(Erratum) Maybank GM Daily - 27 Apr 2016

Global

      Oil rallied on news that Saudi could lower crude output. Brent and WTI were up around 3% each, giving boost to commodity-linked currencies. While the dollar softened against the G10-ex-JPY, its performance against the Asians varied. For one, MYR was lifted from earlier lows by the higher crude prices. THB and KRW traded on the backfoot in contrast to PHP, INR and CNH which clocked gains against the USD.

      Benchmark indices were in a mix of mild red and black by close. Apple reported a 13%y/y fall in revenue due to year-on-year drop in iPhone sales. Elsewhere, Twitter Inc also had a miss in revenue for 1Q, citing lower-than expected spending by large advertisers. In data, durable goods order for Mar missed expectations with a print of 0.8%m/m.  Apr consumer confidence deteriorated more than expected to 94.2. The significance of these economic indicators and earnings projections seems to diminish as market players eye the FOMC language on tonight.

      Day ahead has the most important FOMC statement. Ahead of that, Australia releases its 1Q CPI at 0930 (SGT), US pending home sales, Germany GfK consumer confidence for May and France’s consumer confidence for Apr. UK releases its 1Q GDP (advanced estimates).

Currencies

G7 Currencies

      DXY – Watch FOMC (Thu Morning 2am SG/KL time). Focus tonight on FOMC meeting (Thu 2m SG/KL time). While the Fed is not expected to hike interest rate at this meeting, focus will be on the language and tone of the accompanying statement. We think there is a possibility that the upcoming meeting could potentially be similar to the FOMC meeting in Oct which was then interpreted as slightly more hawkish than expected and in Sep and eventually paved the way for a 25bps rate hike in Dec. For the upcoming meeting, we expect the language of the statement to be more balanced with more acknowledgement of improvement and expansion of activities in the economy. The recent release of the Fed’s Beige Book has already noted increase of consumer spending, increased manufacturing activity, improvement in credit conditions and modest rise in prices and input cost pressures. This should keep the USD supported while month-end USD/AXJ sell flows may also cap the USD strength to some extent. We continue to hold to our long-held view of 2 hikes in 2016 – one in Jun and another hike in Dec. Modest USD weakness overnight amid gains in oil prices and equities. Overnight data was mixed with durable goods orders weaker while Richmond Fed Mfg was above market expectation. DXY was last seen at 94.50 levels.  Daily momentum and stochastics are indicating a mild bullish bias. Next resistance at 94.80 (23.6% fibo retracement of Mar high to Apr low), 95.50 (38.2%), before 96 levels (50% fibo). Support at 94.80 (23.6% fibo). Week ahead brings Pending Home Sales (Mar), FOMC Rate Decision (Apr 27) on Wed; GDP, Personal Consumption, Core PCE (1Q) on Thu; Fed's Kaplan Speaks, Personal Income, Real Personal Spending (Mar), PCE Core (Mar), U. of Mich. Sentiment (Apr F) on Fri.

        EURUSD – Take Cues from US FOMC Tonight. EUR traded a touch higher with a muted range of 1.1260 – 1.1340 in absence of fresh catalyst as all eyes remain fixated on FOMC meeting later tonight. EUR was last seen at 1.1305 levels. Daily momentum is mild bearish bias while stochastics is showing early signs of rising from near-oversold conditions. Resistance at 1.1315 (23.6% fibo) before 1.14 levels. Support at 1.1220 (38.2% fibo retracement of Mar low to Apr high), 1.1150 (50% fibo). Firmer support at 1.1070 (61.8% fibo, 100 and 200 DMAs). Week ahead brings GE GfK Consumer Confidence (May), FR Consumer Confidence (Apr) on Wed; EC Economic Confidence (Apr), GE CPI (Apr P) on Thu; FR GDP (1Q A), EC CPI Estimate, GDP (1Q A) on Fri.

