Maybank GM Daily - 21 Sep 2015

FX

Global

      US stocks closed lower on Fri, still reeling from the Fed’s decision to keep short-term interest rate at 0-0.25%. Investors see the inaction by FOMC as an indication of how uncertain the Federal Reserve is of the US economy and the impact of the global environment. Over the weekend, Fed Williams sees accelerating wage growth lifting the inflation rate towards target. He also noted improvement in the jobs market and US’ resilience towards global headwinds. Elsewhere in the EU, the Schengen Treaty of open borders broke down, as EU countries closed their borders in response to the escalating refugee crisis.

      In the near-term, we expect dollar to remain offered. AUD and CAD saw small gains this morning. In Asia, MYR had reversed out Friday’s gains, weighed by the retreat in brent prices on Fri as well as domestic issues. KRW is also on the backfoot, down -0.8% against the the USD, dragged by equity-related outflow. Expect risk sentiments to be cautious in the rest of Asia as well.

      Week ahead should focus on China Caixin Sep flash PMI-mfg (Cons.: 47.6) on Wed. Malaysia releases FX reserve data tomorrow and its Aug CPI numbers on Wed, along with Singapore. The latter also has Aug industrial production on Fri. BSP meets on Thu and no change is expected. Other data we are watching for the majors includes US Aug existing home sales; Fed’s Lockhart speaks; GE Aug PPI; ECB Coeure, Praet speak; NZ consumer confidence on Mon. For Tue, US Jul house prices; US Sep Richmond Fed Mfg index; EU emergency meeting on migration. For Wed, US Sep PMI, Fed’s Lockhart speaks; EC, GE, FR Sep flash PMIs; ECB Draghi quarterly hearing. For Thu, US Aug CFNAI, durable goods, new home sales, Kansas City Fed Manf. Activity; GE Sep IFO; NZ Aug trade. For Fri, Fed’s Yellen and Bullard speak; US 2Q GDP; Sep Univ of Michigan sentiment; EC Aug M3.

Currencies

G7 Currencies

      DXY – Caught between Delayed Rate Hike and Flight to Quality? USD reversed weakness into NY close overnight, tracking softer risk appetite. US treasuries also risen, with UST 10Y yields falling about 6bps. Global equities closed in negative territories. Comments from Fed - EM growth concerns and downward revision on US growth, inflation and Fed fund rate could weigh on risk appetite, and may support flight to quality flows (supporting the USD to some extent). But a delayed rate hike move should weigh on USD strength. DXY was last at 95.20. Weekly momentum remains bearish bias. Resistance at 95.50 (21 DMA cuts 200 DMA). Support at 94.50 (23.6% fibo of Mar high to Aug low), 93.80 levels. Week ahead brings Aug existing home sales; Fed’s Lockhart speaks (Mon); Jul house price index; Sep Richmond Fed Mfg index (Tue); Sep flash Mfg PMI; Fed Lockhart speaks (Wed); Aug CFNAI, durable goods, capital goods new home sales; jobless claims; Kansas City Fed Manf. Activity (Thu); Sep Markit PMI flash; Sep Univ. of Michigan Sentiment; Fed’s Yellen, Bullard to speak (Fri).

      EUR/USD – ECB Talk Could Weigh on EUR Strength. EUR slumped amid broad USD weakness. ECB Coeure commented that monetary policy divergence between US and Europe remains even after Fed did not hike interest rates. Recall that last ECB meeting saw Draghi pledging to do more QE if need arises. This could continue to weigh on any EUR strength. Over the weekend Syriza party won the Greek elections, restoring Alexis Tsipras back to power (non-even for the EUR).  EUR was last at 1.13 levels. Daily momentum is flat while stochastics is showing tentative signs of falling from overbought areas. Resistance remains at 1.1400 (50% fibo of retracement of Aug low to high), 1.1475 (61.8% fibo). Support at 1.1250 (200 DMA), before 1.1150 (100 DMA). We continue to reiterate that the impetus to sell EUR on rallies remains as ECB stands ready to do more QE if need arises but tricky part is risk-off sentiment moves tend to support the EUR, given its “funding currency” status. Week ahead brings GE Aug PPI; ECB’s Coeure, Praet to speak (Mon); EU Emergency meeting on Migration (Tue); FR 2Q GDP; EC, GE, FR Sep PMI; ECB’s Draghi Quarterly hearing (Wed); GE Oct GfK Consumer Confidence, Sep IFO (Thu); EC Aug M3 (Fri).

