Maybank GM Daily - 1 Oct 2015

FX

Global

      US stocks had another choppy session with the benchmark indices falling from its opening prices before rebounding back at close. Risk sentiments were mostly positive as equities joined their European and Asian counterparts in exuberance, buoyed by speculations of further stimulus. There were quite a number of Fed speaks overnight with Fed Dudley warning of a rise in bond market liquidity risks that can only be seen as Fed tightens. He also expects more volatility as Fed liftoff approaches. Fed Bullard did not comment on monetary policy and economic outlook. Fed Chair Yellen mentioned that economy has seen ‘significant improvement’ which, in our view, begs the question of what they are still waiting for to lift the target rate by a mere 25bps.

      ADP saw addition of 200K of private employment, 10K higher than consensus. That should be a positive cue for NFP on Fri.  Today, focus will be on China’s PMI-mfg which came in slightly better than expected at 49.8. The Markit Caixin version is expected to be 47.0. PBOC lowered the required mortgage downpayment for first home owners yesterday from current 30% to 25%. The central bank also released findings of a market survey done in 3Q that saw fewer households regarding property prices as high. Onshore markets are closed for Golden Week which will last until 7 Oct.

      This morning, Japan released Tankan business confidence survey. Outlook for  manufacturing and non-manufacturing seems to be less than optimistic as the next tankan was projected to be lower for both sectors. The latest survey increases expectations of further easing by BOJ this month. More PMI-mfgs numbers watched from the rest of the world including Singapore, Europe and US. Indonesia releases CPI today as well. BOE’s financial policy committee record of Sep meeting will be released. Dollar is firm at this point  but current positive risk sentiments could help cap USDAXJs. 

Currencies

G7 Currencies

      DXY – Consolidate. USD firmed overnight as ADP payrolls was better than expected. US and EU equities were also broadly higher (around 2%). Sep Chicago PMI disappointed – slumped into contractionary territory.  DXY was last seen at 96.28 levels. Daily momentum remains mild bullish. Resistance remains at 96.30 (50 DMA) – 96.50 area (previous resistance area that capped DXY from rallying in early-Sep. If broken on daily close basis could push higher towards 97.40 (61.8% fibo retracement of Mar high to Aug low). Support remains at 95.70-80 levels (21 & 200 DMAs). A break below on daily close basis should see further downside pressure playing out; next support at 94.50(23.6% fibo retracement of Mar high to Aug low). Week remaining brings iitial Jobless Claims (Sep-26); Markit US Manufacturing PMI (Sep); ISM Manufacturing (Sep); Fed's Williams Gives Outlook Speech to Salt Lake Area Community on Thu. For Fri, Nonfarm Payrolls (Sep); ISM New York (Sep); Factory Orders (Aug); Fischer Addresses Boston Fed Conference on Monetary Policy.

      EUR/USD – 50 DMA Cutting 200 DMA Soon? EUR eased below 1.12-handle overnight tracking risk-on appetite. We continue to reiterate EUR’s status as a funding currency.  Price action continues to suggest that the inverse relationship between risk assets and EUR/USD still hold. EUR was last seen at 1.1170 levels. Daily and 4-hourly momentum are indicating a mild bearish bias intra-day. Support at 1.1170 (21 DMA and 200 DMA), 1.1140 (100 DMA), 1.1090 (Sep low). Resistance at 1.1320 (38.2% fibo retracement of Aug high to Sep low) before 1.14 levels (50% fibo). There is a potential of 50DMA cutting 200 DMA to the upside. This could suggest potential upside pressure. Week remaining brings FR GE EC Mfg PMI (Sep F) on Thu. For Fri, EC PPI (Aug); EU's Juncker Attends German Unity Ceremony in Frankfurt.

      GBP/USD – 21 DMA Meets 200 DMA. GBP firmed on 2Q GDP and current account data; traded a high of 1.5214 but strength was reversed into NY close overnight amid USD strength. 2Q final GDP held up on q/q basis but was slightly lower on y/y basis. 2Q current account deficit narrowed to lowest level in 2 years. GBP was last at 1.5125 levels. Daily momentum and stochastics remain mild bearish bias. 21 DMA is attempting to cut 200 DMA, typically suggesting downside pressure. Support at 1.5090 (61.8% fibo retracement of Apr low to Jun high). Break below could see a push towards 1.4890 levels (Apr lows). Resistance remains at 1.5330 (21 and 200 DMAs). Week remaining brings BOE's Financial Policy Committee Record of September Meeting and Markit Mfg PMI (Sep) on Thu.

