Maybank GM Daily - 27 Nov 2015

FX

Global

      Investors seem to have made slight position adjustments in the absence of US. Most Asian currencies were lower as risk appetite was subdued in the region. AUD fell the most, by 0.3% against the greenback, weighed by the poorer than expected 3Q CAPEX.  Elsewhere, European equities rose as markets expect further monetary easing next week.

      Oil prices softened this morning but we do not expect major swings ahead of the OPEC meeting on 4 Dec. MYR was still ahead of the pack as we write though bids were running into eager offers. KRW was the only in the red as market players took profit ahead of the weekend.

      Day ahead has industrial profits out of China for Oct. Thailand has manufacturing production index due for the same month. Beyond Asia, ECB Knot speaks. Europe also releases economic and consumer confidence. UK has 3Q GDP due. The US markets return after the Thanksgiving Holiday. Black Friday could probably see more position adjustments ahead of a busier week that leads into RBA, ECB and US NFP release. In addition, China also awaits IMF’s decision on the inclusion of CNY in the SDR basket.

Currencies

G7 Currencies

      DXY – Relative Calm Before A Busy Week Ahead. USD was little changed amid quiet trading as US markets were closed for Thanksgiving Day yesterday. Black Friday trading tonight may see another quiet session but we are cautious of the relative calm before a busy week ahead – ISM, PMI, ADP, NFP, Durable goods order, trade, housing data. Possible market positioning ahead of next week amid thin liquidity tonight could exacerbate FX moves. On technicals, bullish momentum on daily chart is waning; while stochastics is showing tentative signs of falling from overbought levels. These could suggest some downside pressure in the short term. Interim support at 99.20, 98.55 (76.4% fibo retracement of Mar high to Aug low) before bigger support at 97.40 (61.8% fibo). Resistance remains at 100.39 (previous 2015 high). We remain constructive of USD strength; remain better buyer on dips. 

      EUR/USD – Sell on Rallies. EUR was a touch weaker amid a rebound in equities overnight. We continue to reiterate that the inverse correlation coefficient between EUR and DAX remains strong at -0.61 (YTD calculated on weekly close) – this suggest EUR and risk proxies is expected to move in opposite direction.  EUR was last at 1.0605 levels at time of writing. Weekly momentum remains bearish bias, but the bearish momentum on the daily chart appears to be waning. Daily stochastics is also indicating some signs of turning higher from oversold levels. Taken together, this could suggest some near term short-squeeze. We like to take opportunity of rally to fade into. Resistance at 1.0760 (21 DMA, 76.4% fibo retracement of Mar low to Aug high). Support remains at 1.06 levels (Nov low), 1.0530 (Apr low) before 1.0460 (2015 low in Apr). Week remaining brings ECB’s Knot speaks and Nov sentiment data from Euro-area (Fri).

      GBP/USD – 3Q GDP on Tap. GBP resumed weakness overnight; last seen just above 1.51-handle. Overnight traded a low of 1.5066.  Daily momentum and stochastics remain mild bearish bias. Next support at 1.5030 (Nov low). Resistance remains at 1.5210 (38.2% fibo retracement of Oct high to Nov low), 1.5270 (50% fibo). Day ahead brings 3Q GDP (Fri). On technicals, we observed that could be possible double bottom in the making around 1.5030 levels (although it remains too soon to call). If pattern holds, possible rebound in the pair towards first objective at 1.52 levels.

      USD/JPY – Two-Way Trades. USD/JPY appears to be in consolidative mode even as it inches higher this morning. Pair is seen around 122.60 with intraday momentum indicator exhibiting only mild bullish bias, though stochastics is showing tentative signs of bearish bias. On the daily charts, both MACD and stochastics are bearish bias. The lack of directional clarity ahead in the near term suggests two-way trades could be likely intraday. Look support around resistance 121.80 (100DMA) still, while resistance remains around the 123-figure. We remain better buyers on dips. Core inflation (overall CPI less food prices) failed to gain traction, falling by 0.1% y/y in Oct, unchanged from Sep. Core-core inflation (overall CPI less food, energy prices) moderated slightly to 0.7% y/y in 0ct from 0.9% in Sep. Overall inflation though rose by 0.3% y/y from Sep’s 0%. Disappointing as well was household spending, which fell 2.4% y/y In Oct vs. expectations of no change. Still, the bright spot was the labor market where unemployment fell to 3.1% in Oct from 3.4% in Sep, where tightening

      AUD/USD – Finding Support on Dips. AUD remained on the retreat as we write this morning, waffling around 0.7220. Pair is finding support at the 100-DMA (0.7200). A break there could expose the next at 0.7160. We are more inclined to think that this pair should hover within 0.7190-0.7270, ahead of the RBA decision next week. The upper bound of this range is marked by the 23.6% Fibonacci retracement of the Sep-Oct rally. The top of the ichimoku cloud also acts as a support for the pair around 0.7220.

