weaker print of 1Q CPI (Cons.: 0.1%q/q vs. previous 0.2%) on Wed. The former will likely be scrutinized for greater clarity on its rate-hold decision.

      NZD/USD – Mild Upside Bias. NZD pushed higher above 0.77-handle this morning on China RRR cut announcement over the weekend. Released early this morning, NZ 1Q CPI data was marginally softer than expected. Likely to see the pair inching higher off the back of weak USD and sentiment driven by China rate cut.  Intra-day expect the pair to consolidate in the range of 0.7660 – 0.7750.

      EUR/USD – Fade Rallies. EUR/USD firmed overnight on USD weakness despite mounting concerns over Greek’s ability to meet repayment schedule. Euro area headline and core CPI inflation remained unchanged from prior month. Pair trades around 1.0810 levels this morning; 1.0750 – 1.0880 range expected intra-day; bias to fade rallies.  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 brings GE Mar PPI; EC Feb construction output (Mon); EC; GE Apr Zew survey expectations (Tue); EC Apr consumer confidence; IT Feb retail sales (Wed); EC, GE, FR Apr manufacturing/services/composite flash PMIs; SP 1Q unemployment; ECB Praet speaks in Berlin (Thu); GE Apr IFO; GE Mar import prices; SP Mar PPI (Fri). Euro-area Finance Ministers meet over Fri-Sat on Greece.

      EUR/SGD – Consolidate in Recent Range. EUR/SGD continued to trade a 1.44 – 1.46 range before closing around 1.4547 on Fri overnight. Pair continues to pivot around 1.45 levels awaiting for fresh cues. Day ahead could continue to see the pair consolidate in recent range of 1.4435 – 1.4500.

Asia ex Japan Currencies

      The SGD NEER trades around 0.85% below the implied mid-point of 1.3432. The top end is estimated at 1.3161 and the floor at 1.3703.

      USD/SGD – Bearish, Accumulate On Dips. The USD/SGD remained pressure downwards below the 1.36-levels on the back of a softer dollar tone. Pair is currently sighted around 1.3550 with intraday MACD showing bullish momentum and slow stochastics tentative signs of a bearish bias. Bearish extension appears likely with our support level at 1.3570 taken out overnight. Our preference remains accumulating on dips. Key support is now around the 1.3470-levels and is expected to hold. Topside is seen around 1.3660 today.

      AUD/SGD – Bulls Taking Over. AUD/SGD extended its upmove on the back of AUD recovery and was last seen at 1.0450. Daily MACD chart also indicates bullish divergence for this cross. Intra-day chart shows bullish momentum as well but RSI indicates overbought conditions. Hence, 1.0466 could be the first barrier to cap bulls but only for today. 1.0360 marks the first support level. We are likely to witness buying interest on dips. Break of 1.0466-resistance exposes the next at 1.0525.

      SGD/MYR – Bulls Taking A Breather. SGDMYR pulled back this morning and was last seen around 2.7135. Bulls might be taking a breather for a while and we expect intra-day trade to be subdued. We still expect dips to attract buyers and 2.6975 marks the support for this cross. 2.7300 to cap bids.

      USD/MYR – Buy on Dips. USD/MYR opened lower this morning and currently trades around 3.6785 at time of writing, tracking USD weakness and SGD strength. Pair could continue to ease lower driven by USD weakness. Intra-day range of 3.6450 – 3.6900 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 – Bearish. Pair extends its downmove this morning, following the dollar retreat and in anticipation of another lower USD/CNY fixing. Prices, last seen around 6.1950, are fast approaching the 200-DMA at 6.1900. China’s growth came in as expected at 7.0%y/y, slowest since 2009. What was more concerning was industrial production that came in much weaker than expected at 5.6%y/y. Still, yuan bulls were steadfast, guided by the stronger CNY fixing against the USD. A decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of Oct-Mar rally). USD/CNY was fixed 35 pips lower at 6.1305 (vs. 6.1340). CNYMYR was fixed 5 pips lower at 0.5907 (vs. 0.5912). Retail sales are at 10.2%y/y, industrial production at 5.6%y/y while urban FAI came in at 13.5%y/y slower than the previous 13.9%.  At home, PBOC Shanghai has ordered banks to check margin trading risks. Elsewhere, a former PBOC adviser Yu Yongding said massive monetary and fiscal stimulus would weaken growth and stability in the medium and long term (China Daily). Moody’s has affirmed State Council’s latest reform plans for the country’s three policy banks. On the RMB, Premier Li Keqiang said he does not want to see further devaluation of the currency during the latest interview with Financial Times.

