Snapshot Summary…

Global FX: DXY traded on thin volume due to the holiday. EUR fell while GBP rose

Global Rates: Germany’s 10Y bond yield edged slightly higher as sentiment was still cautious

MYR Bonds: Malaysian government bonds closed mixed on light trading interest as caution persisted ahead of MPC this week.

USD/MYR: Malaysian ringgit strengthened, in line with most regional currencies

Macro News

Australia: The Reserve Bank of Australia maintained its cash rate at 4.10% during its July 2023 meeting after a previous 25bps hike in June 2023, mentioning they would need more time to assess the impact of past rate hikes, while acknowledging that inflation in Australia has peaked but remains high.

South Korea: South Korea's inflation receded to 2.7% y/y in June 2023 (May 2023: 3.3% y/y), marking the fifth consecutive month of slower inflation. This is the lowest level since September 2021 and supports the central bank's decision to pause its efforts to tighten monetary policy. The Bank of Korea had previously raised interest rates by 3 ppts since August 2021 to combat inflation, reaching a 14-year high of 3.5%. However, they paused the rate increase in February 2023.

Fixed Income

US Treasuries: UST market was closed for Independence Day. However, the market has been cautious in the past couple of trading days amid the hawkish Fed despite weak ISM data earlier this week. The remaining UST drivers this week include nonfarm payroll data and Fed meeting minutes.

Other Major Bonds: Germany’s 10Y bond yield edged slightly higher as sentiment was still cautious. The UST market being closed provided little direction for bond markets in Europe. UK government bonds edged lower in yields but the 10Y remained above 4.40%.

MYR Government Bonds: Malaysian government bonds closed mixed on light trading interest as caution persisted ahead of MPC this week. The 10Y MGS moved 1 bps higher to 3.87% while on the shorter end of the curve, the 3Y and 5Y MGS each saw less than RM100 million volume traded. Nevertheless, the 3Y MGS rose another 3 bps to 3.52% or a large 53 bps over the OPR.

MYR Corporate Bonds: Ringgit corporate bond trading reflected the cautious MGS segment as yields moved mixed yesterday. Total volume traded was decent at RM373 million. Notable trades include AAA (S) Infracap Resources 04/24 at 3.76% on RM20 million flows and AAA Malaysia Airport 11/27 at 4.02% on RM30 million volume.

Forex

DXY Index: The dollar index closed at 103.04 amidst thin trading volume due to the 4 th of July holiday. Investors await for Fed meeting minutes and non-farm payroll data this week.

EUR: The euro fell 0.3% to 1.088. Germany's trade surplus narrowed to EUR14.4 billion during May, compared to EUR16.5 billion in the previous month (cons.: EUR17.5 billion). It was the smallest trade surplus since last December, as exports fell while imports rose for the first time in three months.

GBP: The pound climbed 0.2% to 1.271. According to the Organization for Economic Cooperation and Development (OECD), the UK will be the only country among G7 countries where inflation is still rising despite the early rate hike cycle started by the BoE and brought the interest rate level to its highest since 2008.

JPY: The Japanese yen appreciated 0.1% to 144.47 but remained close to its eight months low. Investors are being cautious to see if the government will intervene in the market as the currency is nearing 145-level.

CNY: The Chinese yuan strengthened 0.4% to 7.216 as the PBoC provided some support to prevent the yuan from weakening significantly. It set a stronger-thanexpected official midpoint rate (7.2046 vs. estimated 7.2386. Also, news flow showed that major state banks lowered their dollar deposit rates for the second time in a month.

AUD: The Aussie dollar rose 0.3% to 0.669 following RBA’s decision maintaining its cash rate at 4.10% during July meeting after raising it by 25bps in June. The board noted it needed more time to assess the impact of past hikes with most recent monthly CPI indicator was last spotted at 5.6% y/y compared to 8.4% y/y in December 2022.

KRW: The Korean won appreciated 0.5% to 1,301 in tandem with stronger yuan. On the macro front, inflation in South Korea has eased further to 2.7% y/y in June 2023, the lowest level since 2021 and approaching BoK’s target level.

MYR: The Malaysian ringgit strengthened 0.3% to 4.650, in line with firmer yuan and traded within the range of 4.650 and 4.668 ahead of the MPC meeting.

Other Markets

Gold: Gold prices benefitted from the recession worries prompted by recent mixed economic data. It gained 0.2% to USD1.925/oz.

Crude Oil: Brent jumped 2.1% to USD76 per barrel as Saudi Arabia said it would extend its voluntary output cut of 1 million barrels per day to August, worsening the tight supply concerns.

FBM KLCI: The FBM KLCI fell 0.2% to 1,392. Detailed transactions showed that foreign investors were the net sellers with RM34.7 million flow, while being offset by the net buying flow from local institutions and retailers with RM26.1 million and RM8.6 million flow, respectively.

US Equities: Wall Street was closed due to Independence Day holiday with Dow Jones last closed at 34,418, S&P500 at 4,456, and Nasdaq at 13,817.

Source: AmInvest Research - 5 Jul 2023