Maybank GM Daily - 28 Apr 2015

FX

Global

      US equities slipped ahead of the two-day FOMC meeting tonight, dragged by weaker biotech shares. Overnight data was not supportive with Dallas Fed Manufacturing down another -16% in Apr.  The DXY index softened as well, weighed by the exuberant EUR which touched a high of 1.0927 on Mon. European stocks also closed higher after Greek Prime Minister reshuffled the team in charge of negotiations with the EU and IMF lenders. Oil prices fell marginally overnight with ICE brent crude at $64.57/bbl at last sight.

      Most of the other majors advanced overnight in the absence of dollar bulls with CAD, the top performer on Mon, up 0.7%.  The main laggards were CHF and JPY amid better risk appetite.  Australia’s RBA Glenn Stevens declined to comment on monetary policy, leaving AUD/USD well above the 0.78-figure, the only major to extend its gain against the USD this morning.

      Nearer to home, the sovereign credit rating of Japan was downgraded one notch to ‘A’ from ‘A+’ by Fitch Ratings, underpinned by  the Japanese government’s lack of commitment to fiscal consolidation. The downgrade was largely ignored by the USD/JPY which steadied around the 119-figure overnight. The day ahead brings trade numbers from Philippines and Thailand. Expect USD/AXJs to keep a downside bias in the absence of dollar strength and a lack of impetus. Action will be contained by the anticipation of FOMC meeting which will end tomorrow night.

Currencies

       DXY – Correction; Accumulate on Dips. DXY was soft overnight amid weaker than expected PMI and Dallas Fed Manf. Activity data. DXY traded a low of 96.47 before rebounding marginally to close 96.77. While daily momentum and oscillators are bearish bias; the 4-hourly momentum and oscillators are showing tentative signs of bullish bias.  Expect intra-day range of 96.50 – 97.30. Week ahead brings Feb S&P/CS home price index; Apr Richmond Fed Manf. Index (Tue); Apr MBZ mortgage application ;Q GDP; Mar pending home sales (Wed); FOMC meeting; Apr initial jobless claims, continuing claims; Mar PCE Core; Apr Chicago Purchasing Manager; Fed’s Tarullo speaks (Thu); Apr ISM Manufacturing, manufacturing PMI; Univ. of Michigan sentiment; Mar construction spending (Fri).

      USD/JPY – Supported. The USD/JPY has bounced back above the 119-levels this morning underpinned by the dollar rebound. It also did not help that retail sales in Mar fell at the fastest since 1988 by 9.7% y/y. These should keep the pair supported ahead, though some consolidation is likely after yesterday overnight move lower. Support is seen around 118.50 today with resistance around 119.70. Intraday MACD is showing no strong momentum though slow stochastics are indicating a mild bullish bias.

      AUD/USD – Upside Bias. Local markets start the week today and onshore players took the AUD/USD higher this morning which was last priced around 0.7860. Some resistance is seen around 0.7877. RBA Glenn Stevens chose not to comment on monetary policy, ahead of the scheduled monetary meeting next week. Pair is supported by the tankan-sen of the daily ichimoku cloud at 0.7770. RSI prints 75, signalling only a little more room for bulls. Upmove will remain a grind. Nonetheless, we continue to expect the bullish divergence to play out 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 – Range; Fade Rallies. Pair rebounded as high as 0.7665 amid broad USD weakness overnight. The pair opened and traded a touch lower towards 0.7625 levels. Little domestic data in the week ahead except for Mar trade (Wed) and RBNZ meeting (Thu). We see RBNZ keeping policy rate on hold, with accompanying statement/speech dovish-tinge. We also believe RBNZ could soon roll out macro-prudential cooling measures to address speculative pressure on its housing market. Daily MACD and slow stochastics are showing tentative signs of bearish bias. Next support at 0.7570 levels (21 DMA and 100 DMA), then 0.75 psychological level before 0.7385 (61.8% Fibonacci retracement of Mar to Apr 2015 run-up). Day ahead attempt to fade rallies towards 0.7660s; intra-day range of 0.7550 – 0.7650 likely.

