Maybank GM Daily - 6 May 2015

FX

Global

      US trade deficit widened to -USD51.4bn in Mar, raising fears of an economic contraction in the quarter. The advanced estimate was already an anemic growth of 0.2%q/q. Investors took profit on the data and upsides could remain capped ahead of payroll numbers on Fri. The greenback also pared recent gains, weighed by the trade numbers. In contrast, oil prices settled above USD60/bbl. UST 10y yields came within striking distance of 2.2% before settling just below.

      AUD was the clear winner on Tue after RBA delivered the 25bps cut. We pencil in two main reasons for the upswing – a fully priced in cut plus a significantly less dovish statement. Whilst the statement has certainly left more room for upsides, we expect the upcoming quarterly Statement on Monetary Policy to rein the AUD bulls in. Asia morning saw the currency pare some of its gains but the slide is nothing compared to its antipodean counterpart. Kiwi sagged 0.8% against the USD this morning, weighed by the Fonterra global dairy trade index which fell 3.5% and a weaker labour report for 1Q. Unemployment rate bounced to 5.8% from the previous 5.5%.

      The surge in US imports that have widened the trade deficit actually bodes well for the rest of the world including Asia. MYR swung higher by 0.5% against the DXY. THB also recouped some of its losses. The data calendar is quiet in the region today and focus will be on Apr ADP report out of US.

Currencies

      DXY - Consolidation. The greenback eased but continued to stay supported near the 100 DMA at 95 levels overnight. Mixed bag of US data - Mar trade deficit widened more than expected while ISM non-manufacturing was better than expected. Day ahead continue to see the index trade range-bound between 94.60 and 95.60. 4-hourly stochastics is falling suggesting some near term pressure on the USD. We continue to caution that a decisive daily close below 100 DMA at 95 could expose DXY towards 92.20 (38.2% Fibonacci retracement of the run-up since Jun 2014 to Mar 2015).  Week ahead brings Apr ADP; 1Q unit labor cost; Fed’s Yellen, Lockhart, George, Kocherlakota to speak (Wed); initial jobless claims and continuing claims (Thu); Apr NFP, average hourly earnings; unemployment rate (Fri).

      EUR/USD – Fade Rallies. EUR initially slipped to a low of 1.1066 during the Asian session but managed to clawed back losses to close the overnight session higher on broad USD weakness despite escalation concerns in the Greek world. Day ahead favour fading rallies towards 100 DMA at 1.1260. We continue to reiterate our bearish bias on the EUR on a combination of macro factors including diverging monetary policies between Europe and the US (ECB QE while Fed is likely to start tightening Sep 2015), ongoing disinflationary concerns, structural headwinds (labor market slack, high debt, slow reforms, possible fiscal slippages, etc.) and worries over Greece’s ability to meet repayment schedule. 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).

      GBP/USD – Downside Bias Amid Election Uncertainty. Dip in GBP towards 1.5089 off the back of weak construction PMI was brief before GBP took a turn higher amid USD weakness towards 1.5218 before closing around 1.5182 levels. Daily stochastics remains bearish bias; a close below the 100 DMA at 1.5150 overnight is expected to see further selling pressure. Favour playing from the short side, leaning against any strength towards 1.5180-1.5220, targeting next objective on the downside at 1.5030 (50% Fibonacci retracement of 1.4566 – 1.5492).

      USD/JPY – Consolidating In Tight Range. Onshore markets remains closed for holidays and re-opens on Thu.  The USD/JPY slid back below 120 overnight in reaction to the US trade deficit, but is bouncing slightly higher again. Still, pair is currently trading close to the lower bound of its current trading range of 119.70-120.80 and should continue to do so unless external shocks arise. Intraday MACD and slow stochastics are bearish bias.

      AUD/USD – Bulls Gaining Momentum - AUD/USD hovered around 0.7940 after hitting a high of 0.7956 in overnight trade after RBA delivered its 25bps cut. Pair still has some upside momentum but we expect upmove could be a grind ahead of NFP and SoMP on Fri. Support is seen at 0.78-figure in the near-term. The upper bound of the daily ichimoku cloud has been broken and we eye the 0.80-figure and the clearance of that exposes the next at 0.8286.

      NZD/USD – See You Later. NZDUSD fell as trade data disappointed and GDT dairy index fell 3.5% in latest auction overnight. Following the RBA rate cut yesterday, pressure is now on RBNZ given that they have hiked rate 4 times last year and that gives them room to lower rates. This is especially so when RBNZ said in its 30 Apr statement that future OCR cut if demand weakens and wage and price setting outcomes come in lower than is consistent with inflation target. RBNZ next meet on 11 Jun.  On the technical analysis perspective, pair remains biased for further downside; MACD and stochastics are bearish bias; a daily close below 0.7535 levels (50 DMA) is expected to see the pair re-visit 0.71 – 0.72 levels. Favour playing from the short side.