        GBPUSD – UK GDP on Tap. GBP broke above 1.4470 resistance to trade a high of 1.4639 overnight amid USD weakness and easing bets of Brexit. GBP was last seen at 1.4580 levels. Daily momentum and stochastics indicators continue to indicate a bullish bias. Resistance is seen at 1.4670 levels (2016 high). Beyond that puts 1.4880 in the picture (200 DMA). Support at 1.4470 (76.4% fibo retracement of 2016 high to low), 1.4350 (61.8% fibo), 1.4250 (50% fibo).  Could see some downside risks on GBP amid possible USD strength in the lead-up to FOMC meeting tonight. But at the moment, momentum favors GBP bulls and with short position at overstretched levels, a stronger than expected GBP number later could see an extension of the rally. Market is expecting +0.4% q/q, a touch weaker than prior of +0.6%. This is due to Brexit-related fear that is impeding activity in the meantime. Week ahead brings GDP (1Q A) on Wed; Nationwide House (Apr) on Thu; GfK Consumer Confidence (Apr), Mortgage Approvals (Mar) on Fri.

      USDJPY – BOJ In Focus. USDJPY remained pressured lower ahead of both the FOMC and BOJ policy decisions tomorrow, underpinned by a softer dollar overnight. Nikkei futures are higher this mornnig, signalling potential for some upside pressures on the pair intraday and once again, the majors were sold off against the JPY. Consensus continues to expect the BOJ to add to its easing measures, including lending at negative rates to banks. We however expect the BOJ to stand pat on policy for now. They are likely to take this opportunity to evaluate the impact of negative interest rates on the economy, while remaining mindful of the Upper House election in early summer. Last seen around 111.20-levels. Daily momentum and stochastics remain bullish bias, while on weekly basis, momentum appears to be turning towards the upside. Monthly momentum indicators though remain bearish bias. Bullish risks continues to be capped by 50-DMA at 111.75 levels. A clean break on a daily basis here could see the pair headed towards 113.30-levels. (50% Fibo retracement of the 2014 low to 2015 high). Support at 110.40 (61.8% Fibo); 110-handle (21DMA). Onshore markets are closed for a holiday on Fri and remaining week has CPI (Mar), retail sales (Mar), industrial production (Mar), BOJ Policy Decision on Thu.

      NZDUSD – RBNZ the Focus Tonight (Thu 5am SG/KL time). NZD firmed amid broad USD weakness. Focus on RBNZ tonight which comes after the FOMC meeting (2am). Price action could be choppy. The implied probability from OIS for a rate cut is now lower at 40% (vs. 45% yesterday). We expect the RBNZ to keep OCR unchanged at 2.25%, following the 25bps cut last month. Rebound in 1Q CPI gives RBNZ some breathing room. That said we expect RBNZ to remain dovish and reiterates that NZD remains too strong and easing bias remains. NZD was last at 0.6890 levels. Daily momentum and stochastics are showing a mild bearish bias. Next support at 0.6750 (lower bound of the upward sloping trend channel and 38.2% fibo retracement of 2015 high to low). Resistance at 0.6935 (50% fibo). Week remaining brings RBNZ meets on decision (Thu); Mar building permits and business confidence (Fri).

      AUDUSD – Bears Lack Conviction. AUD edged higher on the back of firmer oil prices and was last seen around 0.7750. We still see bearish divergence on the daily chart but we do not rule out further bullish ticks in intra-day trades. Interim barrier is still seen at 0.7770. The 4-hourly chart seems to be pointing north and breaking the 0.7770 could expose the next barrier at 0.7813. Beyond the near-term, bears probably still have legs. Thereafter, bears could re-assert towards the 21-DMA at 0.7668 before the next at the 50-DMA at 0.7500. Resistance is seen at 0.7835 (previous high). Week ahead is quieter in terms of data with only the release of the ANZ Roy Morgan Weekly Consumer Confidence Index (Apr 24), CPI (1Q) today; RBA Debelle Gives Speech on Fri.

      USDCAD – Bullish Divergence. The short-term bottom around 1.26 levels is being tested again and a break here could expose the next at 1.2574(76.4% fibo retracement of the 2015 rally). Last printed 1.2609, daily momentum and stochastics are not indicating a clear bias. The 4-hourly chart flags bullish divergence and another dip could make the third trough with higher corresponding trough in the MACD. We are cautious of a potential upmove within the 1.26 – 1.29 range.  Week ahead brings IP, GDP data on Fri. In an overnight speech, BoC Governor Poloz expressly kept his options open including negative interest rates that could give the economy a jolt even though he said that it has minimal impact on growth.

