The US

The dollar index rebounded 0.40% to 103.63 and ended the week stronger as investors realigned their focus on inflation and the possible future path of Fed rate hike. A report by University of Michigan showed that the consumer sentiment for the US rose to more than one-year high of 66.4 in February 2023 from 64.9 in the prior month (cons.: 65). In addition, the same survey showed that the inflation expectation for 12-months ahead rose to 4.2% from 3.9%.

This week, market players will be on the lookout for the January’s inflation data which is due on Tuesday 14th February 2023. It is anticipated that the inflation to rose by 6.2% y/y, slightly slower than 6.5% y/y in the previous month, which will mark the sixth straight months of falling inflation rate.

US Equities & Sovereign Bonds

Wall Street was mixed as the Dow Jones gained 0.50% to 33,869, S&P500 rose 0.22% to 4,090, but Nasdaq dropped 0.61% to 11,718.

The UST10Y benchmark yield added 7.4bps to more than one-month high at 3.732% while the UST2Y added 3.5bps to 4.517%, widening the inverted differential to 78.5bps.

Eurozone

The Euro fell 0.58% to 1.068. One of the ECB policymakers Isabel Schnabel stated that the ECB will continue stay the course in rising interest rates to bring the inflation target to 2.0% and that there is a need to see “robust” evidence of easing underlying inflation.

The UK

Similarly, the British pound traded lower, dipping 0.49% to 1.206, hovering near a one-month low. Investors digested UK’s GDP data which showed that the economy grew 0.4% y/y in 4Q20222, narrowly avoiding recession. For the full year, it grew 4.0% y/y compared to our estimate of 3.6%. In 2023, we hold to the baseline view of UK recession likely to revisit should there be significant upside surprises in key indicators.

Japan

The Yen strengthened 0.17% to 131.36 after the government nominated Kazuo Ueda as the new BoJ’s governor, which took the market by surprise as he is deemed to be more hawkish compared to the top contender deputy governor Masayoshi Amamiya. The market is now pricing in the possibility that the BoJ will exit from its accommodative policy soon after decades of negative interest rate.

China

The Yuan weakened 0.41% to 6.815 as the dollar rose. On the macro front, China’s inflation rate rose to 2.1% y/y in January 2023 from 1.8% y/y in December 2022. The higher reading was due to the Lunar New Year and the full economic reopening.

South Korea

The Won weakened 0.36% to 1,264. The government planned to lift visa curbs on Chinese travelers after China improved its Covid-19 situation. South Korea banned them last month after China ended its zero-Covid policy, leading to a wave of infection.

Australia

The Aussie Dollar shed 0.27% to 0.692. The RBA’s latest monetary policy statement showed that the central bank revised its inflation forecasts higher for this year, saying price pressures were spreading into services and wages. This suggests more rate hikes going forward and development in inflations would dictate the situation.

Crude Oil

Oil price climbed as Russia plans to cut oil production after the Western countries imposed price cap on Russian crude oil. Brent surged 2.24% to US$86 per barrel while WTI climbed 2.13% to US$79 per barrel.

Gold

Gold Price Inched Higher Slightly by 0.20% to US$1,865/oz.

Malaysia Highlights

The ringgit depreciated 0.40% to 4.334. In line with our expectation, Malaysia’s economy grew by 7.0% in the 4Q2022 (3Q2022: 14.2% y/y). This brings the allyear 2022 GDP growth at 8.7% (2021: 3.1%). Slowdown during the final quarter of the year reflects the soft patch period globally as most of major economies are now dealing with the cumulative effect from interest rate hikes that had taken place.

Moving forward, we expect growth to be supported by domestic factors. Private consumption will be the impetus for growth due to the improvement in the labour market, and stable inflation as well as robust consumer balance sheets to some extent. Overall, we expect GDP growth in 2023 to be at 4.5% on the back of 6.1% growth forecast for private consumption.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.290 and 4.300 while our resistance is pinned at 4.360 and 4.370.

FBM KLCI

The FBM KLCI closed higher by 0.68% to 1,475. Detailed transactions showed that the foreign investors were the net sellers with RM91.4 million, offset by the net buying flow from local institutions and retailers with RM34.6 million and RM56.7 million, respectively.

Fixed Income

The benchmark yield MGS 3Y +2.0bps to 3.400%, 5Y +3.5bps to 3.575%, 7Y +4.0bps to 3.760%, and 10Y +4.0bps to 3.860%.

Source: AmInvest Research - 13 Feb 2023