      GBP/USD – Buy on Dips. GBP eased amid broad USD strength last Fri. Last seen at 1.5535 levels.  Week ahead is relatively quiet on the data front. On technicals, daily momentum and stochastics are indicating a mild bullish bias. GBP was last at 1.5580 levels.  Key support at 1.5350 (200 DMA), before 1.5260 (50% fibo retracement of Apr low to Jun high). Resistance at 1.5670 (76.4% fibo). Week ahead brings Sep house prices (Mon); Aug public finances; CBI Sep Trends Total Orders (Tue).

      USD/JPY – Downward Tilt. Onshore markets are closed until Wed for a series of public holidays and will re-open on Thu. USD/JPY tumbled below the 120-handle to 119.06 (18 Sep) following FOMC decision to keep policy rate unchanged amid a dovish statement and projection. With the market out for most of the week, trades are likely to be quiet. Dollar resurgence could keep the pair supported around the 120-region for now. Still, the death-cross-equivalent formation (21DMA crossing below 200DMA which we highlighted last week) had materialized. Pair could push lower towards 118.30 (23.6% Fibo retracement of Jul-Aug downswing) before 116 support. Meantime, 120.85 (200DMA) remains key resistance. Though the BOJ remains reluctant to add to QE for now, we continue to expect the lack of price pressure and more moderate growth to push the central bank to eventually move by end-Oct. We remain buyers on dips. This shortened week brings Sep PMI flash (Thu); and Aug CPI (Fri).

      AUD/USD – Further Upmove Could Be a Grind. AUDUSD hit another high of 0.7280 on Fri night before reversing lower. Upside momentum is still intact as we write, last seen around the 50-DMA at 0.7190. While bias is still to the upside, RSI flags near overbought conditions and subsequent upticks might be more of a grind. Next strong resistance is seen around 0.7340.  This pair has been lifted by a rebound in the copper prices recently and another upside surprise in the employment numbers. The leadership change at home, hardly put a dent in the currency.   Any retracements to meet support at 0.7147 ahead of the next at 0.7100. Week ahead brings 2Q house prices (Tue); Aug skilled vacancies (Wed)

      USD/CAD – Back to Range. USDCAD sank to a low of 1.3013 on Fri, the upper bound of the daily bullish ichimoku cloud and reversed higher to around 1.3220. Aug CPI came in flat at 0.0%m/m, in line with expectations. Core inflation also matched consensus, picking pace to 0.2%m/m from 0.0% in the month prior. The weak inflation prints lifted the USDCAD, enabling a full reversal for the pair. USDCAD is now back above the base line at 1.3184 and this line could be a viable support. Weekly MACD shows waning bullish momentum. Daily MACD shows bearish momentum as well. Despite the strong reversal, bearish risks still lurk and we look for a clearance of 1.3157-support for this pair to target next support at 1.3016. Resistance levels seen at 1.3300 and 1.3354. Week ahead brings only Jul retail sales (Wed). Consensus expects a firmer print of 0.8%m/m (Vs. prev. 0.6%).

      NZD/USD – Sell Rally. NZD-short squeeze continues post-FOMC USD weakness. Last seen around 0.6380 levels. Daily momentum and stochastic continue to indicate a mild bullish bias in the near term. Next resistance at 0.64 levels (21 DMA), if broken on a daily/weekly close basis could see another grind higher towards 0.65 levels (50 DMA). NZD remains well within the downtrend channel formed in May. Still favour selling into rallies. We continue to reiterate our bearish bias for NZD on a combination of drivers CPI inflation at 15-year lows with risk of staying low for longer on low oil prices and weak dairy prices, prospect of dairy prices staying low for longer (although recent auction last month saw the 2nd back to back increase after 10 consecutive declines), benign wage inflation, declining ToT amid weakening demand. Week ahead brings 3Q consumer confidence; Aug net migration, credit card spending (Mon); Aug trade (Thu).

Asia ex Japan Currencies

      The SGD NEER trades 0.21% below the implied mid-point of 1.4015 with the top end estimated at 1.3734 and the floor at 1.4296.

      USD/SGD – Capped; Buy on Dips. USD/SGD had come under pressure post-FOMC, hitting a low of 1.3886 (18 Sep). Since then, pair has been on the uptick, climbing back above the 1.40-handle. Last seen around 1.4033, pair’s bearish bias remains intact as indicated by daily momentum and stochastics. Upmoves this week is likely to be capped around 1.4100 (21DMA), while dips should find support around 1.3936 (50DMA). A break below this level could expose the next support at 1.3860 (38.2% Fibo retracement of the Apr-Sep upswing). We continue to favour buying on dips. The week ahead has Aug CPI (Wed) and Aug IPI (Fri).