     Asia ex Japan Currencies

      The SGD NEER trades 0.36% above the implied mid-point of 1.3536. We estimate the top end at 1.3266 and the floor at 1.3805.

      USDSGD – Limited Downside; Buy On Dips.  USDSGD is edging lower this morning on the back of a softer dollar overnight. Still downside pressures could be limited given market caution ahead of FOMC and BOJ policy decision tomorrow. Last seen around the 1.35-handle, daily momentum indicators are signalling bullish bias. We favour accumulating on dips. Further downside today should find barrier at 1.34-handle (50% Fibo retracement of 2014 low to 2016 high) 1.3650 (61.8% Fibo); 1.37-handle (50DMA) should act as barrier to curb upside.  In the news, the decline in industrial production slowed in Mar to –0.5% y/y (Feb: -3.8% YoY) as improved output in biomedical and electronics softened the steep fall in transport engineering. In 1Q 2016, industrial output contracted by 1% y/y in Mar (Feb: -6.2%), coming in better than the -2% reported in the advanced estimates. This suggests that the final 1Q 2016 GDP print could be revised upwards. This tweak in 1Q 2016 however does not materially change the outlook for the rest of the year and our economic team maintains its full-year growth forecast of +1.7% for 2016.

      AUDSGD – Overbought Conditions. AUDSGD steadied around 1.0460 as we write this morning. Weekly, daily stochastics are at overbought conditions and bullish momentum on daily chart continues to wane. In addition, bearish divergence suggests further pullback towards 1.0350 levels (21 DMA). Resistance at 1.0520 (previous high).

      SGDMYR – Mild Upside Risks. SGDMYR was a touch firmer amid MYR weakness and SGD strength. Cross was last seen around 2.90 levels. Daily momentum and stochastics are mild bullish bias. Resistance at 2.9165 (23.6% fibo retracement of 2015 high to 2016 low), before 2.95 (38.2% fibo). Support remains at 2.85 (2016 low).

      USDMYR –Upside Pressures. USDMYR spiked to a high of 3.9525 off the back of Bloomberg news (yesterday morning) - that 1MDB cross defaults triggered on debt due 2021, 2024, 2039. The pair has since eased towards 3.9090 levels amid strong oil prices, supported sentiment and USD weakness overnight. Daily momentum remains mild bullish bias. Resistance at 3.95 before 3.9850 (23.6% fibo retracement of 2016 high to low). Support at 3.9010 (21 DMA), 3.8440 (2016 low). No key data for release this week.

      1s USDKRW NDF – Mild Bullish Bias. 1s USDKRW NDF fell amid USD weakness and, supported risk sentiment. US FOMC meeting tonight could provide further cues on USD direction. Pair was last at 1144 levels. Daily momentum and stochastics indicators are exhibiting mild bullish signals – tentative signs of waning observed but remain too soon to make a call at this stage. Resistance at 1153.70 levels (23.6% fibo retracement of Mar high to Apr low) before 1171 levels (38.2% fibo). Support at 1140 levels. Week remaining brings Business Survey; IP on Fri.

      USDCNH – Watch the 6.45-6.54 Range. USDCNH hovered around 6.4990 this morning, sticky around the 50-DMA at 6.5014. Momentum remains on the upside though MACD forest has waned a little. Barrier is now seen at 6.5400 (100DMA). Support is at 6.4845 (21DMA) ahead of the next at 6.4575 (200DMA). We continue to observe that PBOC uses the DXY index and the RMB index to guide the USDCNY. USDCNY was fixed 45 pips lower at 6.4837 (vs. previous 6.4882). CNYMYR was fixed 31 pips higher at 0.5994 (vs. previous 0.6026). We think there that given the primary concerns on capital outflows had ebbed and an outstanding overvaluation of its REER, PBOC would be less concern of a weaker RMB against the basket and seek to adjust the fixing in order for its REER lower in episodes that the dollar is weak. This is again, in line with our observations that the RMB index is positive correlated to the dollar. IN news, IMF said that China debt-equity swaps must be part of broader plan. Getting the scheme right is critical and NPL securitization carries some risk (BBG).

