The US – Economic Data Came in Stronger Than Expected

This includes the US unemployment rate that declining to 3.4% in January 2023 (December 2022: 3.5%) and nonfarm payroll that increased by 517K jobs (December 2022: 260K) in January 2023. Furthermore, inflation numbers remained stubbornly high at 6.4% (December 2022: 6.5%) in latest core PCE also unexpectedly accelerated to 4.7% in January 2023 (December 2022: 4.6%).

All of these are signalling a very robust US economy, which may prompt that Federal Open Market Committee (FOMC) to readjust their interest rates to stay higher for longer.

Fed Chair Became More Hawkish.

During the semi-annual appearance before Congress, Fed Chair Jerome Powell stated that recent economic data has been stronger than expected and that the ultimate level of interest rates is likely to be higher than previously anticipated. Quoting the Fed Chair, he said that “…if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

After this comment, the probability for a 50 bps rate hike in the upcoming meeting in the final week of March 2023 has increased from 31.4% to 69.8%, based on Bloomberg’s estimates. Currently, our base case is the Fed Funds Rate to peak at 5.25% - 5.50%, and no rate cut to be made this year. We will revisit this outlook again once the latest FOMC’s projections are published alongside with the statement later this month.

Malaysia – High Speed Rail Could be Making a Comeback.

According to the Transport Minister, the High Speed Rail (HSR) from Kuala Lumpur to Singapore project that was terminated back in 2021 could be revived if it does not involve government funding. The revival will bring economic opportunities to all states involved including KL, Selangor, Negeri Sembilan, Melaka and Johor in the context of jobs and investment opportunities.

Furthermore, it will also bring competitiveness to the air carries, since KL-Singapore is one of the busiest international air routes in the world1, with 2.4 million passengers in 2022.

Source: AmInvest Research - 10 Mar 2023