January 21, 2015
Global Markets Research
Daily Market Highlights
Key Takeaways
Overnight Economic Data
US
Renewed fall in oil prices and IMF growth forecast downgrade appeared to have little dent
Eurozone
on market sentiments and we believe the string of “not too bad” Chinese data that showed
sustained growth of 7.3% YOY in 4Q and quicker gains in retail sales and industrial production has
China
Australia
helped cushion some of the jitters. Days after World Bank’s downgrade, IMF cut its world growth
New Zealand
forecasts for this and next year by 0.3ppt to 3.5% and 3.7% respectively, amid downgrades in
Eurozone, Japan, China, Russia, as well as some oil exporting economies, which offset the
upgrade in the US. Back home, the government is again striking a fine balancing act between
growth and fiscal consolidation amid the current oil turmoil, cutting 2015 growth forecast to 4.5-
Government Bond Yield
5.5% and raising budget deficit target to 3.2% of GDP amid oil revenue loss as it seeks RM5.5bn
opex cut whilst maintaining development expenditure at RM48.5bn.
The DXY index extended its gain to a fresh 11-year high at 93.05 as at yesterday’s close as
impending QE by ECB vis-à-vis Fed rate hike is set to enhance the appeal of USD denominated
assets and debts. Back home, MYR weakened 1.01% to 3.6075 at close, its weakest level since
MYR
Aprr-09, after regaining some losses from 3.6153 hit in intraday trade. Markets were unnerved by
a higher budget deficit target of 3.2% of GDP for 2015 and Fitch statement saying it is more
3-year
3.57
5-year
3.77
7-year
3.88
10-year
3.92
15-year
4.18
20-year
4.36
likely than not to downgrade the sovereign rating of Malaysia. We expect continued weakness in
30-year
4.62
the MYR amid lingering fiscal and growth concerns.
2-year
0.49
UST
Moving into MYR bonds, benchmark govvies ended mixed yesterday with yields inching
higher amid influence from weaker Ringgit performance. Total volume traded was over
RM3.6b with focus skewed towards GII 7/22 with RM1.32b dealt. Levels ended circa 2-3 bps higher
5-year
1.28
10-year
1.79
30-year
2.38
from previous trade. PM announced that fiscal deficit target for 2015 will be revised to 3.2% of GDP
versus previous level of 3.0%, whilst growth to moderate to 4.5%-5.5% versus previous forecast of
5.0%-6.0%. Fiscal consolidation is expected to continue. Despite the challenges, we opine fiscal
consolidation although is a tad higher from previous forecast, its path of consolidation
Daily Supports - Resistances
remains on track in achieving a balance budget by 2020. All eyes on CPI release today.
S2
S1
Indicative
R1
R2
EURUSD
1.1500
1.1540
1.1555
1.1568
1.1600
What’s Coming Up Next
USDJPY
117.87
118.54
118.59
118.91
119.32
GBPUSD
1.5075
1.5100
1.5140
1.5164
1.5200
Major Data
Malaysia CPI
US housing starts, MBA mortgage applications
AUDUSD
0.8152
0.8164
0.8170
0.8182
0.8205
EURGBP
0.7595
0.7615
0.7632
0.7633
0.7673
UK jobless claims change, ILO jobless rate
Japan all industry activity index, supermarket sales, leading index
Major Events
BOJ MPC meeting
BOE minutes
Bond Tender
Nil
USDMYR
3.6045
3.6153
3.6190
3.6258
3.6298
EURMYR
4.1600
4.1725
4.1824
4.1841
4.1937
JPYMYR
3.0300
3.0448
3.0532
3.0560
3.0679
GBPMYR
5.4590
5.4755
5.4797
5.4838
5.4970
SGDMYR
2.6920
2.7000
2.7037
2.7071
2.7083
AUDMYR
2.9455
2.9500
2.9583
2.9600
2.9718
NZDMYR
2.7560
2.7655
2.7680
2.7700
2.7777
= above 0.1% gain
= above 0.1% loss
Name
KLCI
Dow Jones Ind.
