Maybank GM Daily - 8 Apr 2015

FX

Global

      US equities initially rose on better than expected JOLTs report as number of job openings (in Feb) continued its upward trend surging to a 14-year high. However gains were erased into the close as on consumer credit data. While consumer credit did rise above expectation, the rebound was led by a surge in non-revolving credit (student and car loans) which more than offset the biggest decline in revolving credit since Nov 2010 (suggesting reluctance on other spending). EU equities, on the other hand, rose on better than expected composite/services PMI and ECB confirmation that bond purchase is on track.

      USD weakness post-NFP continues to be undone with the USD rebounding broadly against most currencies including the JPY, EUR, GBP (driven by election uncertainty) and NZD. AUD initially surged on RBA surprise to keep rates on hold (in line with our expectation) but failed to hold on to gains overnight. Oil prices were supported on falling rig count and smaller rate of increase in inventories.  

      Day ahead in Asia, BoJ will conclude its 2-day monetary policy meeting today. Neither the markets nor we, expect any surprises. In Europe, GE Feb Factory Orders; EC Feb Retail Sales; EC, GE, FR, IT Mar Retail PMI; GE Mar Construction PMI due for release. For US, MBA mortgage applications on tap; Fed’s Powell and Dudley due to speak. USD likely to consolidate with mild bias to the downside; focus on FOMC meeting minutes due tomorrow; we remain better buyers on USD dips.

G7 Currencies

      DXY – Consolidation. Dollar weakness post-NFP was undone and DXY rebounded overnight on better than expected jobs openings (JOLTS), consumer credit strength data. Fed’s Kocherlakota yesterday said Fed should defer rate hike to 2H2016 and then raising rates gradually to a peak of 2% by end-2016. Note that Kocherlakota is not a voting member this year. 4-hourly oscillators are suggesting possible signs of pullback. DXY now at 97.80; intra-day range of 97.50 - 98.50 expected.  Week ahead MBA mortgage applications (Wed); FOMC minutes (Thu); Mar import price index (Fri). Fed speaks include Fed’s Powell and Dudley (Wed); Kocherlakota and Lacker (Fri). 

      USD/JPY – Sideways. The USD/JPY took out our resistance level at 120 overnight towards 120.50 underpinned by a firmer dollar tone. Pair has since retraced slightly and is hovering around the 120.20-levels currently, helped in part by the wider current account surplus of JPY1.44tn in Feb. Intraday MACD is still showing bullish momentum though slow stochastics are at overbought levels, suggesting further downsides could be limited today. Ahead of BOJ policy decision (we expect BOJ to stand pat) and Governor Kuroda’s press conference later today, look for the pair to move sideways within 119.50-120.80 intraday.

      AUD/USD – Mild Upside Risks. AUD/USD softened from post-RBA highs and traded around 0.7640 as we write, dragged by overnight dollar gains. The central bank held cash rate target at 2.25% though it clearly retained an easing bias. We found the latest statement consistent with its Mar meeting minutes. Notwithstanding a likely rate cut in the coming months, RBA expects AUD to depreciate further given the “significant declines in key commodity prices” and that could open the way towards our medium term target of 0.75. Intra-day, pair does not show much momentum on either side and could hover within 0.7608-0.7700. Market players await FOMC Minutes tonight. Disappointing Mar NFP has prompted dovish expectations and with 18-SMA above the 40-SMA on the intra-day chart, risks to the AUD is tilted to the upside in the short-term. 

      NZD/USD – Consolidation. NZD was softer, traded a low of 0.7487 amid USD strength overnight before rebounding marginally towards 0.7520 this morning. Pair is expected to consolidate in 0.7470 (50 DMA) – 0.7600 (100 DMA) range in absence of fresh impetus. Daily MACD and stochastics are neutral-bias for now. Slight bias to sell on rally towards 100 DMA at 0.76 levels.

      EUR/USD – Fade Rallies. EUR continued to stay soft overnight; traded a low of 1.0804 despite better than expected composite/services PMI in the Euro-area and IMF Lagarde’s comments that Greece won’t attempt to delay its EUR450m payment to the IMF this week.. We have previously mentioned that the rebound in high frequency data only represented a cyclical recovery at best. We continue to maintain our bearish-bias EUR/USD view amid structural decline in Europe fundamentals and diverging monetary policies - the Fed is still expected to be on a tightening bias as compared to its Euro-counterparts whom have just began QE amid ongoing unresolved Greek issues. We remain better sellers on rallies. 1.08 is key support; break below 1.08 revisit 1.07, 1.06 levels again. We remain better sellers on ralliues. Week ahead sees GE Feb Factory Orders; EC Feb Retail Sales; EC, GE, FR, IT Mar Retail PMI; GE Mar Construction PMI (Wed); GE Feb IP, Trade; FR Mar Business Sentiment (Thu); FR Feb Industrial, Manufacturing Production; SP Feb Industrial Output (Fri).

