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Monday, January 5, 2015
BPAM : LEAGUE TABLES, BOND INDEX & ATTRIBUTION REPORTS, BIR REPORT AND FACT FILE #95 - 5 JAN 2015
Maybank GM Daily - 5 Jan 2015
FX
Global
Happy 2015! The 3D environment is in play
– Dollarisation, Divergence, and Disinflation. We expect higher volatility to
continue against a backdrop of softer global growth, wider policy divergence
and expectation of rate hike intensifying. In particular towards end-Jan, we
see heightened volatility on key event risks that include first ECB meeting
on 22 Jan which markets are looking for hints/action of ECB easing, SNB will
also impose a negative deposit rate on that date, China GDP is also due
for release in the early part of that week. US FOMC meeting will take place
the following week over 28-29 Jan 2015.
Dollar strength in 2014 continued into the
new year as DXY hit a 9-year high of 91.55 this morning; USD/JPY stayed
comfortably above 120-handle while EUR/USD sank to its weakest level at
around 1.1864 since Mar 2006, AUD/USD at 5.5-year low of 0.8053. For AXJs,
MYR was the worst performing currency in 2014, falling by about 6.2% against
the greenback on rapid declining oil prices. SGD is at its weakest levels
against the USD since Sep 2010 at around 1.3350s.
For the week key data releases we are
watching include German CPI (+0.3% Cons.), Singapore PMI (51.8 prior) on Mon;
HSBC China PMI (51.1 prior) on Tue; EMU HICP (Cons.), Malaysia and US Nov
trade data, US FOMC minutes from the Dec meeting on Wed; China trade data, UK
BoE MPC meeting on Thu; and China CPI, PPI, Malaysia, German and UK IP as
well as US NFP (Cons.) on Fri. China trade data is due for release on Sat. |
G7 Currencies
|
DXY – Uptrend remains intact. USD started the year on a strong note, pushing to
levels not seen since Dec 2005 of 91.55 early this morning. Bullish momentum
remains intact but stochastics are showing tentative signs of falling from
overbought levels which could suggest some pullback throughout the day. Hard
to go against the USD bull trend; favor buying USD dips. Fed’s Kocherlakota
and William are due to speak at separate event later today. No key data for
release.
USD/JPY – Rangy. The USD/JPY continues to hover around the
120-figure for the past two weeks, currently sighted around 120-figure. Pair
is feeling the heat from euro weakness, which is offsetting pull of the
dollar resurgence. Daily MACD forest is showing only mild bearish momentum for
the week ahead, while stochastics are still indicating overbought conditions.
Still, dollar strength ahead as well as possibility of further measures by
the BOJ to meet its 2% inflation goal around FY2015 is likely to keep
downswings in check. We could continue to expect the pair to trade
range-bound within the confines of 117.30-122.20 for the week ahead.
AUD/USD – Fade Rallies. AUD/USD remained under pressure, trade to a low of 0.8053 this
morning tracking the large decline in EUR. Key data on tap this week include
trade data, building approvals and retail sales. Fade rallies remain the name
of the game but possible short-term bounce towards 0.8120 intra-day looks
likely. Hourly momentum and stochastics are pointing to some near term
upside. Support seen around 0.80 psychological level.
EUR/USD –Fade Rallies if Any.
EUR/USD opened the new year at about 1.21 levels last
Fri and continue to trade heavily towards low of 1.1864 this morning.
Momentum continues to be bearish but the sharp sell-off could find some
interim support around 1.1860 levels (Mar 2006 low). Slow stochastics are
showing tentative signs of turning higher from oversold levels. Day
ahead brings German CPI. We continue to hold a core bearish view of EUR/USD,
but caution for a potential rebound towards 1.20, which presents opportunity
to fade into. Taking stock of some key data and ECB talk recently, Italy and
France PMI released last week continued to be weak and ECB’s Draghi had also
commented that he can’t rule out deflation in the area and the ECB is in
technical preparations to alter the size, speed and composition of their
measures at the beginning of 2015, should they become necessary to react to
long period of low inflation. |
EUR/SGD – Fade Rallies. EURSGD traded a low of 1.5794 this morning on the EUR collapse to
1.1864. Bearish momentum as indicated on the MACD. But near term, oscillators
are indicating tentative signs of an upturn, from oversold levels. Bounce is
likely to re-visit 1.6020 levels which could be a good level to fade into.
Downside support seen around 1.5830. Day ahead brings SG PMI and German CPI.
Regional
FX
The SGD NEER trades at 0.70% below the implied mid-point
of 1.3233. The top end is estimated at 1.2967 and the floor at 1.3500.