Asia ex Japan Currencies

      The SGD NEER trades around 0.09% below the implied mid-point of 1.3331. The top end is estimated at 1.3065 and the floor at 1.3598.

      USD/SGD - Range-Bound. The USD/SGD retreated towards 1.3300 overnight on the back of a softer dollar tone. Pair has regained almost all of its losses, no thanks to the uptick in the USD/JPY. Pair is currently in an intraday ichimoku cloud, suggesting range-bound trading is likely ahead. Upside today should be capped by the upper bound of the ichimoku cloud around 1.3345 ahead of the stronger hurdle at 1.3380. Downside moves remains supported by 1.3230. Intraday MACD is showing no strong momentum, but slow stochastics continues to fall from overbought levels.

      AUD/SGD – Bulls Gain Favour. AUD/SGD bounced in tandem with the AUD and hovered around 1.0580,s till resisted by the bearish ichimoku cloud. This cross needs to break the 1.0590-barrier to make way for more upsides. 1.0675 is the next resitance level to watch while 1.0376 supports. Eye the Statement on Monetary Policy this Fri.

      SGD/MYR – Consolidate in Triangle. Cross continued to trade 2.69 – 2.7050 range overnight; opened around 2.6940 levels this morning. Pair is likely to consolidate in triangle bounded by 2.68 – 2.73 range. We continue to caution that a break out lower with 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).  4-hourly stochastics is approaching overbought areas and could suggest some downside bias interim; likely to see intra-day range of 2.68 – 2.7050

      USD/MYR – Respite. USD/MYR gapped lower towards 3.5893 levels this morning tracking a firmer oil prices and broad USD weakness overnight.  WTI is now back above $60 while Brent is back above $67/bbl; Ringgit could find some short term support on a combination of drivers including firmer oil prices, some support from net foreign fund inflows and slowly dissipating concerns about the impact of risk of sovereign rating downgrade (while still being flagged as a risk). BNM meeting (Thu); we are not expecting any change to policy rate. Daily momentum and oscillators are mild bullish bias. Next resistance at 3.6080 (100 DMA) before 3.6210 (21 DMA). Intra-day see 3.5800 – 3.6100 range.

      USD/CNH – Consolidative. USD/CNH slipped this morning, in anticipation of a lower USD/CNY fixing by PBOC after the slide in the greenback last night. Pair was last seen around 6.2060, still in consolidation phase within 6.1842-6.2292. A breakout is needed for more directional cues at this point. Expect USD/CNY fixing to be slightly lower than the fixing at 6.1180 yest. We still await the completion of the head and shoulders pattern and the clearance of the neckline around the 6.19-figure, which is near to the 200-DMA at 6.1896. On 5 May, USD/CNY was fixed 15 pips higher at 6.1180 (vs. previous 6.1165). CNYMYR was fixed 22 pips higher at 0.5745 (vs. 0.5723).

      USD/IDR – Bullish Bias. The USD/IDR climb higher to 13062 yesterday on the back of disappointing 1Q15 GDP print (4.71% y/y vs. cons: 4.94% and 4Q14: 5.01%). As we noted yesterday, this worst-than-expected performance should keep the pair above the 13000-levels ahead with the pair possibly heading towards 13150 given the close above 13050 yesterday. Still, the grind higher could be gradual as the pair plays catch up with its regional peers. Look for support still at 12950. Intraday MACD and slow stochastics remain bullish bias. Foreign funds bought a net USD0.35mn in equities on Tue, helping to mitigate the upside in the pair yesterday. 1-month NDF is broke above 13150 yesterday and continue to edge higher at 13165 with four-hourly MACD still showing bullish momentum though slow stochastics is now falling from overbought levels. The JISDOR was fixed lower at 12993 on Tues from Mon’s 13021.

      USD/PHP - Rangy. The USD/PHP is edging lower this morning to 44.555 on the back of a softer dollar tone overnight. Pair continues to trade within familiar range of 44.400-44.800. Pair is likely to see two-way trades ahead with intraday MACD showing bullish momentum though slow stochastics is showing tentative signs of falling from overbought levels. 1-month NDF is edging lower this morning to 44.650 but remains within its 44.400-44.900 range with intraday MACD and slow stochastics showing bearish bias. Foreign funds bought a net USD8.91mn in equities on Tue, helping to support the PHP yesterday.