Last Price
DoD %
YTD %
1750.1
-0.2
-0.6
CRB Index
17515.2
0.0
-1.7
WTI oil ($/bbl)
S&P 500
2022.6
0.2
-1.8
FTSE 100
6620.1
0.5
0.8
Shanghai
3173.1
1.8
23951.2
3334.0
Hang Seng
STI
Source: Bloomberg
1
Name
Brent oil ($/bbl)
Outlook
= less than 0.1% gain / loss
Last Price
DoD %
YTD %
219.0
-2.4
-4.8
46.4
-4.7
-12.9
48.0
-1.7
-17.2
Gold (S/oz)
1295.4
1.5
9.2
-1.9
CPO (RM/tonne)
2331.5
0.5
1.5
0.9
1.5
Copper ($/tonne)
5672.0
-0.8
-10.0
0.8
-0.9
Rubber (sen/kg)
370.5
0.0
-1.9
Macroeconomics
•
Economic Data
US NAHB housing market index
EU ZEW survey Expectations
JP convenience store sales
CH fixed assets ex rural YTD
CH retail sales
CH industrial production
CH GDP
AU Westpac consumer
confidence
NZ CPI QOQ
For
Actual
Last
Survey
Jan
Jan
Dec
Dec
Dec
Dec
4Q
57
45.2
-1.2%
15.7%
11.9%
7.9%
7.3%
58
31.8
-1.7%
15.8%
11.7%
7.2%
7.3%
58
--15.7%
11.7%
7.4%
7.2%
Jan
93.2
91.1
--
4Q
-0.2%
0.3%
0.0%
The slew of China data was not as bad as feared. The China
economy sustained a 7.3% YOY growth pace in 4Q underpinned
mainly by robust 11.2% YOY growth in the tertiary industry. This
brought full year 2014 growth to 7.4%, within the government’s
target of “about 7.5%”. Retail sales and industrial production both
exceeded expectations, registering 11.9% and 7.9% YOY increases
respectively although the expansion in fixed asset investment
moderated to 15.7% YOY YTD as expected. Growth outlook will turn
a tad softer going into 2015 as the government continues with its
reform efforts and amid looming headwinds in the world economy.
•
In its latest WEO update, IMF has downgraded China’s growth
forecast to 6.8% and 6.3% for 2015 and 2016 (previous: 7.1% and
6.8%). Growth in the Euro region and Japan was also downgraded
by 0.1-0.3ppt while that of the US were revised higher by 0.3-0.5ppt
to 3.6% for 2015 and 3.3% 2016. Overall, the world economy is
projected to grow at a slower pace of 3.5% in 2015 and 3.7% in
2016 (previous estimate: 3.8% and 4.0%). This came in higher than
World Bank’s revised forecast of 3.0% for this year and 3.3% next
(previous: 3.4% and 3.5%).
•
Overnight US data however came in a tad softer. NAHB housing
market index dipped a notch to 57 in January but this remained near
Source: Bloomberg
10-year high levels that signaled continued optimism over the US
housing market this year.
•
On the contrary, ZEW expectations in the Eurozone climbed to a 6month high at 45.2 in January, suggesting increased optimism
growth would improve at the end of the year as ECB roll out another
round of QE.
•
At the local front, in his special address yesterday, the PM
announced that growth is expected to come in lower at 4.5-5.5% this
year (previous 5-6%) amid lower oil prices. This compares with our
revised growth forecast of 4.5%. However, in the absence of
development expenditure cut and amid RM5.5bn reduction in opex
and lower revenue, budget deficit target is raised to 3.2% of GDP,
but remained below 2014’s 3.5%. We believe this should offer some
comfort that the government’s commitment in balancing its budget
remains intact although this marked a derail from the original target
of 3.0%.
•
Fitch in a statement yesterday said it is more likely than not to
downgrade the sovereign rating of Malaysia in its review in 1H2015.
Fitch commented that the upward revision in deficit target and lower
growth forecast is reinforcing the fact that “dependence on
commodities remains a key credit weakness for Malaysia”.
Separately, S&P Associate Director of Sovereign Rating viewed
Malaysia’s revised budget as an indication of continued focus on
fiscal consolidation by the government but cautioned that prolonged
oil slump could derail its fiscal consolidation efforts.