      USD/JPY – Range-Bound. The USD/JPY ended 3Q at 119.67 underpinned by safe haven plays. Pair remains below the 120-handle this morning measures as the majors were sold off against the JPY. This was even as 3Q Tankan Report was mixed, which could spur the central bank to add to its easing. Our long-held view remains for the BOJ to add to its easing measures at end-Oct given the lack of inflationary pressures and sluggish growth, which should be supportive of the pair ahead. Pair is hovering range-bound for now with both intraday MACD and stochastics showing no strong bias in either direction. Look for range-bound trades to continue intraday with resistance around 120.25 (100DMA) and support around 119.25 (29 Sep low). 3Q BOJ Tankan Report out this morning was mixed, suggesting that the economic environment was not as bad as feared but that the economic recovery could be a very gradual process. Sep large manufacturer Tankan fell from 15 to 12 (cons.: 13), while large non-manufacturer rose to 25 from 23 (cons.: 20). However, the outlook for both fell to 10 and 19 respectively. Small manufacturer and non-manufacturer Tankan was flat and 3 respectively with the outlook down for both at -2 and 1 respectively.

      AUD/USD – Supported on Dips. AUDUSD was easing back from yesterday highs of 0.7038 at first ahead of China’s PMI-mfg release. Print was 49.8, firmer than expected and better than the Aug number. The Caixin version awaits. Intra-day, risks are to the upside with MACD showing bullish conditions. Daily MACD however, shows little directional bias. Broad downtrend is still intact though a failure to clear the 0.69-figure could mean serious reversal. Recent low of 0.6896 is still support level to watch and next support beyond that is seen around 0.6846. Weekly MACD also indicates little directional bias. Moves ahead could be volatile and we anticipate action to remain largely within 0.6900-0.7200. Sep commodity index is due today after lunch. Aug retail sales due on Fri. IMF stated ina  report that China’s slowdown poses risks to Australia’s economic outlook and warned of a hard landing in the housing sector. Its real GDP growth forecast is seen at 2.5% this year, 3% in 2016. Medium –term potential growth is likely to be around 2.5% vs 3.25% in the past. The IMF staff added that AUD is “still on the strong side”.

      USD/CAD – Tentative Pullback. USDCAD slumped towards the 1.33-figure on Wed and hovered around there still. Growth in Jul eased less than expected to 0.3%m/m from previous 0.4% (revised). Year on year, growth accelerated to 0.8% from previous 0.5%. Despite the pullback, uptrend is still intact and pair has come off from overbought conditions. Next support, should the 1.33-figure give way is seen at the 50-DMA at 1.3187. 1.3420 is now a resistance level once the pair resumes uptrend. RBC Canadian Manufacturing due today should wrap up data releases for the week.

      NZD/USD – Upside Pressure Intra-day. Kiwi remained resilient despite USD strength elsewhere. Kiwi continued to edge higher this morning following China PMI numbers. Last seen at 0.6410 levels. Daily and 4-hourly momentum continues to indicate a mild bullish bias. We continue to reiterate our expected range of 0.6250 (interim double-bottom formed in Sep) – 0.6470 (50 DMA) for the week.  We remain better sellers on rallies; 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 saw the 3rd back to back increase after 10 consecutive declines since Mar), benign wage inflation, declining ToT amid weakening demand. Week remaining brings ANZ Commodity Price (Sep) on Fri.

Asia ex Japan Currencies

      The SGD NEER trades 0.75% below the implied mid-point of 1.4108. The top end is estimated at 1.3850 and the floor at 1.4392.

      USD/SGD – Consolidating. The USD/SGD appears to be consolidating after inching lower over the past two sessions. Pair is hovering around 1.4220 with both intraday MACD showing bearish bias, though stochastics is at oversold levels, suggesting the potential of a rebound. For now, market appears to be focused on the US NFP out later this week and could see the pair consolidate around current levels. An intraday ichimoku cloud is also forming ahead of price action and if pair is trapped within, range-bound trades can be expected. Consolidative trades within 1.4188-1.4265 are likely to hold intraday.

      AUD/SGD – Capped By 50DMA. This cross is still stuck at parity this morning, on the uptick because of AUD strength. We continue to see two-way moves in the week ahead with swivels likely to be around parity. Beyond the near-term, this cross remains pressured to the downside with broad downtrend still intact. Support is seen around 0.9886/40 and a break there exposes the next at 0.9700. Resistance is still marked by 50-DMA at 1.0079 and 1.0203 (100-DMA).

