Morning News - 31 May 2016 - MCIL / EVSD / JAKS

Today’s Highlights

►    Results Note – MCIL (SELL, maintain) - Disappointing set of results

►    Results Note – Eversendai (BUY, maintain) - Fair value loss

►    Results Note  – JAKS Resources (BUY, maintain) - Maiden contributions from Vietnam

Quick Bites

►    AirAsia: US$1bn offer for leasing company

Outside Malaysia            

►    Euro area economic confidence rises as ECB stimulus kicks in

►    German consumer prices unexpectedly halt slide before ECB meets

►    French economy grows faster than estimated as investment jumps

►    Japan’s retail sales stall as Abe mulls delay to tax hike

►    No slowdown for India despite global uncertainty, Jaitley says

►    Brazil’s April primary budget surplus exceeds all estimates

►    Oil rises as Libya fighting flares up before OPEC meets

Maybank Weekly Bond Report - 30 May 16

Positive in the Long Run, Cautious in the Short Run

BOND MARKET REVIEW

Indonesia bond market closed with a weekly gain supported by buying appetite. The increasing appetite in our view may have occurred as IGS yield seem to be attractive to certain bond investors. Yet, the incline of IGS prices was not supported by a huge volume and any economy data release as there weren’t any economic data release globally as well as domestically which could significantly move the IGS higher last week. In short, IGS prices incline in the mid of a silent market. During the week, Indonesia president met with Saudi Arabian prince as well as attended G7 meeting in Japan where he met with several delegates and Japan officials. He encourages FDI from both of the country to Indonesia. The result seems to be positive as these officials and delegates have the same intention with the Indonesian President. Bi-weekly conventional auction was conducted by DMO last week which received Rp14.7 tn while DMO awarded Rp10.0 bids.

Total trading volume at secondary market for the government segment was noted thin amounting Rp53.92 tn during last week with FR0056 (10y benchmark series) as the most actively traded. On the corporate segment, total trading volume was noted moderate amounting Rp4.18 tn with STTP01ACN2 (Shelf registration I Siantar Top Phase II Year 2016; A serial bond; Maturity date: 21 May 2017; Rating: _idA) as the most actively traded bond.

Foreign ownership stood at Rp616.4 tn or 37.9% of total tradable government bond as of May 26^th. Considering a 2 day’s settlement, Foreigner booked net sell worth of Rp9.19 tn within the month of May while biggest buyer during the same period was banking sector which bought Rp11.36 tn. Insurance companies was seen purchasing Rp9.41 tn due to liaising with new OJK regulation that Insurance companies should have IGS proportion approx. equal or above 20% of total investment asset.

We believe that bond market this week would be moving sideways with IGS prices to slightly decline. Bond investor in our view would be really cautious ahead of the U.S. May NFP and Unemployment data release mostly after Fed Yellen remarked that she sees the Fed to gradually and cautiously increase their overnight interest rate over time and probably in the coming months. In the short run, we do see that an increase of the FFR would impact negatively to the IGS and Indon prices. However, the negative sentiment could be offset if S&P rating agency upgrades Indonesia rating to investment grade and tax amnesty bill is passed by legislative. In the long run, we remain to believe the potential appreciation of both of the asset prices backed by expansionary monetary and fiscal policy stance taken by the local Central Bank and government respectively which would lead to higher GDP growth, lower unemployment rate and a stable inflation rate in the long run. ECB meeting will be held this week as well with consensus expecting of an unchanged of their refinancing rate. Indonesia May inflation rate will be published by Indonesia statistics this week, our house calls a monthly inflation of 0.18% MoM however yearly inflation would decline to 3.28% YoY. Expectation of a disinflation would result in IGS yield to decline. This is why we are expecting for IGS prices to move sideways this week.

May’s Industrial Output And Export Growth Eased But Retail Sales Growth Remains On Track

Economic Research	30 May 2016
Vietnam
Economic Highlights
May’s Industrial Output And Export Growth Eased But Retail Sales Growth Remains On Track Vietnam’s industrial production (IPI) growth eased marginally to 7.8% y-o-y in May, after growing +7.9% in April and compared to +6.2% in March, caused mainly by the easing in the output of manufacturing, electricity and water supply. Economist:  Vincent Loo  | +603 9280 2172
To access our recent reports please click on the links below: 28 Apr : IPI Grew Stronger But Exports And Retail Sales Eased In April, Overall Economy Remains Healthy 29 Mar: March Economic Indicators Show Mixed Signals 29 Mar: 1Q 2016 GDP Growth Slowed On Declines In Agriculture And Mining Output 01 Mar: February Indicators Show Improvement In Economic Activities 03 Feb: Economic Indicators In January Mark Slow Start To 2016 28 Dec: 2015 GDP Growth Hit A Seven-Year High On Manufacturing And Construction 28 Dec: December Indicators Capped Off A Resilient Year

CIMB Fixed Income Weekly Commentary & Strategy - 30 May 2016

Highlights

• US Treasuries: UST down as Yellen raises hike fears
• MYR govvies: As Fed looms, weak auction reflects pressure on MGS
• MYR credits: Longer tenor TBEI offer pickup
• THB govvies: Fed fears as well, and no BoT cuts for support
• IDR govvies: More weakness expected