Maybank GM Daily - 29 Apr 2015

FX

Global

      The overnight session was a mixed one with DJI, S&P in modest black while NASDAQ slipped -0.1% by close. Stocks were weighed by the earnings report from twitter which also downgraded their revenue forecast for the whole of 2015.  That provided some distraction before investors shift their focus back on the FOMC statement to be released tonight. Market players continue to unwind dollar longs ahead of the event tonight, allowing gains for most other majors, even the GBP that swung lower earlier on a poorer 1Q GDP estimate. Elsewhere, crude prices rose overnight after Iran seized a cargo ship but prices have since slipped in early Asian trades.

      AUD had a stellar session on Tue, up 2.1% above USD0.80 by Asia morning. The pair tracks iron ore prices which had rebounded 27% from its low of USD47 at the start of Apr. The currency is also buoyed by a combination of better data at home, recent stimulus in China and lower expectations of a rate cut by RBA next Tue. This upcoming rate decision will be a closely watched one.

      Day ahead, US is due to release advanced estimate of its 1Q GDP ahead of the FOMC statement. In Asia, BOT is not expected to change its key policy rate from the current 1.75%. Markets are likely to remain on the side-lines ahead of the FOMC statement and USD/AXJs should keep its downside bias.

Currencies

      DXY – Correction; FOMC tonight. DXY remained soft and traded a low of 96.01 overnight as markets focused on the bad data - unexpected fall in consumer sentiment and ignored the good data - US S&P/CS homes prices and Richmond Fed data were better than expected. Daily momentum and oscillators remain bearish bias; intra-day range of 95.50 – 96.50 expected. Remaining of the week brings Apr MBA mortgage application;1Q 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 – Downside Bias. The USD/JPY slipped lower below 119-levels underpinned by a softer dollar tone overnight as well as speculations that BOJ will hold policy steady tomorrow. The sell-off in the EUR/JPY, GBP/JPY and AUD/JPY though is limiting the pair’s downside. Further moves lower intraday should see support at 118.50. Intraday momentum indicators and oscillator are showing downside bias ahead. Rebounds should meet resistance around 119.50.

      AUD/USD – Bullish Momentum. AUD/USD broke out of its recent consolidative range and bounced above the 0.80-figure (reaching our target) before slipping back to levels around 0.7990 as Asian players take profit. As we have mentioned, the combination of better data at home, soggy dollar, a healthy rebound in iron ore prices, China’s stimulus and lower expectations for RBA to cut rates drove the AUD rally. Bullish divergence have played out but we suspect that this not the end of the rally. That said, we have plenty of risk events ahead – FOMC statement and RBNZ tomorrow. On the charts, bulls are resisted by the 0.8014-level (23.6% Fibonacci retracement of the 2014-2015 downswing). Pair is now supported by the daily ichimoku cloud at 0.7928. Clearance of the 0.8014-,mark gives way towards the next at 0.8299, our next tactical bullish target.

      NZD/USD – Range; Fade Rallies. Kiwi traded above 0.77 levels off the back of broad USD weakness overnight. Mar trade data were better than expected, focus for the week is on RBNZ meeting tomorrow (5am SGT).  We see RBNZ keeping policy rate on hold at 3.5%, 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. Futures markets (3m bills) do not expect RBNZ to move at the upcoming meeting while there are some market participants inching towards an easing bias. Pair is unlikely to make much headway ahead of RBNZ meeting. Intra-day range of 0.7670 – 0.7750 likely.

      EUR/USD – Potential Relief Rally? EUR/USD continue to inch as high as 1.0991 overnight on hopes that Greece could soon reach a deal with creditors soon. Opinion polls are pointing to more support for an “agreement” rather than “rupture”. We noted that many analysts mentioned that Greece may not have sufficient funds to meet its 12th May repayment of EUR767mil to IMF, it is however important to note that it remains an estimate whether Greece has sufficient funds or not. Greece could potentially has sufficient funds for this round.   Given price action overnight, it does seems like the pair could potentially target higher towards 1.1050 at the least before 1.12 levels in the near term. 1.0880 at 50 DMA has now turned support.  Intra-day of 1.09 – 1.1050 range likely.  Remaining week ahead brings EC, IT Apr CPI; FR, IT Mar PPI; EC, GE, IT Mar unemployment rate (Thu).