USD/SGD – Overbought. The USD/SGD rally continues after the pair broke above the 1.33-level
on Fri following weak flash 4Q14 GDP print (1.5% y/y vs. 3Q: 2.8%) and
continued dollar strength. Pair was last sighted around 1.3326 with stochastics
showing overbought conditions. Continued dollar strength amid weakness in the
euro should keep the pair elevated in the week ahead with further upticks
likely to meet resistance around 1.3390, while downticks are likely to be
guarded by 1.3255.
AUD/SGD – Range-Bound. After drifting lower since mid-Nov 2014, the AUD/SGD has seen some
relief recently and is bouncing higher on the back of a slight uptick in the
AUD and weakness in the SGD. Cross is currently sighted around 1.0786 with
daily MACD forest showing little directional momentum in either direction,
suggesting rangy trades ahead. Further upmoves could see topside curbed by
1.098, while dips are likely to see support around 1.062 (17 Dec 2014 low).
SGD/MYR – Still Consolidating.
Since hitting a recent high of 2.6802 on 17 Dec 2014, the SGD/MYR has been in
consolidative trades within 2.6345-2.6600. Sighted lower currently around
2.6453, momentum indicators are showing little directional impetus ahead. Look
for the cross to remain in consolidative trades in the week ahead, though the
bias remains to the upside given the continued weakness in the USD/MYR.
USD/MYR – Slow Grind Higher. USD/MYR maintained its bid tone on USD strength and soft oil prices.
Ringgit weakness could continue to persist in the medium to longer term as weak
drivers (vulnerable to foreign fund outflows, macroeconomic challenges) remain
intact. Last week, there were talks of a Circular that the government has
directed all government-owned companies, statutory bodies and subsidiaries to
stop buying foreign assets. This can be seen as an attempt to stem fund
outflows. This morning spot traded high of 3.5280. 1s NDF
traded around 3.5420 levels this morning. USD/MYR could stay within range 3.51
– 3.54 intra-day.
USD/CNY was fixed at 6.1248 (+0.0058), vs. previous 6.1190 (+2.0% upper band
limit: 6.2498; -2.0% lower band limit: 6.0047). CNY/MYR was fixed at 0.5710
(+0.0037). USD/CNY – Upside bias. In the past week or so,
USD/CNY had traded a high of 6.1530 on 30 Dec, before easing to 6.20 levels, on
regulatory changes to FX NOP. SAFE Notice 53 was announced on 30 Dec that FX
NOP will be delinked from FX LDR ratios. This is to allow for more flexibility
around how banks manage their foreign currency lending books. A slew of China
data is scattered throughout the week with focus on HSBC PMI on Tue, CPI and
PPI on Fri and trade data on Sat. Intra-day see greater swings; still expect
upside bias and likely to trade within 6.21 – 6.24 range.
1-Year CNY NDFs – Range. 1-yr NDF eased from 6.37 (30 Dec) towards 6.3380 this
morning.. MACD suggests mild bearishness and stochastics are falling,
suggesting some downside bias. 6.32 – 6.35 range likely to be in play
intra-day.
USD/IDR – Edging Higher. The USD/IDR has been on the rise after CPI released on Fri showed
headline inflation rising 8.36% y/y in Dec, up from 6.23% in Nov. Furthermore,
the announcement of changes to the fuel price subsidies, while positive for the
budget deficit and infrastructure spending, could lift inflation even higher in
the near term (fuel subsidies for gasoline scrapped while those for diesel
fixed at IDR1000 per litre effective 1 Jan). Moreover, weak exports in Nov
(-14.57% y/y) did not helped. Pair is currently sighted around 12585 with daily
MACD showing waning bearish momentum. Immediate resistance is seen around 12650
ahead of the stronger barrier at 12700 while support is around 12425 this week.
Last week, foreign funds sold a net USD3.57bn in equities, but bought a net
IDR1.25tn between 29-31 Dec. Soft risk appetite this week could see mixed
purchases of Indonesian assets again, which could the pair elevated ahead. The
1-month NDF edged closer to the 12700-levels this morning, sighted currently at
12690 with daily MACD forest showing waning bearish momentum though stochastics
are showing oversold conditions. The JISDOR was fixed higher at 12474 on Fri to
end the week, up from 12434 at the start of that week. A higher fixing is
likely today given the spot’s move higher this morning.
USD/PHP – Upside Bias.
The USD/PHP is edging closer to the 45-figure on the back of dollar strength.