      USD/IDR – Bearish Tilt. The USD/IDR broke below 12900 – our support level - yesterday and continues to edge lower towards the 12800-levels, helped by the better than expected trade surplus for Mar (S1.13bn vs. cons. $589m) and dollar retreat overnight. Improving external balances should continue to weigh on the pair in the interim. New support is now at 12810 before the next at 12750. Topside continues to be curbed by 13000. 4-hourly MACD is showing only mild bullish momentum while slow stochastics are indicating bearish bias. Foreign funds continued to sell-off equities with a net USD50.57mn sold yesterday, which limited the pair’s move lower. 1-month NDF fell below the 13000-figure this morning to 12985 currently with intraday MACD and slow stochastics showing bearish bias ahead. JISDOR was fixed lower as expected at 12976 yesterday from Tue’s 12979 and another lower fixing is likely given the spot’s drift lower this morning.

      USD/PHP – Limited Downside. The USD/PHP gapped lower at the opening this morning to 44.460 from yesterday’s close of 44.545, helped by the dollar retreat overnight as well as strong rebound in remittances in Feb (up 4.2% y/y vs. Jan’s 0.5%). Lacking fresh impetus, further downside moves could be limited today with trades within 44.300-44.540 should hold intraday. Intraday MACD and slow stochastics are showing only mild bearish bias. 1-month NDF continues to edge towards the lower bounds of its 44.400-44.850 range at 44.490 currently with 4-hourly MACD should bearish momentum, though slow stochastics are at oversold levels. Foreign funds again sold a net USD33.3mn in equities yesterday.

      USD/THB – Bearish Tilt.  Onshore markets re-open today after closing for the Songkran holidays the past three days. The USD/THB continues its slide lower towards the 32.400-levels on the back of a softer dollar tone. Data-wise, it is a quiet day and the pair should continue to track the dollar moves ahead. With our support at 32.420 taken out yesterday, new support is seen around 32.350. Rebounds should be capped by 32.520 (50DMA) today. Intraday MACD is showing bearish momentum but slow stochastics continues to indicate little bias in either direction.

Rates

Malaysia

      Local government bonds ended the day 1bp lower with buying seen on the front ends to the belly. Volumes centered upon the 5y benchmark MGS 10/20. BNM announced the issue size on the next auction which is a retap on the SPK 7/22 at MYR2b auction size with an additional private placement of MYR1.5b. WI was quoted wide 4.04/3.95% with nothing traded on the WI.

      MYR IRS traded slightly lower alongside lower global bond yields. 2y IRS traded at 3.62%. 3M KLIBOR was down 1bp to 3.72%.

      In the PDS market, 8-9 years Telekom tightened 1-2 bps, 9-10 years Sarawak Energy tightened 1bp. Overall the AAA curve was generally 5-6 bps tighter at 9-10 year part benefited from relatively tight pricing of the new Putrajaya, but Suria KLCC and Aman are lagging behind probably might catch up next week.

Singapore

      SGS yields moved higher by 2-5bs across the curve despite positive overnight UST sentiment. Meanwhile swap rates equally moved higher by about 1-3bps up to the 10y point.

      Asian credit market last Friday mostly focused on the new issuances overnight. China Cinda issued 5y and 10y with a combined size of USD3b at T5+190bps and T10+240bps respectively. Industrial Bank of Korea (IBK) issued USD700m of 5y paper at T5+75bps from its initial guidance of +90bps. Upon FTT, Cinda was trading around its reoffer level, but after that traded wider. Cinda 5y was last seen at +189 level while the 10y was at +243bps. IBK was trading a tad better to the low of +72bps before going wider at +76bps. Elsewhere Indon and Phillip continue to trade weaker. The same goes with Chinese HY with Kaisa making headlines again. Treasuries rallied further in the afternoon while bonds were a little muted.

Indonesia

      Indonesia bond market booked losses on Friday’s trading supported by minimum market sentiment. Today we see that bond price may move sideways with a positive sentiment on the note of U.S. March deflation and China reserve ratio requirement cut which may be a positive catalyst. This week however, we see bond market would move within a tight range as there will be minimal fundamental data release both globally and domestically. We suggest buying on dips strategy for this week and believe that if FR0070 (10y benchmark series) yield reach 7.70% level; this might be a point of accumulation. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.379%, 7.524%, 7.671% and 7.830% while 2y yield shifts up to 7.095%. Trading volume at secondary market remains heavy at government segments amounting Rp6,052 bn with SR007 (3y) as the most tradable bond. SR007 total trading volume amounting Rp2,401 bn with 644x transaction frequency and closed at 101.548 yielding 7.653%.

      Corporate bond trading traded thin amounting Rp349 bn. BIIF02A (BII Finance II Year 2013; A rating bond; Rating: AA+_(idn)) was the top actively traded corporate bond with total trading volume amounted Rp46 bn yielding 8.844%.