Maybank GM Daily - 22 Apr 2015

FX

Global

      US equities finished the session mixed in absence of key economic data while EU equities largely firmed on positive earnings and ZEW survey (Current situation).  In FX markets, consolidation took told.  Dollar index see-sawed but finished the session overnight little changed. USD/JPY   traded higher tracking a firmer Nikkei. USD/CAD rebounded tracking softer oil prices. Oil prices were weaker despite Saudi Arabia announcing an end to its 3weeks of military bombing, reducing tension in the Middle East.

      Day ahead focus on Australia 1Q CPI data (Cons. +0.1% q/q; +1.3% y/y). Market is not expecting an outright deflation. Lower fuel and commodity prices are likely to weigh on the headline. This is closely watched as an upside surprise to CPI inflation could pare back expectation of a RBA rate cut in May and send the AUDUSD higher.

      Other data we are watching for the day ahead includes BoE Minutes. It is likely to be a non-vent – expect no change to MPC voting pattern with all 9 members voted to keep rates on hold for Apr. For Europe, EC Apr consumer confidence; IT Feb retail sales on tap. For US, Mar existing home sales; Feb FHFA House Price index are due for release. Day ahead expect USD to consolidate; remain better buyers of USD on dips.

Currencies

       DXY – Consolidation; Accumulate on Dips. USD finished the overnight session little changed amid little data flows. The 96.90 – 97.40 area remains a key level to watch; 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 97.10 – 98.30. 4-hourly stochastics is downside bias. Week ahead brings 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 – Consolidating Higher. USD/JPY edged higher towards the 119.80-levels amid a firmer dollar. Even the better-than-expected trade surplus of JPY229.3bn (cons: JPY44.6bn) failed to stem the pair’s climb higher. Pair is showing bullish momentum with slow stochastics currently at oversold levels, suggesting a potential pull-back could be on the way. Until then, continue to expect the pair consolidate with a slight upside bias within 118.70-120.15 range intraday.

      AUD/USD – Bears Reassert. AUD bears did not gain traction overnight as market players await the 1Q CPI numbers, due later at 0930(SGT). The currency is priced around 0.7710 USD at last seen, which is near the base of the bearish daily ichimoku cloud. Intra-day momentum tools signal more downside risk and we also note a negative crossover of the tenkan-sen below the kijun-sen. That could play out should there be a miss in the 1Q CPI (Cons.: 0.1%q/q; 1.3%y/y) which will raise rate cut expectations in in two weeks. Pair risk testing the recent low of 0.7533 today. That said, we are wary of a bullish divergence on the daily chart and prefer to buy on dips for a tactical bullish target towards 0.80 within a broader bearish trend.

      NZD/USD – Consolidation. NZD consolidated in the range of 0.7635 – 0.7713 yesterday in absence of fresh cues. Day ahead pair is likely to take cues from AUD, which is expected to be driven by 1Q CPI report later. Expect to see range of 0.7620 – 0.7750 intra-day. AUD/NZD continued to drift to a low of 1.0039 before rebounding to trade 1.0060 levels. AUD/NZD parity remains in focus.

      EUR/USD – Fade Rallies. EUR/USD declined to a low of 1.0660 before rebounding to close around 1.0736 overnight. ECB said to study measures to rein in ELA to Greek banks put pressure on EUR during the European open session yesterday. ZEW index of confidence was largely in line with expectation. Bias to fade rallies; intra-day range of 1.0630 – 1.0780.  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 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 1.4410 – 1.4510 range before closing around 1.4505 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 1.4450 – 1.4550.

Asia ex Japan Currencies

      The SGD NEER trades around 0.74% below the implied mid-point of 1.3416. The top end is estimated at 1.3146 and the floor at 1.3687.