•
Today, BOJ meeting and BOE minutes will take center stage,
followed by US housing starts and UK job reports. Malaysia CPI is
due and we are expecting a more moderate print of 2.7%. Given
less intense inflationary pressure stemming from lower pump prices
and delay in electricity tariff hike, we have tweaked our 2015 full
year CPI from 4.4% to 3.7%. This should strengthen the case for an
extended OPR pause in 2015 amid prevailing growth risks.
2
Economic Calendar Release Date
Country
Date
MA
US
Event
Survey
Prior
Revised
Dec
2.80%
3.00%
--
Foreign reserves
15-Jan
--
$116.0B
--
MBA mortgage applications
16-Jan
--
49.10%
--
Dec
0.80%
-5.20%
-3.70%
--
01/21
CPI YoY
01/22
01/21
Building permits MoM
01/22
Reporting Period
Housing starts MoM
Dec
1.20%
-1.60%
Initial jobless claims
17-Jan
300K
316K
--
Continuing claims
10-Jan
2400K
2424K
--
22-Jan
0.05%
0.05%
EU
01/22
ECB main refinancing rate
SW
01/22
World economic forum-Davos
--
UK
01/21
Jobless claims change
Dec
-25.0K
-26.9K
--
ILO unemployment rate 3Mths
Nov
5.90%
6.00%
--
Public finances (PSNCR)
Dec
--
6.7B
--
CBI trends total orders
Jan
--
5
--
All industry activity index MoM
Nov
0.0%
-0.10%
--
Supermarket sales YoY
Dec
--
-0.70%
--
Leading index CI
Nov F
--
103.8
--
Machine tool orders YoY
Dec F
--
33.80%
--
BOJ annual rise in monetary base
21-Jan
--
Â¥80T
--
--
Bank of England minutes
01/22
JP
01/21
Bank of Japan monetary policy statement
HK
01/22
CPI composite YoY
Dec
4.7%
5.10%
--
AU
01/22
Consumer inflation expectation
Jan
--
3.40%
--
NZ
01/22
Source: Bloomberg
3
HIA new home sales MoM
Nov
--
3.00%
--
BusinessNZ manufacturing PMI
Dec
--
55.2
--
ANZ consumer confidence index
Jan
--
126.5
--
Forex
MYR
FX Table
Nam e
Last Price
DoD %
High
Low
YTD %
EURUSD
1.1550
-0.48
1.1615
1.1541
-4.6
USDJPY
118.82
1.07
118.87
117.56
-0.9
GBPUSD
1.5145
0.21
1.52
1.5058
-2.8
AUDUSD
0.8172
-0.48
0.8218
0.8160
-0.2
EURGBP
0.7626
-0.70 0.76928
0.7613
-1.8
USDMYR
3.6075
3.5682
3.6
EURMYR
JPYMYR
• MYR slumped 1.01% to 3.6075 against USD, sliding further after the
announcement of a restructured budget as concerns over Malaysia’s fiscal
position remained, amplified by Fitch Rating’s warning of a rating
downgrade. MYR weakened against 9 G10s.
• Expect extended weakness in MYR from further declines in oil prices as
well as on continued concerns over Malaysia’s fiscal strength; however, we
note that technical viewpoint hints at MYR being grossly oversold and may
trigger an imminent moderate pullback.
1.01
3.6153
4.1753
0.91
4.1863
4.1382
-1.6
3.0365
-0.05
3.056
3.0310
4.4
GBPMYR
5.4549
0.78
5.4553
5.3853
0.7
SGDMYR
2.6973
0.54
2.6999
2.6766
2.2
AUDMYR
2.9627
1.10
2.9638
2.9225
3.2
NZDMYR
2.7919
0.42
2.7958
2.7699
0.9
USD
• USD bids returned and advanced against 8 G10s, supported by extended
declines in commodity and Nordic majors. The Dollar index reversed early
losses as bids firmed up in US trade, climbing to a fresh 11y high at 93.04.
• We continue to expect a firm USD, supported by prevailing divergence in
policy outlook between the Fed and ECB.