      SGDCNY – Further Pullback Likely. SGDCNY inched lower and closed just above the 21-DMA at 4.8032.  Momentum indicators suggest further decline ahead. Support is first seen at 21-DMA at 4.7943 before 4.7513 (23.6% Fibo retracement of the Nov-Apr rally). Next support is seen at 50-DMA at 4.7389. Resistance at recent high of 4.8408.

      1s USDINR NDF – Risks to the Upside. Positive equities dragged the pair from its highs 67.26 back to levels around 66.80 as we write. Bias is still to the upside with first resistance seen at 67.175 (50% Fibo retracement of the Oct-Feb rally). Daily momentum and stochastics are showing mild bullish bias but this pair has proven to be sticky around the 200-DMA at 66.70 and could remain a line of pivot in the absence of stronger market cues. We eye the FOMC statement tonight. Next barrier at 67.50 (100-DMA). The 50-DMA has crossed the 100-DMA from above and we could see more risks to the downside in the medium-term. Foreign investors bought U$36.1mn of equities and sold U$158.6mn of debt on the 25^th of Apr. Forex reserves rose by U$333.7mn to U$360.3bn.

      USDIDR – Gapping Lower. USDIDR gapped lower at the opening this morning to 13181 from yesterday’s close of 13189 as it played catch-up with its regional peers. As well, BI comments that it will cautiously use room to ease monetary policy and maintain FX volatility at less than 10% by managing inflows. Should risks sentiments remain weak today, further outflows are likely and weigh on the IDR, limiting further downside to the pair. Yesterday, foreign funds had sold a net USD61.45mn in equities. They had however added a net IDR0.98tn to their outstanding holding of government debt on 25 Apr (latest data available). Last seen around 13175 levels, pair is showing increasing bullish momentum and stochastics is turning higher. With risks still to the upside, further downmoves should find support around the 13000-handle. Resistance is at 13225 levels (23.6% Fibo retracement of the Jan-Mar downswing; 50DMA). The JISDOR was fixed lower yesterday at 13215 from Mon’s 13235. No data of importance due this week.

      USDPHP – Limited Downside.  USDPHP slid lower towards the 46.700-levels this morning, tracking the USDAXJs broadly lower. Still, uncertainty regarding the economic positions of presidential candidates, particularly that of the front runner Davao Mayor Rodrigo Duterte, could weigh on foreign investors’ decision and on the PHP as well. Pair was last seen around 36.725. Daily momentum remains bullish bias and stochastics is fast approaching overbought conditions. This suggests further downside could be limited for now. Look for support around 46.640 (50DMA).  Immediate resistance is seen around 46.815 (200DMA) before 46.985-levels (50% Fibo retracement of the Jan high to Mar low). The 50-DMA has crossed the 200-DMA lower and further downside risks are possible in the medium-term. Risk appetite remained supported with foreign investors buying a net USD39.64mn of equities yesterday. Imports and trade balance (Feb) are on tap later today. In the news, imports rose by just 1.2% y/y in Feb, coming in way below consensus estimates of +12% and Jan’s +30.8%. The more moderate increase in imports resulted in the trade deficit narrowing to USD1.1bn in Feb from US2.64bn in Jan.

      USDTHB – Buy On Dips.  USDTHB is holding steady this morning around the 35.130-levels underpinned by a softer dollar overnight.  Pair though appears stuck within the 34.720-35.370 trading range since Mar. Further negative risk sentiments could weigh on the THB and limit further downsides to the pair as they did yesterday. Foreign funds had sold off a net THB1.39bn and THB3.48bn in equities and government debt yesterday. Pair was last seen around 35.120 levels. Daily momentum indicators are bullish bias. With risks to the upside, further downside moves could be limited and find support around the 35-handle. Barrier is at 35.240 (50DMA) before the next at 35.370 (38.2% Fibo retracement of the Jan high to Mar low). Favour buying the pair on dips. On tap this Fri is foreign reserves (22 Apr), trade (Mar), current account balance (Mar).

Rates

Malaysia

      Local government bond market turned bearish on the back of negative domestic headlines which led the MGS yield curve to rise 2-7bps higher. MGII 7/23s continued to see the most trades. Issue size for the 7y MGS 8/23 re-tap was announced at a slightly lower than expected MYR3b. Nothing was dealt on the WI, which was last seen quoted at 3.82/77%.