Pair is currently seen around 44.943 with MACD showing bullish momentum though
the pair is overstretched. Continued dollar strength should keep the bias to
the upside this week. Further upticks this week is likely to meet resistance
around 44.050, while downside moves are likely to be capped by 44.700. Foreign
funds sold a net USD4.6mn in equities last week, and the selling could continue
this week given mixed risk sentiments, which could help lift the pair. The
1-month NDF is edging higher this morning, currently sighted around 45.070,
with daily MACD showing bullish momentum though it is currently overstretched.
CPI data for Dec is due on 6 Dec and market is expecting headline inflation to
ease to 2.8% y/y vs. 3.7% in Nov.
USD/THB – Sideways.
The USD/THB continues to test the 33-figure, currently sighted just a tad off
that level at 32.990. There does not seem to be much momentum to push the pair
in either direction in the week ahead as indicated by our daily charts,
suggesting that range-bound trading is likely for the week ahead. Still
continued dollar strength ahead could see the pair re-test the 33-figure,
though the pair is likely to trade well-within its current trading range of
32.720-33.150 for now. The last trading day of 2015 saw foreign funds sell a
net THB.15bn in equities, but bought a net THB0.17bn in debt. Weak risks
sentiments ahead could see mixed results for Thai assets in the week ahead,
providing little directional momentum for the pair. CPI data for Dec is due
later today and our economic team is looking for inflation to ease to 1.0% y/y
while market is expecting 1.10% y/y in Dec compared to 1.26% in Nov.
Rates
Malaysia
Local government bond market had a choppy start to the
new year last Friday as bonds remained volatile on USDMYR reaching new highs.
Yields on the 7y MGS 9/21 and 10y MGS 7/24 rose 3bps and 5bps respectively,
while the 15y MGS 4/30 gapped 9bps lower on thin trades.
IRS market saw paying interest emerge as spot weakened
further. 7y IRS traded at 4.14%. A foreign bank appears to have a paying flow
in the 7y tenor. There is still uncertainty in the market, but with 3M KLIBOR
still elevated (unchanged at 3.86%), the spreads between IRS and 3M KLIBOR
still look tight.
Local PDS market also had a very quiet first trading
session of the year. Overall, very few offers and bids were seen despite the
slight pick-up in MGS trading activity. In the AAA space, however, we saw Aman
5/19 initially offered at 4.05% before being traded around at its MTM levels at
4.19% with trading volume at MYR55m. This represents a 37bps spread from the
benchmark MGS which is too tight for our liking at the moment. We also saw some
potential crosses, while no GGs were traded. We hope that liquidity will return
this week, but there is a risk that investors would remain on the sidelines due
to tight spreads.
Singapore
SGS market opened the year with some buying interest
in the shorter end of the curve, but selling interest eventually dominated the
rest of the day. Last Friday ended with SGS underperforming, closing about
2-5bps weaker than previous close, and SGD IRS up 2bps. SGD funding rate
continued to tighten in the longer end of the curve which is somewhat causing
SGS to remain soft. Rates are threatening to go up as the market looks for more
indication on whether it will be near term (1-3 months) or later. We are looking
to start the year by remaining slightly more neutral.
Asian credits started off the new year on a quiet tone
as most investors were still on holiday. Last Friday’s highlight was the high
yield (HY) Kaisa when it defaulted on its HKD400m HSBC loan, with news
reporting it was due to the chairman’s resignation, resulting in the company
having to assess any potential cross-defaults. This led to a free fall of the
stocks across the board with its curve down 25-30pts. The rest of the HY
Chinese property names were also dragged lower with quotes down about 1pt. We
saw some buying on investment grades, especially names like CHIOLI and DALWAN
as they open new books for the year. We expect to see more activity this week
with the market likely back in full force.
Indonesia
Indonesia bond market closed with a positive tone on
the first trading day of 2015 amid weakening IDR and unfavourable economic
data. During the opening of the day, local banks were seen aggressively buying
the 10y benchmark series IGS. As a result, 10y IGS yield was seen touching the
7.68%. New fuel scheme announced by Indonesia government has been the
motivation behind the aggressive purchase during morning opening. The newly
adopted fuel scheme has made gasoline price to reach Rp7,600 per litre
(previous: Rp8,500 per litre) and diesel price to reach Rp7,250 per litre
(previous: Rp7,500 per litre). At current point, Indonesia government sets
fixed fuel scheme of Rp1,000 per litre for diesel prices while leaving gasoline
prices fluctuate accordance to market price. However, post economic data
release by Indonesia statistic, bond prices started to decline as December
inflation and November trade balance were higher compared to economist
consensus. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.687%
(-2.8bps), 7.808% (+0.5bps), 8.127% (-4.4bps) and 8.281% (-1.4bps) while 2-yr
yield shifts down to 7.478% (-1.5bps). Government bond traded thin at secondary
market amounting Rp5,098 bn with FR0070 (10-yr benchmark series) as the most tradable
bond. FR0070 total trading volume amounting Rp1,945 bn with 25x transaction
frequency and closed at 103.648 yielding 7.808%.
