• World Bank officially downgrades 2022 global growth forecast to 3.2% from 4.1% due to fallout in Ukraine

Global Highlights

Dollar Index – The dollar posted a 0.18% increase to trade around 100.96. The Fed’s St Louis president James Bullard said that the Fed needs to move quickly to combat the high inflation, and willing to act aggressively by implementing a 75bps increase in the upcoming meeting,

US equities – Wall Street closed higher with the Dow Jones gaining 1.45% to 34,911, the S&P 500 rising 1.61% to 4,462 and the Nasdaq jumping 2.15% to 13,620. The benchmark UST10-year yield added 8.3bps to 2.936%.

Euro – The euro gained 0.06% to 1.079. The European Union is planning to set up a trust fund to finance the reconstruction of Ukraine, the same model that the EU has put in place previously during the pandemic. The fund will include investment financing and reforms to support Ukraine.

British pound – The pound declined 0.16% to 1.300. The latest survey by Bloomberg suggested that the UK economy will shrink in the second quarter this year due to deteriorating living standards. Most economists have now raised some doubt whether the Bank of England will continue lifting interest rates.

Japanese yen – The yen weakened 0.46% to at 126.46. The Japanese Finance Minister had said the weakening of the yen could lead to an economic fallout through much higher prices. Prices for global commodity, oil, and supply bottlenecks have already pushed up import prices. Since Japan is highly reliant on imports, the weakening of the currency could put more pressure on imported price.

Chinese yuan – The yuan slid 0.41% to 6.394. China’s central bank has unveiled more measures to support the economy amid the strict containment measure that is dampening growth outlook. On top of the 25bps reserve requirement ratio cut, there were another 23 measures introduced to support infrastructure projects, the property sector and financial services.

Korean won – The won lost 0.22% to 1,236.60. The Bank of Korea’s (BoK) incoming new governor had said that the central bank will continue to tighten its monetary policy to keep inflation in check. However, he emphasised that the BoK will not be as aggressive as the Fed to avoid disrupting economic recovery.

Australian dollar – The Aussie dollar gained 0.34% to 0.737. The latest minutes by the Reserve Bank of Australia (RBA) suggested that the central bank now is closer to raising interest rates due to accelerating inflation. Specifically, the RBA believed that core inflation is likely to go beyond the 2–3% target and more businesses will pass on the high prices to consumers.

Commodities Highlights

Crude oil – Brent declined 5.2% to US$107.30 per barrel and WTI remained at US$107.00 per barrel. Oil prices dipped as investors responded to the IMF’s growth outlook. The IMF slashed global growth forecast by 0.8 percentage point to 3.6% for 2022.

Gold – The gold price rose 0.2% to US$1,978/oz, extending its rally for the past two weeks.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.09% to 4.236. On the macro front, Malaysia’s trade continues to record a healthy number. Malaysia’s total trade expanded 27.3% y/y, increasing by RM50.8bil to RM236.6bil in March 2022. The trade balance continued to be in a surplus of RM26.7bil. Gross exports expanded by 25.4% y/y to RM131.6bil, or 10.8% on a seasonally adjusted month-on-month basis. On average, exports grew by 22.0% in the first three months of the year. Gross imports increased by 29.9% y/y to RM104.9bil. On a month-on-month basis, gross imports rose by RM13.8bil.

The firm commodity prices are expected to benefit exporters, where Brent is anticipated to average US$89 a barrel in 2022 and CPO at RM4,500 per tonne. Thus, on the back of a high base comparison, we expect exports to grow between 8% and 10% in 2022.

KLSE – The FBM KLCI remained at 1,581 on Tuesday due to a holiday. Trading activities on Monday saw net buying from local institutions and local retails at RM73.6mil and RM1.6mil respectively. Foreign investors were net sellers at RM75.2mil.

Fixed Income – The MGS benchmark for the 3-year was up 5.5bps to 3.405%, 5-year higher by 3.5bps to 3.605%, 7-year higher 4.0bps to 4.040%, and 10- year higher by 2.5bps to 4.145%.

Rates – The IRS yield for the (3Y) remained at 3.285%, (5Y) at 3.675%, (7Y) +2.0bps to 3.810%, and (10Y) was unchanged at 4.080%.

Against major currencies – The ringgit lost against the AUD, IDR and VND, while it gained against the GBP, JPY, CNY, SGD, THB, and PHP. The ringgit was unchanged against the EUR.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2300 and 4.2330 while our resistance is pinned at 4.2550 and 4.2580.

Source: AmInvest Research - 20 Apr 2022