Source: Bloomberg
EUR
• EUR rallied to a stronger ZEW survey, but reversed gains on the back of a
MYR vs Major Counterparts (% DOD)
well-bidded USD to fall 0.48% to 1.1550 at closing, a fresh 11y low. EUR
closed higher against 6 G10s, cushioned by worse-off commodity and Nordic
CHF
-1.28
-0.05
MYR
Depreciated
JPY
SGD
0.54
approaching ECB announcement on policy tomorrow.
0.78
GBP
EUR
0.91
1.00
USD
1.01
-0.50
0.00
• GBP stemmed its recent weakness to rise 0.21% against USD to 1.5145,
supported by firmer refuge demand as sell-off in most European majors
1.10
CNY
-1.00
GBP
HKD
AUD
-1.50
majors.
• EURUSD remains bearish in our view, led lower by rising QE bets
continued. GBP advanced against 9 G10s.
1.12
0.50
1.00
1.50
• We remain slightly bearish on GBPUSD ahead of UK employment data
and BOE minutes; upsides likely to firm up on solid UK data, coupled with
intensifying sell-off in European majors ahead of ECB announcement.
JPY
• JPY was pressured by more positive sentiment in Asian and European
sessions before narrowing early losses in US trading to close lower against 8
G10s and weaken 1.07% to 118.82 against USD.
• While we maintain that JPY would remain supported by refuge demand,
its bids would most likely be superseded by a firmer USD.
AUD
• AUD was supported by firmer risk appetite in Asian and European trades to
advance against 7 G10s but saw its gains overturned by a rising USD,
closing 0.48% lower at 0.8172.
• We now turn slightly bearish on AUD on the back of a firm USD.
SGD
• SGD advanced against 8 G10s, lifted by firmer risk appetite in Asian and
European trade but weakened 0.25% to 1.3370 against a rising USD.
• SGD is expected to stay slightly bearish on the back of a firm USD.
4
Fixed Income
US Treasuries
• UST rallied, pushing yields lower across the curve on speculation
over an imminent bond purchase programme by the ECB.
Meanwhile benign yields of government bonds of developed
nation seen appealing the higher relative yield of USD safe
haven assets. Yields on 10-year notes seen lowered to end at
1.79% yesterday. On the data tap, investors will be focusing on
tonight’s release of housing starts (Dec) and building permits
(Dec) ahead of tomorrow’s ECB meeting. Expect UST to remain
supported.
MGS
• Moving into MYR bonds, benchmark govvies ended mixed
yesterday with yields inching higher amid influence from weaker
Ringgit performance. Total volume traded was over RM3.6b with
focus skewed towards GII 7/22 with RM1.32b dealt. Levels
ended circa 2-3 bps higher from previous last trade. PM
announced that fiscal deficit target for 2015 will be revised to
3.2% versus previous level of 3.0%, whilst growth to moderate to
4.5%-5.5% versus previous forecast of 5.0%-6.0%. Fiscal
consolidation is expected to continue.
Daily Trades Government Bonds
Securities
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
MGS
GII
GII
GII
GII
GII
GII
Closing
YTM
Vol
(RM mil)
Previous
YTM
3.432
3.341
3.263
3.451
3.411
3.586
3.573
3.669
3.769
3.856
3.869
3.881
4.015
3.923
4.184
4.364
3.954
4.118
4.137
4.237
4.399
4.400
150
30
313
0
100
12
75
27
177
9
56
200
19
187
41
44
40
6
1320
310
210
30
3356
3.377
3.271
3.290
3.520
3.441
3.631
3.597
3.638
3.757
3.914
3.889
3.843
4.020
3.920
4.191
4.364
3.949
4.235
4.103
4.233
4.553
4.414
8/15
9/15
10/15
7/16
9/16
2/17
3/17
10/17
10/19
3/20
7/20
9/21
8/22
7/24
4/30
4/33
11/18
3/21
7/22
5/24
12/28
2/24
Source : BPAM
5
Previous
Trade Date
(dd/mm/yyyy)
19/01/2015
14/01/2015
19/01/2015
19/01/2015
19/01/2015
15/01/2015
19/01/2015
19/01/2015
19/01/2015
19/01/2015
19/01/2015
19/01/2015
15/01/2015
19/01/2015
19/01/2015
19/01/2015
19/01/2015
14/01/2015
19/01/2015
19/01/2015
16/12/2014
15/01/2015
Chg
(bp)
6
7
-3
-7
-3
-4
-2
3
1
-6
-2
4
0
0
-1
0
1
-12
3
0
-15
-1
• Meanwhile Fitch commented that it maintains its Negative
outlook on Malaysia and will review Malaysia’s rating during the
first half of 2015. The Negative outlook indicates that Fitch is
more likely than not to downgrade the rating of sovereign.