      USD/THB - Mild Bearish Bias.  Onshore markets re-open today after a two-day holiday with the USD/THB sliding to a low of 33.085 before rebounding to hover around 33.326 at last sight. Pair had attempted but failed to break our resistance level at 33.450 (1 Feb 2010 high) yesterday, should continue to cap any upticks today. A clean break of the 33.450 hurdle could see the pair head towards 34.000. Support remains at 33.000. Intraday MACD is showing tentative signs of bearish momentum while slow stochastics are falling from overbought levels.

Rates

Malaysia

      Local government bonds traded range bound, with offshore buying seen on MGS 10/20s despite the selloff in US Treasuries (UST) and USDMYR gapping higher after the holidays. The 5y benchmark ended lower by 1bp with MYR981m trading volume. Some buying was also seen on the 10y benchmark MGS 9/25s in the late trading hours as the bond closed unchanged.

      In the IRS market, we saw good bidders on the back of the higher USD and regional rates market. The curve bear steepened by 2-5bps, with some trades reported on the 2y IRS. 3M KLIBOR stayed at 3.72%.

      PDS market remained uneventful. For GGs, the 9-18y Prasarana and Danainfra papers traded at MTM prices or just 1bp wider. In the AAA space, Telekom papers were well bidded but no trades were done, while Aman 24s tightened 2bps to 4.40%. This translates to a 54bps spread over the 10y benchmark govvy which is still attractive. Longer dated Plus papers (15-19y) widened 1-2bps due to a lack of demand for this maturity bucket. Meanwhile, Khazanah-related paper Danga 30 was still well bidded and we heard buying interest for Rantau 19s with bids tightening 2bps from previous levels.

Singapore

      SGS yields rose as high as about 9bps before ending 5-6bps higher for the long end and 3-4bps higher for below the 10y. SGD IRS also ended higher by 7bps. Bond swap spreads widened about 1bp despite USDSGD moving up post the RBA rate cut.

      The Asian credit market was relatively quiet in the morning with UST out as Japan was still on holiday. It was, however, skewed towards a firmer tone as spreads tightened 3-5bps with some Chinese credits being bought up for absolute yield. Japanese and Koreans names remain largely unchanged though some nibbled on tech names. Sovereigns were more active as the long end INDON and PHILLY were down about 0.50-0.75pts in tandem with the movement in UST. The tone improved slightly when buyers came in to support later in the day. Only 2 new issues: 1) Korean Shinsegae 30y bond, and 2) China Energy Reserve unrated 3y deal guiding at 5.25%-5.375%.

Indonesia

      Indonesia statistics issues Indonesia’s 1Q 15 growth which grew by 4.71% YoY slowing from 5.01% YoY in 4Q 14 driven by slowing growth of Non-Profit Institutions Serving Household consumption, government spending, exports, and imports. Based on industry, most of the sector experience a decline of growth, however, several sectors such as Agriculture, forestry and fishery sector, Transportation and storage sector, Information and communication sector, Real Estate sector and Human health and social work activity sector experience a better growth. (Please read our economist GDP Snapshot report: Economy Posted at Slowest pace since 4Q 2009 for further details). As a result, Indonesia bond market experience a significant loss in term of price and matched our expectation that the 10y bond yield continue creeping up ahead of the 8% level. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.674%, 7.893%, 8.080% and 8.224% while 2y yield shift up to 7.455%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,990 bn with FR0070 (10y benchmark series) as the most tradable bond. FR0070 total trading volume amounting Rp2,667 tn with 83x transaction frequency and closed at 103.014 yielding 7.893%.

      Indonesian government conducted their sukuk auctions yesterday and received incoming bids of Rp3.60 tn bids versus its target issuance of Rp2.00 tn or oversubscribed by 1.8x. However, DMO only awarded Rp1.96 tn bids for its 5mo, 1y, 5y 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 5.91406%, 1y PBS008 at 7.38914%, 5y PBS006 at 7.81818% while 26y PBS007 was sold at 8.44932%. No bids were rejected during the auction. Bid-to-cover ratio on today’s auction came in at 1.05X – 3.30X. Till the date of this report, Indonesian government has raised approx. Rp20.13 tn worth of debt through bond auction which represents 24.1% of the 2Q 15 target of Rp83.50 tn.

      Corporate bond trading traded thin amounting Rp452 bn. SSMM01A (Sumberdaya Sewatama I Year 2012; A serial bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp100 bn.