      SGD/MYR – Upside Limited. SGDMYR eased off recent highs; last seen at 3.0910 levels this morning. 4-hourly momentum turned mild bearish bullish with stochastics falling from overbought levels. Support at 3.0780 (break-out level). Resistance remains at 3.1325 (176.4% fibo). While upside pressure remains, we continue to see limited upside on the cross due to expected SGD weakness leading into MAS bi-annual monetary policy meeting (sometime between 5 and 14 Oct).

      USD/MYR – Some Downside Pressure. USDMYR backed off from multi-year highs of 4.4812 (29 Sep). Last seen at 4.39 levels. Move lower was due to a jump in risk appetite leading to a reversal of USD strength against commodity-linked and risk proxy currencies including AXJs. We remain cautious of risk sentiment which remains fickle. A combination of oil price volatility and re-escalation of domestic concerns may keep the pair supported. On technicals, we highlighted yesterday that daily stochastics is showing tentative signs of falling from overbought areas. Bullish momentum has also waned. Pair could face some downside pressure. First support at 4.38 (break-out level) before 4.33 (21 DMA).   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. FX reserves showed improvement, rising slightly to US$95.3bn (up from $94.7bn prior). 

      1s KRW NDF – Downside Pressure Intra-day. 1s KRW continued to ease from recent highs; last seen at 1181 levels this morning on improved risk appetite (US and EU equities were in positive territories) and less worse than expected Sep trade (posted larger than expected surplus and less worse than expected exports growth), Aug IP (+0.4% m/m vs. -1.5% Exp) data. Bullish momentum is waning and stochastics is showing some signs of falling. Support at 1180 (50 DMA) before 1176 (61.8% fibo retracement of Sep low to high) and 1169 (76.4% fibo). Downside pressure could dominate intra-day. Week remaining brings Sep inflation and Aug current account (Fri).

      USD/CNH – Convergence. USD/CNH is on the uptick towards the 50-DMA. The retracement will become more meaningful if the 50-dma at 6.3795 is broken. Onshore markets in Hong Kong and China are closed for National Day. CNH is now trading with at a small discount to CNY. MACD continues to flag bearish momentum. We eye more volatility without the presence of onshore markets. We will not rule out the possibility that capital flows has turned and to support onshore yuan. On 30 Sep, USD/CNY was fixed 47 pips lower at 6.3613 (vs. previous 6.3660). CNY/MYR was fixed 48 pips higher at 0.6994 (vs. previous 0.6945). PBOC lowered first downpayment mortgage to 25% from previous 30%, a move to support growth via the housing sector.  Sep official PMI-mfg improved to 49.8 from 49.7. PMI-non mfg steadied at 53.4. The Caixin version awaits at 0945 (SGT).

      SGD/CNY – Onshore markets are closed in China. This cross steadied around 4.4670 this morning. Daily momentum indicators still flags bearish risks. The next support is seen at 4.4280. Rebounds will meet resistance at 4.4900.

      USD/INR – Risks To the Downside. USDINR remained on the pullback as the pair closed at 65.60 as the rupee was strengthened by rallies in the equity markets. Euphoria of the 50bps cut still lingered. Support is seen at 65.2904 and interim resistance is marked at 66.3267. Daily MACD indicates that bears continue to hold the upper hand. The daily chart for 1-month NDF shows bearish momentum as well and was last seen at 65.92, resting above the 50-DMA. We expect pair to be drawn towards this level. Still, global risk sentiments could swing the USDINR. Foreigners sold USD167.9mn of equities on Tue and bought USD142.7mn of bonds. India’s Maharashtra Finance Minister said the state will increase tax on cigarettes, liquor, gold and diamonds to raise funds to tackle drought.

      USD/IDR – Two-Way Trade.  The USD/IDR on the slide this morning, tracking its regional peers broadly lower. Pair is currently hovering around 14634 with both intraday MACD and stochastics bearish bias. Still, domestic growth concerns (sluggish growth, slow pace of reforms etc.) amid concerns about a global slowdown should keep the pair supported.  Market focus on US NFP out later this week could also keep the pair limit any downside to the pair. For now, look for two-way trades within 14450-14720 to hold intraday. 1-month NDF is inching higher this morning but still well-within its current trading range of 14750-14928 with intraday MACD showing bearish momentum and stochastics hovering a tad off oversold conditions. The JISDOR was fixed lower for the first time in five days at 14657 yesterday from 14728 on Tue. Sentiments improved for the first time in 13 days with foreign funds purchasing a net USD19.60mn in equities yesterday. We have Sep CPI out later today and our economic team is expecting headline inflation to come in at 7.11% y/y in Sep, which is a tad higher than consensus’ 7.0%. In the news, the BI announced that it will begin to intervene in the currency forward markets to stabilize the IDR starting in Oct. The BI already intervenes in the spot to smooth out volatility. Intervening in the forward market will allow the central bank to signal its intentions for the IDR to the market.