December inflation reached 8.36% yoy or 2.46% mom.
This is the highest figure within 2014. The high inflation number occurred as
Indonesia government increased subsidized fuel price in the month of November.
However, deflation may occur this month as Indonesia government applied a new
fuel scheme at the end of last year. Administered prices, transportation cost
including gasoline and public transportation tariff and electricity hike
contributed the most towards the December headline inflation. December core
inflation reached 4.93% yoy.
November trade balance came in deficit of US$426 mn
compared to a small surplus of US$23 mn in a month earlier. The deficit
occurred as oil and gas deficit widens to US$1.4 bn along with declining non
oil and gas trade surplus to US$0.9 bn. Overall, imports value fell by 8.39%
mom while exports value decline by 11.29% mom.
Corporate bond trading was thin amounting Rp200 bn.
BLTA04B (Berlian Laju Tanker IV Year 2009; B serial bond; Rating: idD)
was the top actively traded corporate bond with total trading volume amounted
Rp24 bnRAM Ratings reaffirms rating of sukuk issued by UEM’s funding vehicle
Published on 31 December 2014
RAM Ratings has reaffirmed the AA2/stable
rating of United Growth Berhad’s Islamic MTN Programme of up to RM2.2
billion (2012/2042). United Growth – a special-purpose company set up to
raise the IMTN – is wholly owned by UEM Group Berhad (the Group).
Through an irrevocable and unconditional purchase undertaking between
United Growth and UEM, the sukukholders are effectively exposed to UEM’s
senior unsecured credit risk. As such, the rating of the IMTN reflects
the credit risk of UEM.
The rating is supported by UEM’s favourable corporate
lineage given that it is wholly owned by Khazanah Nasional Berhad, the
investment arm of the Malaysian Government. We deem UEM to be important
to the Government in view of the Group’s stakes in strategic tolled
roads and vast land holdings in Nusajaya (part of Iskandar Malaysia, an
important economic corridor). Based on RAM’s methodology on
government-linked entities, we expect a moderately high likelihood of
support. Notwithstanding being a government linked corporate entity and
wholly owned by Khazanah, UEM is expected to operate independently and
provide the required return on investment to its sole shareholder, as
has happened in the past.
UEM enjoys a diversified business profile,
underpinned by its 4 core businesses of expressways, engineering and
construction, property development, and asset and facility management
(AFM). While the construction segment dominates its top line,
contributions from non-construction businesses account for the bulk of
its pre-tax profits. The stable performance of its expressways and AFM
divisions will help mitigate the Group’s exposure to the cyclical
natures of the construction and property sectors. Additionally, its
expressways, property development and AFM segments have strong business
profiles.
Despite a debt burden of RM4.80 billion as at
end-June 2014, UEM displays a strong balance sheet, with respective
gearing and net gearing ratios of 0.48 and 0.08 (including money-market
investments) times. While the Group’s funds from operations (FFO) debt
coverage is deemed adequate, its large reserves of cash and money-market
investments facilitated an annualised FFO net-debt coverage of above 1
time for 1H FY Dec 2014. UEM also boasts a strong liquidity position,
backed by RM4.05 billion of cash reserves (after including money-market
investments) against RM633.21 million of short-term debts. Moving
forward, we expect the Group’s debt level to increase over the next 2
years, mainly to fund its investments and growth, whilst its balance
sheet is anticipated to remain robust. Over the same period, its gearing
and net gearing ratios are anticipated to stay below 0.6 and 0.3 times,
respectively. The Group’s FFO debt coverage is expected to hover around
the mid-teens while its FFO net-debt coverage should remain strong.
Nonetheless, we are cautious about any substantial increase in debts or
depletion in its huge cash pile to fund the Group’s investments, the
plans for which have yet to be firmed up. In such an event, the Group’s
current strong financial profile could change abruptly.
Despite its established domestic presence, UEM’s
construction business has a less favourable track record given the
incidence of construction delays that have led to thinner margins and
losses. The segment’s order book had shrunk to RM4.1 billion as at
end-June 2014 (end-May 2013: RM5.2 billion), although we do not foresee
issues with job replenishment. We opine, however, that UEM is fairly
dependent on developments in Nusajaya. Given the general slowdown in the
property market and the keener competition within Iskandar Malaysia,
the Group’s revenue and earnings could weaken in the medium term. We
also expect lower dividends from its toll-road concessions going
forward, due to scheduled principal repayments. The Group faces
regulatory risks in its domestic and foreign toll-road projects.
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