• Omicron scare resurfaces on vaccine efficacy doubt

• MYR to fluctuate in the range of 4.1920 and 4.2104 against US dollar

Global Highlights

The dollar index fell 0.44% to close at 95.913 on the back of risk-off sentiment following the surprising hawkish turn coming from Fed chair Jerome Powell amidst reignited Omicron variant concerns. He stated that the inflation risk has increased and posited to abandon the “transitory” narrative to describe the surge in prices. He also said that the central bank possibly will discuss faster tapering during its upcoming meeting in December. On its monthly performance, the dollar index has gained as much as 1.90%.

On a separate note, the market was also rattled by Moderna’s CEO comment saying that existing vaccines may be less effective against the Omicron variant.

Equities resumed its decline when the Dow Jones dropped 1.86% to 34,484 while the S&P 500 tumbled 1.90% to 4,567. Both indices hit the lowest since October 2021. The UST 10-year yield benchmark was sent significantly lower by 5.4bps to 1.444%. Gold slipped 0.56% to US$1,775/oz.

The euro added 0.42% to 1.134 amidst a weaker dollar. Among local data, a preliminary report suggested that the Eurozone inflation rate accelerated to 4.9 % y/y in November, from 4.1% in the previous month. This is the highest level since July 1991, driven mainly by energy prices and higher inflation rate in Germany, Spain, Italy and France. Compared to the end of October, the euro has lost 1.90%, close at the weakest level since July 2020.

The British pound lost 0.12% to 1.330. It declined by more than 2.5% m/m, near its lowest level since December 2020. On pandemic development, there are now 11 cases of the new variant in the UK.

The Japanese yen strengthened by 0.32% to 113.17, erasing losses made during early this week. The occasional strong yen has been driven mainly by safe haven status triggered by the finding of new variant. Looking at its monthly performance, the yen went up 0.68%.

The Chinese yuan appreciated by 0.37% to 6.365 on a higher guidance rate by the PBoC. The yuan strengthened by 0.64% based on its monthly changes, which marked the fourth consecutive month of increase.

Crude oil sharply declined with the Brent lost 3.91% changing hands at US$70 per barrel while WTI tumbled 5.39% to US$66 per barrel. Both are currently trading at the lowest point since August 2021. The fall was underpinned by the Omicron fears and uncertainties that OPEC+ will hold plans to supply 400K barrels per barrel.

Malaysia Highlights:

The ringgit appreciated significantly by 0.81% to 4.204 and it went as high as 4.238 and low of 4.204. On monthly changes, the ringgit weakened by 1.54% going against the dollar. The government will put its plans to move into the Covid-19 endemic phase on hold because of the newly discovered Omicron variant.

Among local data, producer prices in Malaysia jumped 13.2% y/y in October, following the 12.3% rise in September. This was the seventh straight month of a double-digit increase and the highest since September 2011.

The FBM KLCI was closed higher by 0.23% to 1,514, defying regional stock market decline. Detailed transaction revealed that both local institutions and retailers were the net buyers with RM69.2mil and RM139.6mil, while foreign investors were the net sellers with RM208.8mil position. Still, this resulted in a poor monthly performance of 3.09% lower compared to the end of October.

On the local bond market, buying interests were seen with 3-years -2.0bps to 2.680%, 5-years -1.5bps to 3.130%, 7-years - 1.0bps to 3.405%, and 10-years -0.5bps to 3.525%.

The IRS yields were sent lower with (3Y) -0.5bps to 2.660%, (5Y) -5.0bps to 2.875%, (7Y) -2.5bps to 3.120% and (10Y) -2.0bps to 3.300%.

Against major currencies, the ringgit outshone across the board. It strengthened vs. EUR by 0.14% to 4.777, vs. GBP by 0.56% to 5.623, vs. 1.14% to 2.996, vs. JPY by 0.39% to 3.715, and vs. CNY by 0.44% to 1.514. Regionally, the ringgit also on the upper hand. It appreciated vs. SGD by 0.58% to 3.079, vs. THB by 0.88% to 8.020, vs. IDR by 0.91% to 3,409, and vs. VND by 1.01% to 5,407 but remained unchanged vs. PHP at 11.884.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1880 and 4.1920 while our resistance is pinned at 4.2104 and 4.2144.

Source: AmInvest Research - 1 Dec 2021