      EUR/USD – Caution of a Rebound Towards 1.10 Levels. EUR/USD inched higher towards 1.0920 overnight on headlines that Greece could be nearing a deal – Greek PM Tsipras overhauled his bailout team side-lining Finance Minister Varoufakis (whom was seen as a strong supporter of Greek interests). Greek development remains fluid and Greek’s ability to meet its upcoming repayment schedule (crunch point is the EUR767mil to IMF on 12th May) remains a key focus. Despite trading above the 50DMA at 1.09; the pair failed to make a daily close above that level. We continue to watch the 50 DMA and caution for a potential squeeze towards 1.1050 levels.  Intra-day of 1.0820 – 1.0940 range likely.  We continue to maintain our bearish EUR/USD view amid structural decline in Europe fundamentals, concerns over Greece ability to meet repayment schedules (total of EUR16.5bn debt repayments between now and Jul), and diverging monetary policies between US and EU. Week ahead brings GE Apr CPI; EC Apr consumer confidence (Wed); EC, IT Apr CPI; FR, IT Mar PPI; EC, GE, IT Mar unemployment rate (Thu).

      EUR/SGD – Familiar Range. EUR/SGD traded a muted range of 1.4446 – 1.4491 range before closing at 1.4465 overnight. Cross continues to trade a familiar range of 1.44 – 1.46 in absence of fresh cues. Consolidation remains the name of the game.

Asia ex Japan Currencies

      The SGD NEER trades around 0.18% above the implied mid-point of 1.3321. We estimate the top end at 1.3055 and the floor at 1.3586.

      USD/SGD – Consolidating. The USD/SGD is in consolidative mode after breaking below our support level at 1.3320 overnight, tracking the dollar lower. Capping the pair’s upside is market expectations of a policy divergence between China and the US as the SGD is still seen as a proxy for the CNY. Expect the pair to trade range-bound within 1.3230-1.3380 intraday. Intraday MACD is showing no strong momentum while slow stochastics are rising from oversold levels.

      AUD/SGD – Supported on Dips. AUD/SGD is back on the upmove, last seen at 1.0450 and the cross is trapped within 1.0380-1.0460 range. Daily tools suggest that current momentum is tilted to the upside. 1.0526 is the first barrier for this cross to clear ahead of the next at 1.0659 - the top of the ichimoku cloud.

      SGD/MYR – Mild Bearish Bias. The double-top formation around 2.71 levels continued to cap the pair. Cross traded a low of 2.67 this morning (100 DMA); and we continue to caution that a decisive close below this level could see the pair ease towards 2.6350 (23.8% Fibonacci retracement of 2013 low to 2015 high).  Daily momentum and stochastics are bearish bias.

      USD/MYR – Free Fall. USD/MYR continued to push lower; traded a low of 3.5518 this morning amid weaker USD. Daily technical chart still looks bearish with momentum and oscillators bearish bias.  Intra-day range of 3.5300 - 3.5650 likely; with a risk towards 3.50 levels. While firmer oil prices and weaker USD have given the Ringgit some breathing space we continue to sound caution over Ringgit strength on potential risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus.

      USD/CNH – Surprise Rally. USD/CNH rallied yesterday on whispers that China considers launching QE. The pair was last seen around 6.2150, still capped by the 6.2292-barrier. Expect USD/CNY fixing to be lower from the fixing at 6.1220 yesterday. Support is still seen at 6.1840.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. On 27 Apr, USD/CNY was fixed 21 pips lower at 6.1220 (vs. previous 6.1241). CNYMYR was fixed 111 pips higher at 0.5742 (vs. 0.5853). Mar industrial profits fell 0.4%y/y in Mar. In news, PBOC Zhou said that China will ease entry into banking sector (China Business News).

      USD/IDR – Still Supported. The USD/IDR is back on the slide this morning, playing catch-up with its regional peers. Pair attempts to move lower remains constrained by the economy’s still dim outlook as well as negative sentiments surrounding the President’s fight against corruption. In the absence of fresh catalyst, expect the pair to track dollar movements ahead with 12900-13000 trading range likely to hold intraday. Intraday MACD is showing bullish momentum though slow stochastics is fast approaching overbought levels. Foreign funds sold a net USD0.17bn in equities yesterday,but added a net IDR0.68tn and IDR0.73tn to their outstanding holding of debt on 23 and 24 Apr respectively (latest data available). 1-month NDF is bouncing slightly higher this morning but still trading well-within its current trading range of 13000-13150 with intraday MACD is showing no strong momentum and slow stochastics is indicating a mild bearish bias. The JISDOR was fixed lower at 12922 on Mon from Fri’s 12922.

