• Malaysia’s economy grew by 5.0% y/y in first quarter

Global Highlights

Dollar Index – The dollar posted a 0.36% decline to trade around 104.187. New York Fed president John Williams earlier said that the recent volatility in the financial market was expected due to uncertainty in the global economy. He also added that real rates need to return to zero within the next year.

US equities and sovereign bonds – Wall Street was mixed with the Dow Jones gaining 0.08% to 32,223, the S&P 500 down 0.39% to 4,008 and the Nasdaq sliding 1.20% to 11,663. The yield differential between the UST10 and MGS10 was around 154bps Also, the yield differential between the UST10 and UST2 was 31.24bps where the UST2 was at 2.57%

Euro – The euro gained 0.21% to 1.043. The European Commission (EC) has slashed its growth forecast outlook for the euro due to the ongoing war in Ukraine that further disrupts supply chain and pushing up energy prices. The EC now expects the Eurozone to expand by 2.7% this year, lower than the previous expectation of 4.0%.

British pound – The pound rose 0.46% to 1.232. The Bank of England’s Michael Saunders, a voting member of the monetary policy committee, had said that Brexit may have made the UK’s inflation situation worse. Governor Andrew Bailey on the other hand, said that the high inflation is something that the central bank could not contain as it was mainly driven by external factors, including the war in Ukraine and slower growth in China.

Japanese yen – The yen climbed 0.05% to 129.160. Japan’s wholesale price increased by 10.0% in April, making this the sharpest rise since the data was first collected in 1981. The primary reason was higher global commodity prices due to the situation in Ukraine. The higher energy and raw goods prices are expected to reduce corporates’ profit, and perhaps push consumer prices higher as more companies are expected to shift the rising costs to consumers.

Chinese yuan – The yuan added 0.06% to 6.786. Macro indicators in China have signalled that the economy is paying its price due to the zero-Covid policy. The latest industrial production showed that the index fell by 2.9% y/y in April, the first decline since March 2020 during the early stages of the outbreak. China’s PMI continued to remain below the expansion threshold, suggesting that recovery is unlikely to occur soon.

Korean won – The won slid 0.03% to 1,284.180. The Bank of Korea’s governor is not ruling a higher interest rate increase in the coming months due to interest rate premium as the Fed has become more hawkish towards its monetary policy. Currently, the interest rate stood at 1.50%.

Australian dollar – The Aussie dollar edged up 0.45% to 0.697. The general election will be held on 21 May, where economic issues such as high cost of living will be the main concern as Australians head to the poll. Recent inflation stood at 5.1% y/y, the highest reading relative to the past 10 years that forced the Reserve Bank of Australia (RBA) to hike the interest rates.

Commodities Highlights

Crude oil – Brent gained 2.41% to US$114.24 per barrel, and WTI up by 3.36% to US$114.20 per barrel.

Gold – The gold price was up 0.68% to US$1,824.14/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit increased 0.14% to 4.393. Malaysia’s economy in the first quarter of 2022 grew by 5.0% y/y on the back of strong exports growth, robust production in the manufacturing sector and spending in the services sector. We maintain our growth forecast of 5.6% this year (base case), with an upside of 6.0% and downside of 4.5%.

KLSE – Bursa Malaysia was closed on Monday due to public holiday. The FBM KLCI was last seen at 1,544.

Fixed Income – The MGS benchmark for the 3-year down by 4.0bps to 3.670%, 5-year down 5.0bps to 4.010%, 7-year down 6.0bps to 4.430%, and 10-year down 1.0bps to 4.440%.

Rates – The IRS yield was unchanged on Monday due to public holiday. The (3Y) was at 3.672%, (5Y) at 4.022%, (7Y) at 4.424%, and (10Y) at 4.426%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3800 and 4.4100 while our resistance is pinned at 4.4150 and 4.4350

Source: AmInvest Research - 17 May 2022