      EUR/SGD – Familiar and Tighter Range. EUR/SGD traded a muted range of 1.4418 – 1.4491 range before closing unchanged at 1.4467 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 0.44% above the implied mid-point of 1.3285 with the top end estimated at 1.3021 and the floor at 1.3548.

      USD/SGD – Consolidation. The USD/SGD is taking a breather after moving lower since the 14 Apr MAS meeting, currently hovering just above our support-level at 1.3170, weighed by the weakness in the EUR/USD. Upside though appears capped for now around the 1.3230-levels amid cautious trades ahead of BOJ and FOMC policy meetings tomorrow. Support nearby remains at 1.3170 before 1.3115. Four-hourly MACD and slow stochastics are still bearish bias.

      AUD/SGD – Turning Bullish. AUD/SGD tracked the AUD higher, last seen at 1.0560 and the cross is capped by the resistance at 1.0592. Daily tools suggest that current momentum is tilted to the upside. A clearance of the nearby resistance at 1.0592 exposes 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); but bounced back hard to close 2.6812 yesterday. This morning the pair gapped higher in the open to 2.6950. Intra-day range of 2.68 – 2.70 is expected to hold while we continue to caution that a decisive close below the 100DMA at 2.67 level could see the pair ease towards 2.6350 (23.8% Fibonacci retracement of 2013 low to 2015 high).  Daily momentum is mild bearish bias while stochastics are entering oversold areas.

      USD/MYR – Free Fall. Ringgit continued to benefit amid weaker USD and firmer oil prices. USD/MYR traded a low of 3.5460 before closing 3.5568. Daily technical chart still looks bearish with momentum indicators bearish bias while stochastics are now at oversold levels.  Intra-day range of 3.5400 - 3.5650 likely. Drift lower towards 3.50 levels cannot be ruled out.

      USD/CNH – Tilting Lower. USD/CNH ended on a bearish note on Tue and hovered around 6.2065. We still see more room for downsides. Expect USD/CNY fixing to be lower from the fixing at 6.1209 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 28 Apr, USD/CNY was fixed 11 pips lower at 6.1209 (vs. previous 6.1220). CNYMYR was fixed 32 pips lower at 0.5710 (vs. 0.5742). PBOC considers allowing banks to tap on the Pledged Supplementary Lending program to buy local-authority debt. Elsewhere, PBOC Ma Jun says there is no need for the central bank to inject funds via bond purchases.

      USD/IDR – Downside Bias. The USD/IDR slipped lower towards 12950 on the back of dollar weakness overnight. Also helping was strong FDI inflows of IDR124.6tn in 1Q15. Still, the lacklustre economic growth as well as negative sentiments surrounding the President’s fight against corruption and possible backlash from the high profile executions could support the pair today. Continue to expect the pair to bounce in range-bound trades within 12900-13000 intraday with a downside tilt. Intraday MACD is showing bullish momentum though slow stochastics remains at overbought levels, setting the stage for a possible pull-back ahead. Foreign funds sold a net USD0.14bn in equities yesterday. 1-month NDF continues in choppy trade but still within its current trading range of 13000-13150 with intraday MACD is showing no strong momentum and slow stochastics indicating bearish bias. The JISDOR was fixed higher at 12978 on Tues from Mon’s 12922.

      USD/PHP – Downside Bias. The USD/PHP continues to edge lower this morning, helped by the softer dollar tone overnight. Still, the pair continues to trade within familiar trading range of 44.130-44.400 range. Intraday MACD is still showing bullish momentum though slow stochastics is at overbought levels, which could potentially result in a pull-back. Continue to expect then the pair to hover within 44.130-44.400 intraday with a bias to the downside. 1-month NDF continues trade close to the lower bound of its current trading range of 44.200-44.400 with intraday MACD showing no strong momentum and slow stochastics bearish bias. Yesterday, foreign funds again sold off equities with a net USD13.99mn sold.

      USD/THB – Bearish.  The USD/THB is edging lower this morning on the back of a softer dollar tone, though it appears to be in consolidation mode. Even the weak custom trade print yesterday is failing to put a dent on the pair as concerns over the draft constitution and market expectations of a rate cut later today though consensus is still for no change weighs. So should BoT stand pat today, there is potential for the pair to move lower back towards the 32.500-levels. Look for support around 32.550 intraday with resistance at 32.730. Intraday MACD and slow stochastics are bearish bias. Foreign funds again sold off equities to the tune of a net THB2.65bn but added a net THB5.40bn in debt to their portfolio.