      EUR/SGD – Sell on Rallies. EUR/SGD was softer overnight; traded low of 1.4690 before closing around 1.4730 levels. 4-hourly MACD remains bearish bias while slow stochastics is falling into oversold areas. Pair could be biased for mild upside intra-day. Expect range of 1.4650 – 1.48 Remain better sellers on rallies.

Asia ex Japan Currencies

      The SGD NEER trades around 1.078% below the implied mid-point of 1.3440. We estimate the top end at 1.3169 and the floor at 1.3712.

      USD/SGD – Sideways. After climbing higher for the past two sessions, the pair is on the retreat this morning back below the 1.36-level this morning helped by a softer dollar and rebound in the JPY. With the MAS poised to release its exchange rate policy decision on 14 Apr (Tue) at 8am, further dovish positioning is likely given that the market is now expecting the MAS to stand pat. We reiterate 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 on 14 Apr will be GDP flash estimates for 1Q15, where we are looking for growth of 1.9% y/y vs. cons 1.7%. For the day ahead, topside should be guarded by 1.3650 while downside should be limited by 1.3535. Intraday MACD is still showing bullish momentum, though slow stochastics is now at overbought levels.

      AUD/SGD – Risks to the downside. AUD/SGD drifted lower and hovered around the 1.0400 for much of overnight trades, retaining much of its post RBA gains. MACD and RSI show bullish momentum in this cross and 1.0360 has turned into a support. Bids to meet first resistance at 1.0463 (38.2% Fibonacci retracement of the 25 Mar-2 Apr downswing).

      SGD/MYR – Capped. The SGD/MYR continues to consolidate with a downward bias even as the MYR weakens and the SGD rebounded. This is likely due to short SGD/MYR positioning on expectations that the rebound in global oil prices would pull the MYR higher. Cross is currently hovering around the 2.68-region with the bias still to the downside as indicated by both intraday momentum indicator and oscillator. Continue to look for consolidative trades within 2.6695-2.6900 intraday with the bias still to the downside.

      USD/MYR – Tentative Bids. USD/MYR opened firmer this morning, underpinned by overnight dollar upmove and was last seen around 3.6460, closing in on the 3.6500-resistance. Ringgit is one of the worst performers in Asia this morning, dragged by fall in foreign reserves. BNM reported foreign reserves to be at USD105.1bn as at 31 Mar. Intra-day charts not showing much momentum on either side and a lift above 3.6500 could open the way towards 3.6658. Eyes on tonight’s FOMC minutes that could swing the USD/MYR pairing. Support remains at 3.6212 for the near term and we retain our underlying view for ringgit weakness as we consider the risk of rating downgrade amid contingent liability exposure, lower fiscal revenue and narrowing current account surplus remain unchanged.

      USD/CNH – Consolidate with Mild Bias to Upside. The pair consolidated in lacklustre range of 6.1930 – 6.2015 range yesterday in absence of fresh cues. Intra-day arrange of 6.19 – 6.21 expected; key support still seen at 6.19 (200 DMA); a decisive close below 200 DMA could open way towards 6.1560 (76.4% Fibonacci retracement of 6.1113 – 6.3021). Intra-day range of 6.1850 – 6.2100 expected.  USD/CNY was fixed higher by 40 pips at 6.1345 (vs. 6.1305). CNYMYR was fixed lower by 6 pips at 0.5851 (vs. 0.5857).

      USD/IDR – Rangy. The USD/IDR is back above the 13000-levels this morning, playing catch-up with the rest of the region. Pair is currently hovering around the 13000-figure with intraday MACD showing no strong momentum and slow stochastics indicating tentative signs of an upside bias. Foreign funds continued to buy Indonesian assets with a net USD37.03mn in equities purchased yesterday and continued asset purchases is likely to keep the IDR supported and limit upside today. Lacking fresh catalyst, we look for the pair to still track the dollar today with upside capped by 13100 and support around 12900. 1-month NDF is little changed this morning, still hovering around the 13100-region, with intraday MACD still showing bullish momentum and slow stochastics at overbought levels. JISDOR was fixed higher as expected at 12982 yesterday vs. Mon’s 12942 and a higher fixing is likely given the spot’s climb higher this morning.

