May 8, 2015

Global Markets Research

Daily Market Highlights

1

Chee8 .

Overnight Economic Data

Malaysia �

US �

Eurozone �

Japan �

Australia �

Government Bond Yield

MYR

3-year 3.28 �

5-year 3.61 �

7-year 3.80 �

10-year 3.90 �

15-year 4.03 �

20-year 4.19 �

30-year 4.61 �

UST

2-year 0.63 �

5-year 1.56 �

10-year 2.18 �

30-year 2.91 �

Daily Supports - Resistances

S2 S1 Indicative R1 R2 Outlook

EURUSD 1.1188 1.1225 1.1251 1.1290 1.1322 �

USDJPY 119.67 119.76 119.78 119.89 119.96 �

GBPUSD 1.5309 1.5343 1.5395 1.5400 1.5450 �

AUDUSD 0.7869 0.7890 0.7896 0.7919 0.7948 �

EURGBP 0.7280 0.7300 0.7308 0.7343 0.7352 �

USDMYR 3.5915 3.5953 3.5993 3.6065 3.6137 �

EURMYR 4.0339 4.0518 4.0532 4.0674 4.0717 �

JPYMYR 2.9932 3.0000 3.0066 3.0103 3.0140 �

GBPMYR 5.5270 5.5360 5.5451 5.5515 5.5672 �

SGDMYR 2.6979 2.7008 2.7025 2.7064 2.7076 �

AUDMYR 2.8354 2.8407 2.8436 2.8455 2.8508 �

NZDMYR 2.6689 2.6763 2.6785 2.6818 2.6876 �

� = above 0.1% gain � = less than 0.1% gain / loss � = above 0.1% loss

Name Last Price DoD % YTD % Name Last Price DoD % YTD %

KLCI 1805.1 -0.9 2.5 CRB Index 226.8 -1.5 -1.4

Dow Jones Ind. 17924.1 0.5 0.6 WTI oil ($/bbl) 58.9 -3.3 10.6

S&P 500 2088.0 0.4 1.4 Brent oil ($/bbl) 65.5 -3.3 14.3

FTSE 100 6887.0 -0.7 4.9 Gold (S/oz) 1184.5 -0.6 -0.1

Shanghai 4112.2 -2.8 27.1 CPO (RM/tonne) 2173.0 1.1 -5.4

Hang Seng 27290.0 -1.3 15.6 Copper ($/tonne) 6400.0 0.2 1.6

STI 3432.8 -0.8 2.0 Rubber (sen/kg) 424.0 1.4 12.3

Source: Bloomberg

Key Takeaways

� BNM MPC meeting offered no surprises, keeping OPR unchanged at 3.25% and maintaining a

neutral policy tone, reinforcing our view for a rate pause this year. In an earlier release, data

showed exports bounced back strongly in March post Lunar New Year and trade surplus

widened for the first time in four months, but we remain skeptical if such momentum could be

sustained amid a soft global backdrop and weak commodity prices. Abroad, initial jobless

claims rose less than expected while continuing cla ims hovered near a 15-year low,

offering reprieve the US job market is tracking on a steady recovery path. We are looking

upon tonight’s NFP for reaffirmation.

� USD strengthened against all G10s and the Dollar Index rose to 94.63 amid job growth

optimism and renewed refuge demand amid slip in higher yielding assets. We expect USD to

remain supported by ebbing risk appetite leading into US NFP tonight as well as renewed

weakness in European majors, led by EUR. MYR weakened 0.68% to 3.5942 against USD ,

uninspired by wider Malaysian trade surplus as buyers stayed on the sideline. MYR also fell

against all G10s. Following overnight rebound in USD and renewed weakness in oil prices

coupled with likelihood of edgy buyers ahead of US NFP tonight, we expect MYR to extend its

weakness against USD . USDMYR is likely to re-test 3.6137.

� Local govvies saw profit taking yesterday, sending benchmark yields higher. Investors seen

taking profit from weeks of gains seen for MYR govvies ahead of BNM MPC meeting. As widely

expected, BNM maintained the OPR unchanged at 3.25%, reinforcing views of a rate pause. Total

volume traded in MYR govvies was over RM2.2b. Focus continue to skew towards MGS 10/20

with RM325m traded with levels closing 4 bps higher at 3.61%. Meanwhile in the GII segment, we

saw GII 10/25 traded at 3.99-4.00% with RM384m changing hands. Expect all eyes to shift

towards US non-farm payrolls release and US unemplo yment data.