Dependence on commodities on account of high share of
revenues linked to petroleum has been highlighted as a credit
concern. Despite the challenges, we opine fiscal consolidation
although is a tad higher from previous forecast, the path of
consolidation remains on track in achieving a balance budget by
2020. All eyes on CPI- December scheduled for release this
afternoon.
PDS/Sukuk
• On the PDS front, trading volume was over RM569m transacted.
Amongst GG bonds, we saw Khazanah ’16 traded wider to end
at 3.89% with RM100m crossed, PTPTN ‘3/24 and ‘12/24 with
combined volume of RM70m and DanaInfra ’34 done tighter to
close at 4.81% with RM20m changing hands. Meanwhile Berjaya
Land ‘12/19 and ‘12/21 were again traded with levels closing at
4.79% and 5.15% with robust combined volume of RM160m
done. Other notable trades include HLA ’20 done at 5.05% with
RM40 dealt.
Daily Trades: PDS / Sukuk
Securities
Khazanah Nasional Berhad
Perbadanan Tabung Pendidikan Tinggi Nasional
Perbadanan Tabung Pendidikan Tinggi Nasional
DanaInfra Nasional Berhad
Berjaya Land Berhad
Berjaya Land Berhad
Quill Retail Malls Sdn Berhad
National Bank of Abu Dhabi PJSC
Aquasar Capital Sdn Berhad
Aman Sukuk Berhad
Aman Sukuk Berhad
Aquasar Capital Sdn Berhad
Projek Lebuhraya Usahasama Berhad
Telekom Malaysia Berhad
Telekom Malaysia Berhad
TNB Northern Energy Berhad
Manjung Island Energy Berhad
TNB Northern Energy Berhad
Sarawak Energy Berhad
YTL Power International Berhad
CIMB Bank Berhad
First Resources Limited
Golden Assets International Finance Limited
First Resources Limited
Hong Leong Bank Berhad
Temasek Ekslusif Sdn Berhad
RHB Islamic Bank Berhad
CIMB Thai Bank Public Company Limited
RHB Bank Berhad
Hong Leong Assurance Berhad
Jimah Energy Ventures Sdn Berhad
BGSM Management Sdn Berhad
UEM Sunrise Berhad
12/16
3/24
12/24
11/34
12/19
12/21
3/17
6/15
7/15
4/19
5/19
7/20
1/24
3/24
6/24
5/29
11/31
5/35
6/16
10/21
8/21
7/17
11/17
12/17
6/19
11/19
5/19
7/19
7/19
2/20
5/21
12/23
12/18
Rating
Closing
YTM
Vol
(RM mil)
Previous
YTM
GG
GG
GG
GG
AAA (FG)
AAA (FG)
AAA (BG)
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AAA
AA1
AA1
AA+
AA2
AA2
AA2
AA2
AA3
AA3
AA3
AA3
AA3
AA3
AA3
AA-
3.896
4.475
4.480
4.807
4.798
5.149
4.163
3.872
3.956
4.189
4.190
4.437
4.600
4.610
4.640
4.949
5.005
5.358
4.024
4.507
5.600
4.424
4.820
4.441
4.996
4.591
4.746
5.129
4.968
5.047
5.010
5.138
4.514
100
60
10
20
105
45
2
5
25
5
5
10
10
15
15
10
6
10
4
3
0
1
20
2
20
10
0
2
1
40
5
1
2
569
3.690
4.470
4.550
4.840
4.800
5.200
4.214
3.636
4.019
4.097
4.177
4.431
4.598
4.549
4.655
5.337
5.006
5.319
4.094
4.508
5.600
4.428
4.819
4.446
5.239
4.579
4.758
4.969
5.200
4.915
5.142
4.520
Previous
Trade Date
(dd/mm/yyyy)
12/08/2014
19/01/2015
19/12/2014
05/01/2015
05/01/2015
05/01/2015
07/01/2015
31/12/2014
13/01/2015
06/11/2014
07/01/2015
23/10/2014
19/01/2015
16/12/2014
22/12/2014
28/01/2014
16/01/2015
22/01/2014
13/01/2015
15/01/2015
16/01/2015
15/01/2015
19/01/2015
16/01/2015
12/01/2015
26/11/2014
06/01/2015
14/01/2015
10/12/2014
21/11/2014
14/01/2015
12/01/2015
Chg
(bp)
21
0
-7
-3
0
-5
-5
24
-6
9
1
1
0
6
-2
-39
0
4
-7
0
0
0
0
0
-24
1
-1
16
-23
13
0
-1
Spread
Against
IRS**
10
32
33
48
100
135
36
7
16
31
31
49
53
46
49
62
68
103
22
47
157
58
98
60
112
79
87
125
109
110
103
107
63
** spread against nearest indicative tenured IRS
Source : BPAM
Market/Corporate News: What’s Brewing
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz did not give away any indication that
there is going to be a hike in the current overnight policy rate of 3.25%, as it is still
accommodative for the country’s economic growth. She said the country’s fundamentals