      USD/PHP – Downside Bias. The USD/PHP is edging lower this morning, helped by the softer dollar tone overnight. The pair though continues to hover within familiar trading range of 44.130-44.400 range. Even the trade deficit of USD0.8bn in Feb on the back of weak imports (down 11.2% y/y) failed to stem the pair’s dip. Intraday momentum remains bullish while oscillator is mildly bullish bias. Continue to expect then the pair to hover within its 44.130-44.400 trading band intraday. 1-month NDF continues to remain well-within its current trading range of 44.200-44.400 with intraday MACD showing mild bullish momentum and slow stochastics little directional bias. Yesterday, foreign funds sold a net USD17.69mn in equities.

      USD/THB – Bullish Tilt.  The USD/THB is bouncing higher again after falling overnight from a monthly high of 32.730 on the back of a softer dollar tone overnight. Dollar resurgence, concerns over the draft constitution and market expectations of a rate cut at tomorrow’s BoT meeting though consensus is expecting no change is keeping the pair supported. Intraday momentum indicator is still bullish though oscillator is falling from overbought levels, suggesting two-way trades ahead. For bullish extension, we need to see a firm break of yesterday’s high of 32.730 to expose the next hurdle at 32.830. Support is seen around 32.500 intraday. Foreign funds sold a net THB1.63bn in equities yesterday but bought a net THB1.50bn in debt.

Rates

Malaysia

      Local government bond yields fell 1-2bps backed by the US Treasury (UST) movement. Substantial trades were done around the 15y conventional and Islamic benchmarks which ended 2bps lower. We noted foreign flows in this part of the curve as the USDMYR gapped lower from last week.

      The IRS market had a very slow day with nothing dealt. IRS levels closed marginally lower. 3M KLIBOR unchanged at 3.72%.

      PDS market was quiet. Buying interest was focused on 7-9y AAA papers and longer dated GGs, but bid-ask spreads remain wide. MACB 22s traded 2bps tighter at 4.345%, representing a 61bps spread over the 7y benchmark which is attractive relative to other names of the same tenor, such as Telekom which traded at 4.32% a few weeks ago. Danga 30 held firm at MTM levels of 4.65% with over MYR40m volume traded. Caga and GG names at the belly of the curve either traded flat at MTM levels or widened by 1bp. There was also buying interest for very short dated papers. Sabah Dev 15s exchanged hands at 4.17%.

Singapore

      SGS market had a relatively quiet day with initial short covering before profit taking took place. The SGS curve ended 1-3bps lower while SGD IRS closed flat to 1bp lower. The 10y bond swap spread closed at around -16bps. Market may trade sideways as players await the upcoming FOMC meeting.

      In the Asian credit market, Tower Bersama bond traded up by 0.5pts to around 100.25/100.75 on the surprising news of a share buyback of 5%. INDONs also traded 0.3-0.8pts higher on the back of UST movement. Korean names are still in demand, while MALAY names continue to hold up well with AMMMK and RHBCMK being sought after. CLP Power Hong Kong (A1) is coming out with 10y USD issuance guiding at T+125/130bps. It garnered over USD3b of orders but is only expected to issue USD300m. Reliance Communications Limited is also looking to sell USD300m of 5.5y bonds with guidance of 6.50%. We expect players to be on the sidelines ahead of the FOMC meeting and Labor Day holiday this week.

Indonesia

      Indonesia bond prices dropped significantly as banking sector’s 1Q earnings was quite disappointing. As an additional, sentiment negative also came from the planned execution of foreign drug smugglers as well as planned bond auction today. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.524%, 7.642%, 7.796% and 8.009% while 2y yield shifts up to 7.253%. Trading volume at secondary market was seen thin at government segments amounting Rp6400bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp1454tn with 67x transaction frequency and closed at 104.650 yielding 7.642%.

      DMO will conduct their conventional auction today with four series to be auctioned which are SPN12160204 (Coupon: discounted; Maturity: 4 Feb 2016), FR0069 (Coupon: 7.875%; Maturity: 15 Apr 2019), FR0071 (Coupon: 9.000%; Maturity: 15 Mar 2029) and FR0067 (Coupon: 8.750%; Maturity: 15 Feb 2044). We believe that the auction will be oversubscribe by 1.2x – 2.2x from its indicative target issuance while our view on the indicative yield are as follows SPN12160204 (range: 7.250% – 7.350%), FR0069 (range: 7.625% – 7.725%), FR0071 (range: 8.000% – 8.100%) and FR0067 (range: 8.050% – 8.150%).

      Corporate bond trading traded moderate amounting Rp530bn. NISP01ACN2 (Shelf registration I OCBC NISP Phase II Year 2015; A series bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp125 bn yielding 8.160%.