      MYR IRS levels were pushed higher due to the negative domestic news. But the curve was rather well offered, especially at the short end. 3y and 5y IRS traded at 3.62% and 3.75% respectively. Aside from domestic issues hanging overhead are the upcoming FOMC meeting, new BNM governor and BOJ meeting. 3M KLIBOR declined 1bp to 3.69%.

      Quiet day in MYR PDS market as negative local headlines dampened sentiment. Most trades were crosses. Elsewhere, Dana 45s widened 2bps to 5% (G+34bps/Z+85bps) and Putra 24s widened 3bps to 4.38% (G+55bps/Z+38bps). Caga 18s had some foreign interest and traded 3bps tighter at 3.88% (G+50bps/Z+6bps). A market correction would open up buying opportunities as macro fundamentals in Malaysia have not changed while rates remain fairly stable.

Singapore

      SGS weakened with benchmark yields adding 4-7bps across the board. SGD IRS settled 6-7bps higher as higher USDSGD and funding continued to soften the market. We think players will mostly be risk neutral going into the 7y auction, which historically does not do well as it lies in between the interest of lifers and investment books, and tends to be a speculative play. We do not expect demand to be strong and suggest to add risk when there is further cheapening.

      Asian credit players were heavily lightening risk across the board. Newly issued SINOPE widened from re-offer, though buyers emerged later and pushed the 19s and 21s tighter than re-offer, while the 26s were still trading 1-2bps wider than issued. JD.com widened further, with the 26s out by 40bps, before some short covering arose. In EM cash bond space, INDON and quasis fell by 50-100cts and PHILIP fell by 75cts. Malaysia CDS remain elevated due to the negative headlines surrounding a political vehicle. OGIMKs were down 3-4points while TIAMK held relatively steady only down by 50cts and MAYMK 26 had limited reaction still trading at +255/252bps.

 Indonesia

      Indonesia bond market closed with a gain backed by couple of reason in our view which are purchase at secondary market by investor which failed to obtain bulk size during auction as well as the release 1Q16 investment (DDI and FDI) which remains to show a solid performance. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.310%, 7.564%, 7.794% and 7.766% while 2y yield shifts up to 6.994%. Trading volume at secondary market was seen heavy at government segments amounting Rp15,688 bn with FR0053 as the most tradable bond. FR0053 total trading volume amounting Rp3,852 bn with 74x transaction frequency and closed at 104.000 yielding 7.310%.

      Indonesian government conducted their conventional auctions yesterday and received incoming bids of Rp24.41 tn bids versus its target issuance of Rp12.00 tn or oversubscribed by 2.03x. Incoming bids during the auction was noted lower by approx. 24% compared to the last conventional auction last two weeks while the result of the incoming bids were lower compared to YTD average incoming bids during conventional auction amounting Rp25.90 tn respectively. However, DMO only awarded Rp13.40 tn bids for its 7mo, 5y, 10y, 20y and 30y bonds. Incoming bids were mostly clustered on the FR0056 series. 7mo SPN was sold at a weighted average yield (WAY) of 5.90000%, 5y FR0053 was sold at 7.38887%, 10y FR0056 was sold at 7.66996%, 20y FR0072 was sold at 7.86981% while 30y FR0067 was sold at 8.12451%. No series were rejected during the auction. Bid-to-cover ratio during the auction came in at 1.26X – 3.94X. Foreign incoming bids during the auction were noted Rp8.97 tn or 36.8% of total incoming bids. However, only Rp6.06 tn bid (45.2% of total awarded bids) were awarded to foreign investors. Till the date of this report, Indonesian government has raised approx. Rp43.37 tn worth of debt through bond auction which represents 40.9% of the 2Q 16 target of Rp106.00 tn. On total, Indonesian government has raised approx. Rp317.01 tn worth of debt through domestic and global issuance which represent 59.5% of this year target of Rp532.4 tn.

      Corporate bond trading traded thin amounting Rp253 bn. MFIN02ACN1 (Shelf registration II Mandala Multifinance Phase I Year 2015; A serial bond; Rating: idA) was the top actively traded corporate bond with total trading volume amounted Rp100 bn yielding 10.287%.