      USD/SGD – Rangy With Upside Bias. The USD/SGD is back on the uptick, lifted by a firmer USD/JPY and softer EUR/USD. Still, further upmoves are likely to be measured for now given the MAS’ “modest and gradual appreciation” policy stance. Look for the pair to track the dollar for now with the pair trading within 1.3470-1.3570 intraday with the bias still tilted to the upside. Intraday MACD is showing bullish momentum and slow stochastics fasting approaching overbought levels.

      AUD/SGD – Supported on Dips. AUD/SGD bears also did not make much headway overnight as the cross swivelled around the 1.0420-mark, underpinned by the SGD weakness. Support is still seen at 1.0376 and the daily MACD shows a slight advantage for the bulls. Still bearish risk loom in the face of the 1Q CPI number out of Australia but current SGD weakness could dampen bearish momentum and keep the AUD/SGD cross within 1.0300-1.0525.

      SGD/MYR – Two-Way Risk. SGDMYR hovered around the 2.69-figure, testing the lower bound of the upward sloping trend channel. SGD and MYR bears are in a tug of war and we expect the two opposing forces to keep this cross in narrow range within 2.6800-2.7000. Ichimoku cloud on the 4-hourly chart still supports prices on dips.

      USD/MYR – Choppy. USD/MYR traded a high of 3.6532 (50 DMA) during Asian session yesterday before closing 3.6370. The pair opened 3.650 levels this morning. While the pair could drift lower towards 3.5950 levels (100 DMA), we remain better buyers in the pair on dips. Mar CPI (Cons. +0.9% y/y vs. +0.1% prior); FX reserves on tap this afternoon.  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. Intra-day ahead range of 3.6300 - 3.6600 in focus.

      USD/CNH – Head and Shoulders. The USD/CNH does not show much momentum in the first half of the week, still hugging the 6.20-figure. Prices are supported by a resilient greenback and intra-day action may be confined within 6.1840-6.2070. Expect USD/CNY fixing to be only slightly higher than the fixing at 6.1280 yesterday. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which coincides with the 200-DMA. Near-term support is seen around 6.1841 (Oct 2014 high) which coincides with the 61.8% Fibonacci retracement of the Oct-Mar rally at 6.1842. USD/CNY was fixed 10 pips higher at 6.1290 (vs. 6.1280). CNYMYR was fixed 3 pips lower at 0.5842 (vs. 0.5845). Baoding Tianwei Group reportedly became the country’s first SOE to default on an onshore bond. Agricultural Development Bank of China may get a capital injection of about CNY 150bn in the form of tax returns.

      USD/IDR – Bullish. The USD/IDR should continue its slow grind back towards the 13000-levels amid a firmer dollar tone and amid pessimism that the 7% growth target of the President could be met. Pair is currently little changed around 12950-levels with both intraday MACD and slow stochastics showing bullish bias. Continue to look for upticks towards 13030 and any downmoves to see support around 12900. Foreign funds bought a net USD11.78mn in equities yesterday and added a net IDR0.91tn to their outstanding holding of debt on 20 Apr (latest data available). 1-month NDF remains in consolidative mode, hovering just off the 13100-levels this morning, with intraday MACD showing bullish momentum but slow stochastics falling mildly from overbought levels. The JISDOR was fixed higher again yesterday at 12942 from Mon’s 12875.

      USD/PHP – Mild Bullishness. The USD/PHP is bouncing higher this morning, tracking the dollar moves overnight, but continues to trade in a tight range within 44.130-44.4000. Lacking fresh impetus ahead, pair should continue to track dollar moves. Look for upside to remain capped around 44.400 and downside to see support around 44.130. Intraday MACD is showing no strong momentum, though slow stochastics is indicating tentative signs of an uptick.  1-month NDF remains in consolidation within 44.200-44.400 with intraday MACD showing mild bullish momentum and slow stochastics little directional bias. Foreign funds reversed their sell off of equities with a net USD5.78mn in equities purchased yesterday.