      USD/CAD – Double Topped. USDCAD was still stuck around the 1.33-figure this morning, hardly moved when US was away. We still see a bearish set up in play with a second peak of the double top pattern formed. Resistance is still seen at the 1.3457. We hold on to our tactical call to short the USDCAD around 1.3360 with an initial target of 1.3136 and stoploss around 1.3460.  Oct industrial product price is due today (Cons.: -0.1%m/m).

      NZD/USD – Sell Rally.  NZD tried to push higher but rally fell short of 0.66-handle. Last seen at 0.6575 levels. Expect quiet trading amid Black-Friday thin liquidity conditions. On technicals, bearish momentum on daily charts is waning while stochastics is rising. These signals may suggest possible upside risks. Immediate resistance at 0.6610 (38.2% fibo retracement of Oct high to Nov low). Break above may see a move towards 0.6660 levels (50% fibo), 0.6720 (61.8% fibo). Continue to favour selling on rallies, for a move towards 0.6390 objective.

Asia ex Japan Currencies

      The SGD NEER trades 0.56% below the implied mid-point of 1.4001. We estimate the top end at 1.3719 and the floor at 1.4282.

      USD/SGD – Supported.  The USD/SGD is holding steady this morning above 1.04080 as continued weakness in the EUR/USD kept the pair support. Last seen around 1.4083, pair is still showing bullish bias, which should keep the pair still supported. Immediate resistance is around 1.4095 (21DMA) ahead of 1.4150 (50DMA). Support nearby is around 1.4050 (200DMA) before the 1.40-figure. Industrial production remained in the doldrums, contracting by 5.4% y/y in Oct (Sep: -4.7%) on the back of broad weakness across most sectors except for chemicals and general manufacturing. The outlook for manufacturing remains soft as reflected in the sub-50 reading of the manufacturing PMI as of Oct 2015 and the deterioration in manufacturing business sentiments and weak outlook as per the recent General Business Expectations survey done by the EDB.

      AUD/SGD – Tilting Lower. AUD/SGD was still softer and was last seen around 1.0170. Nearby support is seen at 1.0133 (61.8% Fibonacci retracement of the Aug-Sep sell off). Bullish momentum is weakening and next support is seen around 1.0080 (100-dma). First barrier for unexpected bids is seen at 1.0235 ahead of the next at 1.0290 (200-DMA).

      SGD/MYR – Watch 100 DMA. SGD/MYR was little changed amid quiet session overnight. Last seen around 3.0030 levels. Daily momentum indicator remains mild bearish and stochastics is falling. We continue to caution that the 100 DMA at 2.9770 could serve as a short term support. Immediate resistance at 3.0000 (50% fibo), 3.03 (38.2% fibo).

      USDMYR – Near Term Upside Risk. USDMYR firmed; with 4.20 holding ground. Last seen at 4.2280 levels. 4-hourly momentum and stochastics suggest possible upside risk intra-day. Move towards 4.28 (50% fibo retracement of Sep high to Oct low) cannot be ruled out. Meantime we watch support at 4.20. If broken on daily/weekly close, further downside towards 4.16 levels (100 DMA), 4.08 levels (50DMA) cannot be ruled out.

      1s USDKRW NDF – Range of 1145 - 1155. Pair was a touch firmer overnight; last seen around 1151 levels. Daily momentum and oscillator indicators continue to suggest some downside pressure but 4-hourly bearish momentum appears to be waning while stochastics also show signs of rising from oversold levels. Next support at 1140 (23.6% fibo retracement of Sep high to Oct low), before 1135 (200 DMA). Prefer to buy on dips towards 1135-40 levels. Resistance at 1156 (50 DMA).

      USD/CNH – Still Bullish Bias. USD/CNH was last seen around 6.4340. Pair is still retaining mild bullish momentum. Next barrier is seen around 6.4480. CNH is trading at a widening discount to CNY against the USD of around 450 pips ahead of onshore yuan open. Expect sideway trades within 6.41-6.44 ahead of the SDR vote on Mon (30 Nov). USD/CNY was fixed 19 pips higher at 6.3915 (vs. previous 6.3915). CNY/MYR was fixed 12 pips lower at 0.6581 (vs. previous 0.6569). Local press report that total investment in new railways will be at least CNy2.8trn. These 23,0000km railways will be built in the central and western regions along with intercity links in the next five years.

      SGD/CNY – Bias upside. SGD/CNY slipped yesterday and was last seen around 4.5370, still within the 4.5210-4.5600 range. Risks are still to the upside according to momentum indicators though RSI flags overbought conditions. Expect bias upside with bids likely a grind.

      1s INR NDF – Choppy in Range. 1s USD/INR rallied to around 67.00.  Momentum indicators show weak bullish conditions. Upmove could be a grind and bids likely to be deterred by next barrier around 67.20. Nearby support is seen at 66.66 ahead of the next at 66.21. Foreigners sold a net of USD77.0mn of equities on Tue and USD64.2mn of bonds. The tax authorities has allowed more times for stakeholders to review plan for corporate tax exemptions in a step to lower corporate tax rate from current 30% to 25% by 2019. Elsewhere, India will also provide indirect tax incentives for local shipbuilding.