      USD/PHP – Mild Upside Bias. The USD/PHP is on the slide this morning, partly playing catch-up with the rest of the region and partly due to the unexpected dip in exports (-3.1% y/y) in Feb. Pair is currently headed towards the 44.580-levels with intraday MACD showing no strong momentum and slow stochastics is indicating bullish bias, suggesting mild upside ahead. Resistance today is around 44.700 and support around 44.300. 1-month NDF has climbed higher to trade near the middle of its 44.400-45.230 trading range, currently hovering around 44.650, with intraday MACD showing bullish bias and slow stochastics at overbought levels. Foreign funds bought a net USD37.74mn in equities yesterday, helping to cap USD/PHP upside yesterday.

      USD/THB – Bullish.  The USD/THB attempted but failed to take out our resistance level for the week at 32.580 even though the pair climbed above the 32.600-levels overnight on the back of a dollar recovery.  Pair has since move back below the 32.580 level as the dollar softens but a re-test of that level cannot be discounted. A firm break of the 32.580-resistance level would expose the next barrier at 32.640. 44.450 should be supportive today. Intraday MACD and slow stochastics are bullish bias. Foreign funds bought a net THB6.82bn in government debt yesterday but sold a net THB0.67bn in equities.

Rates

Malaysia

      Local government bond market saw the new 10.5y GII 10/25s issued with a strong bid-to-cover of 2.752x. However, there was no follow through buying post auction and instead, the market saw profit taking which sent MGS yields 2-5bps higher on the front end to the belly of the curve. All eyes will be on the next auction which is the 5.5y new MGS 10/20. This new 5.5y MGS may pressure the 5y GII 8/20 to correct itself as it is currently trading tight against the present 5y MGS 10/19.

      IRS market saw an aggressive foreign seller in the belly of the curve but there were no willing payers. As the curve shifted higher with MGS prices cooling down towards closing, the seller took a step back and payers came forth. 3y IRS traded at 3.65%. We prefer to pay given that a rate cut has been priced into the curve. 3M KLIBOR remains at 3.73%.

      For the PDS market, it was relatively quiet amid the new GII auction. Aman 19s tightened 1bp with firm bidding interest in the market. PTPTN 24s also traded 1bp tighter with MYR30m volume done. Telekom 24s were given at 4.48%, 1bp wider than last traded level. We noted keen buying interest for very short dated papers (<1y maturity) with MYR20m of Rantau 15s being traded.

Singapore

      Relatively quiet day in the SGS market and there was little interest to be aggressive on either side. The yield curve rose about 2-3bps at the back end while the front end was only up by 1bp. SGD IRS curve steepened slightly with the 2y up by 3bps and the 5y-10y up by 4-5bps. Bond swap spreads recovered back to -18bps.

      Asian credit market was muted again with HK still out for Easter holidays. We saw CNOOC tightened by 2bps at T+148 given the recent rally in oil prices. Today, we expect other O&G names to trade higher as well as more buyers for other credits as the market comes back in full force.

Indonesia

      Bond prices corrected post strengthening on previous week as market sentiment was rather minimal during the day. This weakening occurred amid President Jokowi visited the stock exchange yesterday for convincing or creating more confidence towards investors in regards to Indonesia government optimism on a better domestic economic condition in the future. His goal is clear and straight forward, which is obtaining a Foreign Direct Investment by simplifying permits and improving policy. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.178%, 7.284%, 7.467% and 7.653% while 2y yield shifts down to 6.942%. Trading volume at secondary market remains thin at government segments amounting Rp8,677bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp1,735bn with 50x transaction frequency and closed at 107.071 yielding 7.284%.

      Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp5.40 tn bids versus its target issuance of Rp2.00tn or oversubscribed by 2.7x. However, DMO only awarded Rp2.64tn bids for its 6mo SPN which was sold at a weighted average yield (WAY) of 5.78711%, 1y PBS008 at 7.07000%, 6y PBS006 at 7.41435% while 26y PBS007 was sold at 8.21175%. Incoming bids were mostly clustered on the front end tenors. No bids were rejected during the auction. Bid-to-cover ratio came in at 1.10X – 5.40X. Till the date of this report, Indonesian government has raised approx. Rp2.64tn worth of debt through bond auction which represents 3.2% of the 2Q 15 target of Rp83.50tn. On total, Indonesian government has raised approx. Rp182.8tn worth of debt through domestic and global issuance which represent 40.5% of this year target of Rp451.8 tn.

      Corporate bond trading traded thin amounting Rp488 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 Rp140bn yielding 11.303.