What’s Coming Up Next

Major Data � US nonfarm payroll, jobless rate

� UK visible trade balance

� China exports

Major Events � RBA Statement of Monetary Policy

Bond Tender

� Nil

2

Source: Bloomberg

Economic Calendar Release Date

Country Date Event Reporting Period Survey Prior Revised

MY 11/5 Industrial production Mar 4.4% 5.2% --

Manufacturing sales Mar -- -2.6% --

Foreign reserves May 7 -- $105.6b --

US 8/5 Change in nonfarm payrolls Apr 228K 126K --

Unemployment rate Apr 5.4% 5.5% --

Wholesale inventories MOM Mar 0.3% 0.3% --

UK 7 – 10 / 5 Halifax house prices YOY Apr 7.8% 8.1% --

8/5 Visible trade balance in mln Mar -£9800 -£10340 --

11/5 BOE rate May 11 0.50% 0.50% --

BOE asset purchase target May 11 -- £375b --

China 8/5 Exports YOY Apr 1.6% -15.0% --

9/5 CPI YOY Apr 1.6% 1.4% --

PPI YOY Apr -4.5% -4.6% --

Australia 11/5 NAB biz conditions Apr -- 6 --

NAB biz confidence Apr -- 3 --

� Macroeconomics

• No surprise from BNM which left OPR unchanged at 3.25% for a fifth

straight meeting. In spite of slower growth projection in the first quarter,

the Malaysian economy is expected to remain on a steady growth path

which does not warrant a rate cut. In a separate release, Malaysia

exports staged a surprised turnaround to increase 2.3% YOY in March,

thanks to higher shipment to the US and China post-Lunar New Year.

Growth was led my manufacturing exports most notably E&E as

commodity exports extended its decline. As a result of the hefty

rebound in exports, trade surplus widened for the first time in four

months, to RM7.8bn. Looking ahead, exports outlook remains cloudy in

the wake of soft global demand although a weaker MYR could help

mitigate some of the impact. No change to our 4.5% growth forecast

for 2015.

• Over in the US, initial jobless claims surprised on the upside as fewer

Americans than forecast filed for unemployment benefits last week.

Last week, 265,000 Americans filed unemployment claims for the first

time versus a record low of 262,000 in the previous week, boosting the

likelihood of upbeat NFP and unemployment rate prints due tonight.

• Eurozone PMI retail index climbed to a 10-month high of 49.5 in April

shored up by increases in France and Italy. The index however

remained in contraction territory for the 10th straight month, pointing to

sluggishness in retail spending.

• Japan PMI services jumped to 51.3 in April, signaling expansion for the

first time in three months as the employment index rose to a 5-month

high. This was in line with services indices seen elsewhere which

signaled continued growth in the services sector despite weakness in

manufacturing.

• In Australia, the job market saw 2.9K jobs slashed in April but this was

offset by upwardly revised job creation from 37.7K to 48.1K in March.

The losses were dragged by a fall in full time employment (-21.9K) that

offset the 19.0K gain in part time employment, a sign of sluggishness

in the labour market. Unemployment rate inched higher to 6.2% as

expected while participation rates were unchanged at 64.8%.