      AUD/SGD – Upside Momentum. This cross inched higher and was last seen around 1.0060, underpinned by AUD strength. Slight SGD weakness this morning also lent support. The 50-DMA is still formidable as a resistance at 1.0093 while support is seen around 0.9995 (Conversion line of the daily ichimoku cloud). Daily MACD shows bullish momentum and we expect further upmove in the near-term. That said, weekly MACD suggests some sideway trades for these two weeks.

      SGD/MYR – Bearish Bias. SGDMYR is stabilising around 3.0260 levels. Daily momentum and stochastics are suggesting a bearish bias. Break below 21 DMA at 3.0200 (on daily close basis) could see the cross push lower towards 2.96 levels.  Support remains at 3.0120 (61.8% fibo retracement of Sep low to high). Resistance at 3.05 levels.

      USD/MYR – Range-Bound. USDMYR opened and traded higher this morning, tracking risk appetite, firmer USD and weaker oil prices. Last at 4.25 levels (vs. 4.1965 close last Fri). Daily momentum continues to indicate a bearish bias but stochastics is showing tentative signs of turning higher from oversold level. Resistance at 4.2530 (21 DMA), before 4.2880 (38.2% fibo retracement of Sep low to high) Support at 4.1970 (76.4% fibo). We continue to reiterate that MYR at current levels is not a reflection of fundamentals and that the weakness is expected to be temporary. Malaysia’s economic fundamentals remain intact. 2015 growth is still expected to come in at 4.9%; current account to GDP remains in surplus. 

      1s KRW NDF – Buy on Dips. 1s KRW traded a low of 1161 last Fri following USD weakness and rating upgrade on KR but KRW strength was soon reversed into the close and continue to stay weak vs. USD this morning, Pair was last at 1174 levels. The pair may look technically bearish on the weekly charts but fundamentals and risk sentiment suggests the pair could remain supported. Risk sentiment remains on the back foot while EM weakness concerns linger and domestic macro-fundamentals remain weak. We continue to reiterate our bearish view for KRW - on concerns over growth/domestic consumption/ tourism/ foreign investment against a backdrop of subdued inflation, weak activity data, soft exports, and rising household debt (165% of annual household disposable income). Immediate resistance at 1175 (50 DMA) before 1178 (38.2% fibo retracement of 1210 – 1158). Support at 1170 levels.

      USD/CNH – Stuck at 6.40. USD/CNH slipped to a low of 6.3850 last Fri and is back on the upmove around 6.3940, attracted to the 6.40-figure. The Fed has added to the downside pressure on the USDCNH but we still think this pair could be sticky around the 6.40. Next support is seen around 6.3780. Gap between CNY and CNH remained around 300 pips as we write. it is clear that PBOC wants a convergence. USD/CNY was fixed -63 pips lower at 6.3607 (vs. previous 6.3670). CNY/MYR was fixed 35 pips lower at 0.6627 (vs. previous 0.6661). NDRC said that China will raise supply of public goods and services and seek to support exports and imports. Private investments are encouraged in the petroleum, natural gas, electricity, railways and telecommunication sector.

      SGD/CNY – Turning Lower. This cross was rejected by the 100-DMA and slipped towards the 50-DMA as we write this Asia morning, last seen at 4.5310. The 50-DMA at 4.5288 is still a support area and break there exposes the next at 4.5155 (23.6% Fibonacci retracement of the Jun-Aug sell off). Momentum on the daily MACD is waning.

      USD/INR – Turning Lower. USDINR gapped down and closed lower on 18 Sep at 65.6740. Weekly MACD shows waning bullish momentum. Daily MACD shows increasing bearish momentum. The closing value is neatly on the base line of the daily ichimoku chart. The daily chart for 1-month NDF shows increasing bearish momentum as well and was last seen around 66.20. Support for the NDF is still seen around 65.79 and risks for both spot and NDF are to the downside. Expect spot to target next support at 64.9455. Softer USD is likely to add to the downside pressure. Foreigners sold USD32.2mn of equities on Wed. At home, Finance Minister Jaitley has urged RBI to “act responsibly on rates”, adding pressure on the central bank to lower policy rates to boost growth.