      USD/THB – Sideways.  The USD/THB is back on the rebound towards the 32.400-levels on the back of a mild rebound in the dollar, increasing political tension over the draft constitution and expectations of further rate cut by the BoT. Pair should some support yesterday from foreing buying of Thai assets with a net THB2.35bn and THB2.56bn of equities and debt purchased. Intraday MACD is showing bullish momentum but slow stochastics is falling, suggesting sideways trade are likely ahead. Amid a quiet data week, look for the pair to remain stuck in range within 32.350-32.500 intraday.

Rates

Malaysia

      Local government bond market saw inflows in the afternoon as foreign players were seen buying on the belly of the curve, which ended 1-2bps lower amidst decent volume. The 7y SPK 7/22 auction drew a decent bid-to-cover of 2.315x with successful bids averaging 4.038% (highest: 4.058%; lowest: 3.994%). Post auction, the bond closed at 4.04%.

      The IRS market saw a good amount of trading done, mainly led by foreign parties paying. The 1y IRS traded at 3.64%, 5y at 3.79%-3.81% and 7y at 3.97%. 3M KLIBOR remained at 3.72%.

      PDS market was well bid with buyers seeking long dated GGs, AAAs as well as Malakoff papers. However, trades done were generally at the belly or the short end of the curve. GG names generally tightened 1-2bps. For AAAs, HSBC Amanah and Malaysia Airports traded 1bp wider while some Plus 14y-15y papers tightened 1-2bps. The AA curve was the star as names such as Malakoff and UEM Sunrise tightened 2-5bps. We expect a pick-up in activity following the rally in the 10y MGS yesterday.

Singapore

      SGS had another fairly volatile day. Yields rose 1-6bps overall, while the SGD IRS and the 10y benchmark bond swap spread closed about flat. There is still volatility in the SGS market. MAS announced a mini auction for the re-opening of SGS 4/18 at a size of SGD1b.

      Asian credit space traded firmer. INDONs traded up and the rest were more focused on new issuances. IGs were mostly about 2-3bps tighter while HYs were mostly unchanged. Kaisa opened about 10pts lower after failing to pay coupons, but buyers were still seen which we suspect to be fast money. In the primary space, Shenzhen Qianhai is issuing 2.5y CNH bonds with guidance of 4.55-4.60% and at last seen, the order book exceeded CNH9b. Sinopec, with guarantee from China Petrochemical Corp, came out with USD and EUR issuances. The USD issuances of 5y, 10y and 30y had guidance at +145bps, +160bps and +180bps respectively.

Indonesia

      Indonesia bond market weakened at the end of the day with the 10y benchmark series yield closed within our expectation. The weakening occurred on the note of minimal market sentiment both domestically and globally. Continuation of strengthening energy price would also add more negative pressure to the bond market. Today we see that bond market would move sideways with 10y yield ranging between 7.460% - 7.560%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.392%, 7.505%, 7.667% and 7.839% while 2y yield shifts up to 7.147%. Trading volume at secondary market remain thin at government segments amounting Rp8674bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2102tn with 69x transaction frequency and closed at 105.566 yielding 7.505%.

      Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp4.73tn bids versus its target issuance of Rp2.00 tn or was oversubscribed by 2.37x which is in line with our expectation. Incoming bid during the auction was the worst (lowest incoming bids) since the start of this year. However, DMO only awarded Rp2.03 tn bids for its 5mo, 1y and 26y bonds. Incoming bids were mostly clustered on the front end tenors. 5mo SPN-S was sold at a weighted average yield (WAY) of 5.75000%, 1y PBS008 at 7.18034% while 26y PBS007 was sold at 8.30973%. Only the 5y PBS006 bid was rejected during the auction. Bid-to-cover ratio on today’s auction came in at 1.38X – 1.47X. Till the date of this report, Indonesian government has raised approx. Rp13.32tn worth of debt through bond auction which represents 16.0% of the 2Q 15 target of Rp83.50 tn.

      Corporate bond trading traded moderate amounting Rp568 bn. NISP01CCN1 (Shelf registration I OCBC NISP Phase I Year 2013; C serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp91bn yielding 8.195%.