Economic Data

For Actual Last Survey

MY exports Mar 2.3% -9.7% -4.2%

MY OPR May-7 3.25% 3.25% 3.25%

US initial jobless claims May-2 265K 262K 278K

EU PMI retail Apr 49.5 48.6 --

JP PMI services Apr 51.3 48.4 --

AU employment change Apr -2.9K 48.1K 4.0K

AU jobless rate Apr 6.2% 6.1% 6.2%

Source: Bloomberg

3

FX Table

Name Last Price DoD % High Low YTD %

EURUSD 1.1267 -0.71 1.1392 1.1237 -7.0

USDJPY 119.74 0.23 119.86 119.06 0.0

GBPUSD 1.5245 -0.01 1.5275 1.5164 -1.2

AUDUSD 0.7907 -0.78 0.8005 0.7890 -3.4

EURGBP 0.7390 -0.69 0.74832 0.7380 -5.9

USDMYR 3.5942 0.68 3.6058 3.5652 3.0

EURMYR 4.0828 1.89 4.0963 4.0444 -4.7

JPYMYR 3.0018 0.46 3.0211 2.9859 3.0

GBPMYR 5.4604 0.81 5.4821 5.4360 1.8

SGDMYR 2.7019 0.54 2.7095 2.6930 2.1

AUDMYR 2.8568 0.32 2.8731 2.8357 -0.7

NZDMYR 2.6880 0.51 2.7025 2.6701 -2.3

Source: Bloomberg

2.05

1.89

0.81

0.68

0.67

0.59

0.54

0.46

0.32

0.00 0.50 1.00 1.50 2.00 2.50

CHF

EUR

GBP

USD

HKD

CNY

SGD

JPY

AUD

MYR vs Major Counterparts (% DOD)

MYR Depreciated

�Forex MYR • MYR weakened 0.68% to 3.5942 against USD , uninspired by wider

Malaysian trade surplus as buyers stayed on the sideline. MYR also fell

against all G10s.

• Following overnight rebound in USD and renewed weakness in oil prices

coupled with likelihood of buyers continue staying on the sides ahead of US

NFP tonight, we expect MYR to extend its weakness against USD .

USDMYR is likely to re-test 3.6137.

USD

• USD rallied to beat all G10s on firmer US data and renewed demand for

refuge as higher yielding assets slipped. The Dollar Index climbed through

early European and late US morning trades before easing slightly

thereafter, but nonetheless closing higher at 94.63.

• We expect USD to remain supported by ebbing risk appetite leading into

US NFP tonight as well as renewed weakness in European majors, led by

EUR. EUR

• EUR has its upside strength clipped by news that a Greek-EU deal on

extended government funding may not be reached before the coming

Monday, exposing Greece to risk of delayed debt payment to the IMF due

12 May. EUR fell 0.71% to 1.1267 against a rejuvenated USD and

weakened against 9 G10s.

• EUR is likely to soften on the back of a supported USD; following

strong downside rejection yesterday, EURUSD is fragile and losing

1.1225 risks further decline to as low as 1.1188 and below.

GBP

• GBP was mostly flat throughout trading and ended 0.01% lower at 1.5245

against USD as bids were sidelined by preliminary results of UK elections.

• We are bullish on GBPUSD following an early surge close to 1.5450 as

early UK election results showed reduced risk of a hung parliament, and

with it, less political uncertainty. We expect upside bias to sustain while

above 1.5309.

JPY

• JPY caved in to USD’s rally to close 0.23% weaker at 11 9.74.

Nonetheless, support from rising refuge demand on the back of sell-off in

higher yielding assets led JPY higher against 7 G10s.

• We now turn slightly bearish on JPY against a rejuve nated USD ;

USDJPY’s advance will be capped by 119.89, above which there is room

for a rally to 120.00.

AUD

• AUD tumbled against all G10s and weakened 0.78% against USD to 0.7907, led lower by sell-off in higher yielding assets.

• We are now bearish on AUDUSD with bids likely to stay soft ahead of

RBA minutes and US NFP; downside bias sustains while below 0.7919.

SGD

• SGD fell against 9 G10s following retreating risk appetite in the markets

and weakened 0.7% against a rallying USD to close at 1. 3327.

• SGD is likely to trade to a weakening bias against USD as risk appetite

ebbs heading into US NFP tonight.

4

Daily Trades Government Bonds

Source : BPAM

T enure

2-yr UST

5-yr UST

10-yr UST

30-yr UST

T enure C lo s ing (%) C hg (bps) C lo s ing (%) C hg (bps)

3-yr 3.28 -2 3.42 0

5-yr 3.61 4 3.70 1

7-yr 3.80 5 3.89 3

10-yr 3.90 4 4.00 1

15-yr 4.03 1 4.19 0

20-yr 4.19 3 4.26 2

30-yr 4.61 4

* M arket indicative levels

IR S C hg (bps)