      USD/IDR – Supported.  The USD/IDR has been on the rapid climb for the past two months on a combination of factors, culminating in a multi-year high of 14489 (18 Sep). Post-FOMC, pair has eased off from that high but remains on the uptick this morning at 14440 underpinned by the firmer dollar, though upside could be capped given that daily MACD is showing no strong momentum and stochastics still at overbought levels but falling. Sluggish domestic economy amid global growth concerns should keep the pair supported ahead. Further upticks should meet resistance around 14500, while any dips should find support around 14230 (21DMA). 1-month NDF is edging lower towards the 14500-levels at 14520 post-FOMC after hitting a high of 14674 (17 Sep) with daily MACD and stochastics showing mild bearish bias. The JISDOR was fixed at a new record high of 14463 on Fri but could come off following the spot’s move lower on Fri. Investor sentiments were mixed last week with foreign funds selling a net USD116.06mn of equities, but had added a net IDR0.21tn to their outstanding holding of government debt (latest data available). Quiet data week ahead.

      USD/PHP – Capped.  After edging lower to 46.421 on Fri post-FOMC, pair is now back on the climb above the 46.500-levels at 46.518. Daily MACD and stochastics remain bearish, suggesting further upside could be capped. Resistance is seen around 46.720 (21DMA) while 46.155 (50DMA) should be supportive. 1-month NDF is back on the climb at 46.620 after slipping lower to 46.320 post-FOMC with both daily MACD and stochastics showing bearish bias. Risk aversion continues to dominate with foreign funds selling a net USD0.53bn of equities last week. This week brings Jul imports and trade balance (Wed); and BSP overnight borrowing rate on (Thu).

      USD/THB – Rebound. USD/THB has been on the slide for most of last week leading to the FOMC decision. Pair has since rebounded to around 35.700 this morning on the back of a firmer dollar tone. Daily momentum indicators and oscillators are bearish bias, suggesting that further upticks could be capped. Still, continued domestic concerns (growth, politics) amid global growth concerns and weak THB policy should continue to keep the pair supported. Look for 36.045 to cap upside while support is seen at 35.345 (50DMA). Risk appetite improved last week with foreign funds buying a net THB2.20bn and THB3.04bn in equities and government debt last week. Week ahead has Aug customs trade (expected sometime 24-29 Sep); and 18 Sep foreign reserves (Fri).

Rates

Malaysia

      MGS advanced across the curve sending 5y and 10y benchmark MGS yields lower by 7bps and 5bps respectively. Some portfolio outflows from debt market may be reversed of the Fed's dovish decision. Nonetheless, some players remain cautious given the uncertainty on global outlook and lingering China risks. The 7y GII re-opening auction will be held on Monday. WI last traded at 4.185%.

      IRS levels were sent lower as EM risk-on sentiments spurred rates lower. The IRS curve ended 3-5bps lower up to the 5y point. 3M KLIBOR stay unchanged at 3.73%.

      PDS market echoed the risk-on sentiment, though trades were still pretty confined in short-dated papers. Liquidity had not fully returned though, but there may be more price action this coming week. Overall, selective buying was seen on 9y-10y AAA names such as Telekom and Plus GG names like Prasa and Dana.

Singapore

      SGS opened lower in yields with good buying interest without the usual volatility. At close the 10y SGS yield was 10bps lower and bond swap spread at around -24bps. Near-term sentiment should remain supportive after the dovish FOMC tone.

      Asian credits were directionless post FOMC. IG spreads were unchanged to a few bps wider. Chinese O&G names and low beta Chinese Industrials (SOEs) saw firm demand and traded a touch firmer. We did see some rally in EM sovereigns. Indon long end traded higher by 2pts and belly higher by 1.5pts while Phillip long end was 1.5-2pts higher. With Malaysia's CDS tightening by 6bps, we saw continued buying interest for PETMK and Malay names.

Indonesia

      Indonesia bond market closed significantly positive after FOMC meeting decided to halt its FFR at 0.25%. However, we should not be overwhelmed by the situation as uncertainty remains. Buying interest was seen coming from both global and domestic investors.  Massive buying of Indonesia bond had also impacted the strengthening of the domestic currency. We are seeing a potential chance for the 10y yield series to reach 8.95%. We also believe LCY bond market would move sideways within this week. LCY bond market volatility would be affected by global event and mainly by any inflow or outflows or an intervention compared to domestic sentiments. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.791%, 9.034%, 9.349% and 9.228% while 2y yield shifts down to 8.438%. Trading volume at secondary market was seen moderate at government segments amounting Rp10,755 bn with FR0070 as the most tradable bond. FR0070 total trading volume amounting Rp1,605 bn with 94x transaction frequency and closed at 96.147 yielding 9.034%.

      Corporate bond trading traded thin amounting Rp353 bn. ISAT01BCN2 (Shelf registration I Indosat Phase II Year 2015; B Serial bond; Rating: idAAA) was the top actively traded corporate bond with total trading volume amounted Rp95 bn yielding 8.830%.