Rates

Malaysia

      Local government bond market saw better sellers despite the lower USDMYR and the yield curve ended 1-2bps higher amidst thin liquidity. This is likely due to players preferring to square out ahead of the FOMC this week and the MPC early next month. Market closed with wide quotes on the bonds.

      Another slow day in the IRS market with levels ending mixed. The front end to the belly of the curve was down by 1bp while the long end rose 1-2bps. 3M KLIBOR stayed at 3.72%.

      Local PDS credit had a quiet day again as the market were better sellers on govvies. We saw GG names at the belly of the curve tighten 1-3bps while long dated GG bonds mostly traded at MTM levels. The AAA curve was generally quiet with the same bid-offer levels as the previous day. We did, however, see 8y Putrajaya paper tighten 2bps. Telekom 3/2024 traded 6bps tighter to 4.32% with MYR20m dealt, which we think is a slightly overdone.

Singapore

      Another quiet day in the SGS market with little interest to break either side. Interest was mostly for bonds 5y and below with slight interest to sell the 10y. The yield curve closed about 1-2bps higher while SGD IRS was flat and bond swap spreads tightened about 1bp, with the 10y closing at -15bps. USDSGD continued to trade heavily. If the funding rate eases off again, SGS could see better demand.

      Asian credit space was swarmed with primary issuances: 1) CNOOC (Aa3) issued 5y USD bonds at T+150bps, 10y USD bonds at T+180bps and 30y USD bonds at T+170bps; 2) Bank of India (Baa3/positive) issued 5y USD bonds at T+205bps; 3) Binhai Investment (Baa3) issued 3y USD bonds at T+280bps; and 4) China New Town Dev (unrated) issued 3y CNH bonds at 5.55% (+/-5bps). Sinopec traded slightly wider due to CNOOC’s announcement and news of its Vice Chairman and President, Wang Tianpu being investigated possibly for graft. Wang has resigned in view of the investigation. Elsewhere, there is still buying interest for Korean and MALAY names with RHBCMK and AMMMK continue to be sought after. INDON sovereigns came off about 0.50pts lower despite US Treasuries mostly unchanged.

Indonesia

      Another day for a significant drop of bond prices. Negative sentiment came from expectation of slowdown in Indonesia government spending in 1Q15 which later came in at Rp440 tn or 22.2% (annualized: 66.6%) of total government spending in first four months of 2015, worst incoming bid during auction and higher awarded weighted average yield compared to previous day closing. However, it was constrained by a 14% yoy rise in FDI during 1Q 15. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.588%, 7.702%, 7.937% and 8.034% while 2y yield shifts up to 7.336%. Trading volume at secondary market was seen moderate at government segments amounting Rp9,626 bn with FR0071 (15y benchmark series) as the most tradable bond. FR0071 total trading volume amounting Rp2,243 tn with 72x transaction frequency and closed at 108.830 yielding 7.937%.

      Indonesian government conducted their conventional auctions yesterday and received incoming bids of Rp7.91 tn bids versus its target issuance of Rp10.00 tn or undersubscribed by 21.9%. Incoming bid during the auction was the worst (lowest incoming bids) since the start of this year. However, DMO only awarded Rp4.85 tn bids for its 8mo SPN which was sold at a weighted average yield (WAY) of 6.17643%, 5y FR0069 at 7.62862%, 15y FR0071 at 7.95998% while 30y FR0067 was sold at 8.27618%. Incoming bids were mostly clustered on the 15y benchmark series. No bids were rejected during the auction. Bid-to-cover ratio came in at 1.14X – 2.74X. WAY during the auction came in higher compared to previous day closing indicating investors were demanding for a much cheaper price to buy the offered asset. Foreign incoming bids during the auction were noted Rp2.16 tn or 27.4% of total incoming bids and was lower compared to Rp3.60 tn bids during previous auction. However, only Rp1.63 tn bid (33.5% of total awarded bids) were awarded to foreign investors. Till the date of this report, Indonesian government has raised approx. Rp18.17 tn worth of debt through bond auction which represents 21.8% of the 2Q 15 target of Rp83.50 tn.

      Corporate bond trading traded heavy amounting Rp1,005 bn. BWPT01 (BW Plantation I Year 2010; Rating: idBBB+) was the top actively traded corporate bond with total trading volume amounted Rp168 bn yielding 10.665%.