1-yr 1

3-yr 3

5-yr 3

7-yr 3

10-yr 3

Source : B loomberg

-6

2.91

M GS

-7

3.87

GII*

3.64

UST

C lo sing (%) C hg (bps)

0.63 -1

1.56 -3

2.18

4.20

3.68

M YR IR S Levels

C lo sing (%)

4.03

Closing Vol Previous Previous Chg YTM (RM mil) YTM Trade Date

(dd/mm/yyyy)(bp)

MGS 7/16 3.117 38 3.187 06/05/2015 -7MGS 2/17 3.295 17 3.292 05/05/2015 0MGS 9/17 3.327 11 3.277 06/05/2015 5MGS 10/17 3.276 55 3.288 06/05/2015 -1MGS 2/18 3.430 50 3.367 05/05/2015 6MGS 3/18 3.409 5 3.409 06/05/2015 0MGS 9/18 3.484 12 3.463 05/05/2015 2MGS 7/19 3.582 0 3.584 06/05/2015 0MGS 11/19 3.635 19 3.622 06/05/2015 1MGS 3/20 3.626 1 3.649 06/05/2015 -2MGS 7/20 3.678 1 3.645 06/05/2015 3MGS 10/20 3.608 325 3.569 06/05/2015 4MGS 7/21 3.748 29 3.739 06/05/2015 1MGS 9/21 3.781 20 3.785 06/05/2015 0MGS 9/22 3.795 81 3.740 06/05/2015 5MGS 3/23 3.912 20 3.874 06/05/2015 4MGS 7/24 3.958 143 3.887 06/05/2015 7MGS 9/25 3.895 70 3.854 06/05/2015 4MGS 9/26 4.050 4 4.073 04/03/2015 -2MGS 3/27 4.050 5 4.041 06/05/2015 1MGS 5/27 4.050 9 4.056 05/05/2015 -1MGS 4/30 4.031 2 4.035 06/05/2015 0MGS 4/33 4.191 23 4.157 06/05/2015 3MGS 9/43 4.605 27 4.568 06/05/2015 4GII 7/15 3.075 20 3.120 27/04/2015 -4GII 7/15 3.123 170 3.052 06/05/2015 7GII 2/16 3.189 528 3.163 05/05/2015 3GII 7/16 3.343 0 3.244 27/04/2015 10GII 11/16 3.368 50 3.311 06/05/2015 6GII 8/20 3.702 20 3.689 06/05/2015 1GII 7/22 3.887 90 3.861 06/05/2015 3GII 10/25 3.996 384 3.980 06/05/2015 2GII 6/27 4.200 7 4.109 01/04/2015 9GII 12/28 4.151 3 4.142 06/05/2015 1GII 9/30 4.200 9 4.148 05/05/2015 5GII 8/33 4.265 4 4.288 05/05/2015 -2SPK 7/22 4.009 10 4.005 05/05/2015 0

2262

Securities

� Fixed Income

US Treasuries

• UST yields eased, paring some of its earlier losses. With UST

yields edging higher this week versus lower yields of German

bunds and Japanese government bonds, interest seen flowing

back to UST for relative higher yields. Meanwhile initial jobless

claims came in lower than expected. Expect tonight’s release of

non-farm payroll as key watch for investors at large. Prospects of

lower than expected job gains could again lend support for UST.

MGS

• Local govvies saw profit taking yesterday, sending benchmark

yields higher. Investors seen taking profit from weeks of gains

seen for MYR govvies ahead of BNM MPC meeting. As widely

expected, BNM maintained the OPR unchanged at 3.25%,

reinforcing views of a rate pause. Total volume traded in MYR

govvies was over RM2.2b. Focus continue to skew towards MGS

10/20 with RM325m traded with levels closing 4 bps higher at

3.61%. Meanwhile in the GII segment, we saw GII 10/25 traded

at 3.99-4.00% with RM384m changing hands. Expect all eyes to

shift towards US non-farm payrolls release and US

unemployment data.

PDS/Sukuk

• In the PDS space, trading volume was over RM686m done. We

saw good amount traded for DanaInfra ’24 with RM70m changing

hands, with levels ending on biddish tone to close at 4.27%.

Meanwhile in the AAA space, we saw Cagamas MBS ‘8/15

traded with RM32m crossed, with levels ending 1 bp inside.