      USD/IDR –Rangy. USD/IDR continues to firm in line with its regional peers. Last seen around 13753 with intraday MACD showing no strong momentum, though stochastics is bullish bias. This suggests a slow grind higher is likely ahead. Still, pair remains trapped within an intraday ichimoku cloud and we could upmoves within range today. Further upticks should meet resistance 13875 (100DMA), while dips should find support around 13650. 1s USD/IDR NDF is softer around 13845 this morning after climbing to an overnight high of 13856 with intraday MACD showing bullish momentum and stochastics at overbought levles. The JISDOR was fixed higher at 13733 yesterday from Wed’s 13673. Risk appetite continued to improve with foreign funds purchasing a net USD25.37mn in equities yesterday.

      USD/PHP – Bullish.  USD/PHP gapped higher at the opening to 47.173 from its close yesterday of 47.120, playing catch-up with its regional peers. Pair is currently hovering 47.188 with intraday MACD showing waning bearish momentum and stochastics tentatively turning higher. This suggests that risks are becoming more to the upside ahead.  Look for further upside to be capped around 47.250, while 47.115 (21DMA); 46.990 (50DMA) should be supportive. 1s USD/PHP NDF climbed higher this morning to 47.290 with intraday momentum indicators and stochastics both bullish bias. Improvement in the risk environment saw foreign funds continue to stock up on equities with a net USD3.08mn purchased yesterday. 3Q15 GDP rose by 6% y/y, better than 2Q’s 5.8%, but failed outperform market expectations of 6.3%. This was especially after the BSP governor had built-up expectations of a sterling performance.

      USD/THB – Rangy. USD/THB on the uptick this morning after slipping towards the 35.720-levels overnight, but remains capped by the 35.800-levels. Last seen around 35.760, pair is exhibiting bullish bias on the four-hourly chart but is bearish bias on the daily chart. This suggests that rangy trades are likely intraday. Immediate resistance remains around the 35.800-levels ahead of 35.830 (50, 100DMAs). Support is at 35.660 (200DMA). Foreign funds continued to favour government debt over equities, selling a net THB0.40bn of the latter and purchasing a net THB0.97bn of the former. On tap today is 20 Nov foreign reserves; and Oct mfg production index (Fri).

Rates

Malaysia

      Local government bonds were softer on the back of a slightly weaker MYR against USD. The 7y MGS 9/22 saw better profit takers as the bond ended +5bps from previous close. In govvy auction, the 3y GII 5/18 reopening garnered moderate demand with bid/cover of 1.86x.

      IRS market saw continued receiving interest from foreigners, notably in the 4y rate which traded at 4.96% and 4.95%. This could be due to the lack of bill issuance YTD and spill-over demand in 2019 MGS. 3M KLIBOR still unchanged at 3.76%.

      Quiet tone for the PDS market, with no trades on GGs and elsewhere mostly front end and belly papers were traded. For AAA, Caga papers traded range bound. Financials across the credit curve saw better buying. Public Bank 7y notes traded 5bps wider while RHB 24s traded flat. Plus 24s were dealt 2bps tighter at 4.55% which is expensive in our view compared to Aman 24 and KLCC 24 which offer higher z-spreads and possibly some yield pick-up.

 Singapore

      Muted day in SGS market though sentiment was bullish. Yields closed 2-3bps lower with strong bids at the front end of the curve as forward rates continued to move left. The closed US market also kept volatility low and most primary dealers maintained small positions. We expect SGS prices to stay supported for the time being. SGD IRS rates were down 2-6bps.

      Asian credit market players stayed on the sidelines as expected given the closed US market for Thanksgiving holiday. Although there was not much flows, the new issuances attracted attention. Guangzhou Metro’s 3y and 5y bonds traded 5-8bps better, while BNKEA AT1 traded to a high of 100.65 before closing lower at 99.95/100.15. The Chinese property space saw buying interest. China Fishery bonds dropped 20pts after HSBC sought to wind up two of its companies in HK. In the primary space, Korea Development Bank is issuing 3y SGD bond guiding for 2.65% and BNP Paribas is selling SGD Tier 2 bond of 10NC5 guiding at 4.5%.

 Indonesia

      Indonesia’s government bond was traded by small range yesterday. Since yesterday, the offshore players looked the short dated paper of SPN and 5Y benchmark bonds. The range for the SPN was around 6.0%-6.4% for the 4-6 months tenor, while the 5Y benchmark bond was hit at 8.40%. Meanwhile, Ministry of Finance issued Government bond (SPN) through private placement yesterday. The government’s bonds private placement reached Rp657.9 billion (non tradable), with maturity 2 Sep-16 at yield 7.50%.  Furthermore, the government will hold next auction on Tuesday, 1st Dec-15, with Rp6 trillion of indicative targets (Rp9 trillion of maximum issuance allowed by law). We think it should be the last auction for this year. Several series that will be auctioned are SPN 4 Mar-16, SPN 2 Dec-16, FR0053, FR0056, and FR0073.