were still intact and that growth prospects should prevail when external conditions
stabilised. “The economic fundamentals will prevail to reflect the strength of the ringgit,”
she said. According to Zeti, the central bank has taken prudent macroeconomic
measures that included building up the country’s foreign reserves and capping credit
growth at a reasonable level “very much earlier on”. “When we built up our reserves, we
were being questioned for building up too much than that were required by a country of
our size,” she said. She added that the country’s optimal level of reserves was “very
much lower” compared with trades and financial activities. On the country’s current
account surplus, she said: “We will continue to have a surplus in our current account,
even though it might be a smaller surplus.” On top of that, Zeti added, the central bank
had introduced cooling measures to contain rapid credit growth when there was a surge
in foreign fund inflows. As a result, household credit growth had moderated from the
peak of 15% in 2010 to 10% currently, she said. As for the country’s fundamentals, she
said a projected gross domestic product (GDP) growth of 4.5% to 5.5% was still
considered steady while the 2.5% to 3.5% inflation rate was still very credible. On top of
that, public indebtedness had declined from 52.8% from 54.7%, she noted. “As we
strengthen our position to address our vulnerabilities, this places us in a very positive
position because over a period of time when conditions stabilise, our currency and
country’s growth prospects will reflect our underlying fundamentals.” Nonetheless, that
did not help with the weakening ringgit, which fell to a near six-year low of 3.607 against
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the greenback yesterday. Zeti said volatility in the financial markets was not unseen by
the country and that the more developed a country was, the more susceptible it was to
external developments such as capital flows. Some analysts were concerned as foreign
investors hold some 40% of Malaysian debt papers and the fear was the ringgit would
depreciate significantly should they sell their bonds. To this, Zeti said short-term
investors might have fled from the domestic market but the country had other long-term
investors such as pension funds, sovereign wealth funds and other central banks.
“These are more stable investors so we don’t expect an exodus like what was
suggested.” Quoting the example of South Korea during 2009, she said the won had
appreciated some 30% to 40% before all the gains were erased due to fund reversals.
In comparison, the ringgit which appreciated by about 12% depreciated at the same
rate, implying a lower volatility. Back in 2009, Malaysia’s foreign reserves fell by
US$30bil compared with South Korea’s US$70bil. She also noted that the country
continued to receive foreign direct investments (FDIs) of RM24bil annually as Malaysia
was still one of the preferred destinations for FDIs. “If we should ever have a deficit, we
will still have financing in the form of FDIs.” She assured that the central bank would
support the real economic sector as well as keep tabs on the financial market so that it
continued to be “orderly”.(Source : The Star)
Rating Actions
Issuer
PDS Description
Nil
Sources: RAM, MARC
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Rating/Outlook
Action
Hong Leong Bank Berhad
Fixed Income & Economic Research, Global Markets
Level 6, Wisma Hong Leong
18, Jalan Perak
50450 Kuala Lumpur
Tel: 603-2773 0469
Fax: 603-2164 9305
Email: [email protected]
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