      USD/PHP – Range-Bound.  USD/PHP is edging lower this morning below the 46.70-region, playing catch-up with its regional peers. Pair is hovering around 46.690 this morning with intraday MACD showing no strong momentum, though stochastic is bearish bias. Moreover, pair is trapped within an intraday ichimoku cloud. These suggest that range-bound trades within 46.550-46.830 are likely ahead. 1-month NDF is trapped within an intraday ichimoku cloud, hovering around 46.760 currently, with both intraday MACD and stochastics bearish bias. Sentiments improved yesterday with foreign funds buying a net USD9.91mn in equities.

      USD/THB – Consolidating Lower. USD/THB appears to be in consolidative mode ahead of the US NFP this Fri. Pair is hovering around 36.345 this morning with both intraday MACD and stochastics showing bearish bias, suggesting that the pair could consolidate lower ahead. In the absence of fresh catalyst, expect pair to hover within 36.250-36.500 with a bearish tilt intraday. However, downside could be limited as domestic concerns (growth, politics) amid global growth concerns remains supportive of the pair. Deteriorating risk appetite continued to see foreign funds sell a net THB1.21bn and THB0.43bn in equities and government debt yesterday.

Rates

Malaysia

      Government bond market was very active, extending the previous day’s rally. MGS curve dropped 4-26bps on the back of foreign real money buying the 10y MGS 9/25, which ended -21bps with a good amount of volume done. Other noteworthy trades were 20y MGS 5/35s and 30y MGS 9/43s which fell 4bps and 26bps respectively.

      IRS levels shifted lower amid the rally in MGS. The 5y IRS was dealt at 4.31% and the 7y at 4.47%. Meanwhile, 3M KLIBOR stayed the same at 3.74%.

      PDS market took a back seat as all were focused on MGS. That said, liquidity turned better as two way quotes were seen for long-dated GGs and AAAs. The space was well bid but offers remained firm. In terms of actual trades, only short-dated AA names were seen dealt with prices unchanged and at the long end, Bright Focus 29s tightened 1bp to 5.68%. The market could see a rally given better MTM values.

Singapore

      SGS bond yields fell by 3-8bps across the board, while bond swap spreads remain very wide with the 10y at -32bps. SGD IRS levels also fell by 7-8bps. Funding is a little lower on the back of softer USDSGD.

      Another quiet day for the Asian credit market ahead of HK’s holiday and being the last day of the quarter. Thin trading volume largely for asset reallocation, we suspect. INDON sovereigns were bought up, pushing most higher by 0.25-0.50pts. UOBSP and SCISP saw some pick up from PB. Quality Korean, Chinese and Malay names were better bid with spreads unchanged to slightly tighter. China cut the mortgage down payment requirement to 25% from 30%, after which there was selling in Chinese IG property names Dalwan and Chioli. Other updates, Fitch affirmed CNOOC’s rating at A+/stable, and China Development Bank Corporation (Aa3) priced its USD1b 5y bonds at T5+120bps.

Indonesia

      Indonesia bond market closed positive supported by economy packages announcement by the Government as well as new central bank incentives. Onshore investors were seen active during the day. However, we continue to believe that bond market remain vulnerable to further negative sentiment coming from either global or domestic. Indonesia statistic will issue September CPI data today. Our house view that down trend of CPI may continue and may reach 7.11% YoY or 0.21% MoM while core inflation is expected to incline to 5.01% YoY supported by rising prices of tuition cost, housing rent, housing contract and imported goods prices due to Rupiah weakening. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 9.553%, 9.603%, 9.807% and 9.937% while 2y yield shifts up to 8.958%. Trading volume at secondary market was seen moderate at government segments amounting Rp11,788 bn with FR0068 as the most tradable bond. FR0068 total trading volume amounting Rp1,818 bn with 75x transaction frequency and closed at 86.896 yielding 9.937%.

      Corporate bond trading traded thin amounting Rp417 bn. TAXI01 (Express Transindo Utama I Year 2014; Rating: _idA) was the top actively traded corporate bond with total trading volume amounted Rp44 bn yielding 12.851%.