Danga Capital ’20 saw RM40m traded. In the AA space, we saw

Bright Focus ’31 traded flat at 5.92% with RM50m dealt. Other

notable trades include BGSM ’22 and ’24 seen traded with

combined volume of RM41m done.

5

Daily Trades: PDS / Sukuk

** spread against nearest indicative tenured IRS Source : BPAM

Market/Corporate News: What’s Brewing

Malaysia Building Society Bhd (MBSB), which aims to become a full-fledged Islamic bank, is said to be looking at Kuwait Finance House (M) Bhd (KFH Malaysia) as an option for a merger exercise, sources say. According to banking sources, MBSB and its

major shareholder, the Employees Provident Fund (EPF), are looking at the foreign Islamic

bank from “afar” and currently studying its numbers. “MBSB is looking at KFH Malaysia as

one option as the deal came to it for consideration. There are no formal talks between the

two financial institutions yet,” the source clarified. KFH Malaysia is wholly-owned by Kuwait-

based Kuwait Finance House (KFH) and is the country’s first and largest foreign Islamic

lenders here. Reuters yesterday reported that KFH might sell some of its investments

including KFH Malaysia and has picked Credit Suisse to advise it on the matter. The report,

however, said that KFH did not provide any details such as a timeline or a potential sale

price of the unit. StarBiz reported last week that the appointment of KFH Malaysia’s new

chief executive officer and managing director, Ahmed S. Al Kharji, could be a precursor to a

corporate exercise such as a merger and acquisition (M&A). Al Kharji, a Kuwaiti whose

appointment took effect on April 20, is KFH Malaysia’s fourth CEO since it began operations

10 years ago. The bank had set up shop in Malaysia in 2005 under the liberalisation of the

Islamic banking industry, but has seen the going tough due to fierce competition. KFH

