The US

The Dollar index fell 0.41% to 103.28 as risk-averse mode was partly lifted due to news flow showing more lifelines are being provided to banks. Latest, the Federal Deposit Insurance Corporation (FDIC) managed to orchestrate an agreement for New York Community Bancorp to buy deposits and loans from Signature Bank, one of the shuttered banks.

On another note, there was a concerted effort in boosting Dollar liquidity among global central banks to ease the strains on global financial system. The US Fed, working together with the Bank of Canada (BoC), Bank of Japan (BoJ), the European Central Bank (ECB), and the Swiss National Bank (SNB) and agreed to “increase the frequency of 7-day maturity operations from weekly to daily”, a coordinated effort to ensure funding will continue to be available given present anxiety concerning the global financial market.

US Equities & Sovereign Bonds

Wall Street closed higher as the Dow Jones rose 1.20% to 32,245, S&P500 climbed 0.89% to 3,952, and tech-heavyweight Nasdaq gained 0.39% to 11,676.

The UST10Y benchmark yield added 5 bps to 3.485% while UST2Y added 14 bps to 3.976%, widening the inverted differentials to 49 bps.

Eurozone

The Euro rose 0.48% to 1.072. Over the weekend, the Swiss government engineered a takeover of Credit Suisse with UBS buying for USD3.2 billion to restore investors’ confidence. This is after the former struggled to keep up with client outflows and losses in its share prices and bond investment.

The UK

The British pound gained 0.86% to 1.228, almost reaching more than one-month high. Amidst Credit Suisse fallout, the banking system in the UK deemed as “well-capitalised and funded” and should remain “safe and sound”, as stated by the BoE. This statement came ahead of the central bank’s policy meeting which will happen on Thursday where there remains a possibility of 25 bps rate hike to 4.25%.

Japan

The Japanese Yen appreciated by 0.40% to 131.32 as demands towards safe haven currencies are supported by lingering concerns over the health of global financial systems given series of events concerning banks in the US & Europe.

China

The Yuan strengthened 0.14% to 6.877. The PBoC kept its key lending rates unchanged during its March fixing. The one-year loan prime rate (LPR), which usually used for reference on corporate and household loans, was kept steady at 3.65% while the five-year LPR, reference for mortgage was maintained at 4.30%. This decision came in after the central bank cut required reserve ratio (RRR) for financial institutions by 25 bps effective 27th March to sustain the domestic’s recovery progress.

South Korea

The Korean Won bucked the trend as it depreciated 0.56% to 1,311. Producer inflation in South Korea rose 4.8% y/y in February 2023, easing from a 5.1% gain in the previous month. It was the lowest level since March 2021 due to easing manufactured goods prices.

Australia

The Aussie dollar rose 0.31% to 0.672. The RBA Assistant Governor stated that banks in Australia are deemed as “unquestionably strong” with solid capital and liquidity buffers, calming down the market’s jitters whether the spill over effects could reach to Australia’s financial system.

Crude Oil

Oil prices rebounded after reaching their lowest level in 15 months as risk-off mode slightly dissipated. Brent rose 1.12% to US$73 per barrel while WTI climbed 1.35% to US$67 per barrel.

Gold

Gold edged lower by 0.52% to US$1,978/oz, retreating away from the one year high it reached recently.

Malaysia Highlights

The Ringgit strengthened slightly by 0.02% to 4.486 and traded within the range of 4.469 and 4.491. During February 2023, Malaysia’s total trade grew 11.0% y/y to RM205.0 billion, with exports expanding 9.8% y/y to RM112.3 billion (January 2023: 1.4% y/y) while imports grew 12.4% y/y to RM92.7 billion (January 2023: 2.2% y/y). Despite the faster growth seen on the headline data, we continue to hold on to a view of moderate export growth for the year as the global economy continues to deal with cumulative effect of higher interest rates as well as potential downside brought by the recent banking crisis in the US and Europe.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.460 and 4.470 while resistance is pinned at 4.500 and 4.510.

FBM KLCI

The FBM KLCI fell 0.70% to 1,402. Detailed transactions showed that the local institutions and retailers were the net buyers with RM56.8 million and RM31.7 million flow, respectively, while being offset by the net selling flow from foreign investors at RM90.3 million.

Fixed Income

MGS yield 3-year -7.0 bps to 3.400%, 5-year -8.0 bps to 3.500%, 7-year -1.0 bps to 3.830%, and 10-year -2.0 bps to 3.920%.

Source: AmInvest Research - 21 Mar 2023