Rating Closing Vol Previous Previous Chg SpreadYTM (RM mil) YTM Trade Date

(dd/mm/yyyy)(bp) Against

IRS**Prasarana Malaysia Berhad 5/23 GG 4.210 15 4.226 20/04/2015 -2 12DanaInfra Nasional Berhad 7/24 GG 4.265 70 4.301 30/04/2015 -4 6Prasarana Malaysia Berhad 9/27 GG 4.434 10 4.477 15/04/2015 -4 23DanaInfra Nasional Berhad 4/35 GG 4.699 30 4.699 05/05/2015 0 30DanaInfra Nasional Berhad 4/45 GG 4.955 50 4.979 23/04/2015 -2 56Aquasar Capital Sdn Berhad 7/15 AAA 3.717 4 3.780 31/03/2015 -6 8Cagamas MBS Berhad 8/15 AAA 3.485 32 3.498 06/05/2015 -1 -15Cagamas Berhad 10/15 AAA 3.464 5 - - - -17Gulf Investment Corporation G.S.C 3/16 AAA 3.819 10 3.846 29/04/2015 -3 18Rantau Abang Capital Berhad 8/19 AAA 4.011 15 4.019 30/04/2015 -1 22Danga Capital Berhad 4/20 AAA 4.099 40 4.091 28/04/2015 1 23Genting Capital Berhad 6/22 AAA 4.411 5 4.535 21/04/2015 -12 38Projek Lebuhraya Usahasama Berhad 1/24 AAA 4.396 20 4.396 30/04/2015 0 31Malaysia Airports Capital Berhad 12/24 AAA 4.448 20 4.450 30/04/2015 0 25Projek Lebuhraya Usahasama Berhad 1/25 AAA 4.431 5 4.448 06/05/2015 -2 23Projek Lebuhraya Usahasama Berhad 1/29 AAA 4.690 5 4.707 21/04/2015 -2 29Public Bank Berhad 10/18 AA1 4.474 10 4.473 06/05/2015 0 79Public Islamic Bank Berhad 6/19 AA1 4.527 12 4.618 19/03/2015 -9 74Sarawak Energy Berhad 6/21 AA1 4.468 10 4.478 21/04/2015 -1 51Sarawak Energy Berhad 7/29 AA1 5.060 40 5.060 29/04/2015 0 66CIMB Bank Berhad 12/20 AA+ 4.648 50 4.648 29/04/2015 0 69CIMB Bank Berhad 8/21 AA+ 5.000 2 5.600 30/04/2015 -60 105Westports Malaysia Sdn Berhad 4/26 AA+ 4.774 2 4.829 01/04/2015 -5 57Hong Leong Bank Berhad 8/15 AA2 4.025 14 4.010 06/05/2015 2 39Hong Leong Bank Berhad 5/16 AA2 4.197 20 4.289 22/04/2015 -9 56Hong Leong Bank Berhad 6/19 AA2 4.612 11 4.609 05/05/2015 0 82Mukah Power Generation Sdn Berhad 12/19 AA2 4.618 2 4.754 27/02/2015 -14 75Bright Focus Berhad 1/23 AA2 4.795 2 4.809 20/04/2015 -1 71Bright Focus Berhad 1/31 AA2 5.926 50 5.928 05/05/2015 0 153Anih Berhad 11/25 AA 4.750 6 4.846 11/03/2015 -10 55BGSM Management Sdn Berhad 12/15 AA3 4.012 6 4.057 20/04/2015 -5 38Eversendai Corporation Berhad 3/18 AA3 4.618 6 4.798 07/01/2015 -18 94Jimah Energy Ventures Sdn Berhad 5/19 AA3 4.648 1 4.679 10/04/2015 -3 86RHB Bank Berhad 7/19 AA3 4.705 10 4.730 28/04/2015 -3 92BGSM Management Sdn Berhad 12/22 AA3 4.842 1 4.842 08/04/2015 0 75BGSM Management Sdn Berhad 6/24 AA3 5.010 40 5.005 20/04/2015 0 81Tanjung Bin Energy Issuer Berhad 3/26 AA3 5.179 10 5.259 24/11/2014 -8 98IJM Corporation Berhad 10/15 AA- 3.799 5 3.751 15/04/2015 5 16UEM Sunrise Berhad 12/18 AA- 4.341 15 4.420 06/05/2015 -8 55UEM Sunrise Berhad 6/19 AA- 4.440 5 4.502 19/03/2015 -6 65Malakoff Power Berhad 12/19 AA- 4.668 10 4.669 06/05/2015 0 80UEM Sunrise Berhad 4/22 AA- 4.699 10 - - - 66

686

Securities

6

Rating Actions

Issuer PDS Description Rating/Outlook Action

Nil

Sources: RAM, MARC

Malaysia has total assets of RM10.47bil as at financial year ended Dec 31, 2014. According

to its 2014 annual report, corporate and commercial financing are the major contributors to

the bank’s assets portfolio at 69%, while consumer is next at 31% as at the end of last year.

(Source : The Star)

SapuraKencana Petroleum Bhd (SapKen) is poised to l and two international jobs in India and Mexico respectively totalling about RM1.5 bil, according to a source close to the deals. This development comes when the crude oil price has crossed US$60 per barrel

two days ago, the first time in nearly five months. The stock has been seeing some buying

interest, topping the active list. It closed seven sen or 2.55% higher to RM2.81 against a

lacklustre FTSE Bursa Malaysia KL Composite Index performance yesterday. For the India

job, SapKen may even edge out local-based Larsen & Toubro Ltd, as it has put in the lowest

bid among the four contenders interested in a portion of the Oil & Natural Gas Corp’s

Mumbai High South (MHS) phase three redevelopment project to the tune of US$200mil-

US$300mil. A source revealed that SapKen’s bid – between US$273mil and US$291mil –

would have an added advantage, especially with the recent oil and gas (O&G) industry

recovery. SapKen’s bid for the Indian contract was done via its wholly owned offshore

construction and subsea services arm, TL Offshore Sdn Bhd. Larsen & Toubro, Abu Dhabi-

based National Petroleum & Construction Co and US company McDermott have put in

higher bids of US$390mil, US$471mil and US$406mil, respectively. Besides likely

frontrunner Larsen & Toubro, SapKen may face stiff competition if Singapore’s Swiber

Holdings Ltd is successful in resubmitting its bid after it had failed to do so earlier due to

technical issues, according to reports by an Indian news agency. (Source : The Star)

7

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: HLMarkets@hlbb.hongleong.com.my

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