Snapshot Summary…

Global FX: The DXY starts the week on a positive note ahead of central bank meetings and following the PMI data

Global Rates: UST Ended Weaker on Monday, But Gilts and Bund Rallied

MYR Bonds: Malaysian Government Bonds Strengthened Though Mainly on the Belly of the Curve

USD/MYR: MYR Weakened Again Amid Cautious Sentiment Ahead of Key Economic Events

Macro News

United States: The S&P Global US Manufacturing PMI increased to 49.0 in July 2022 from a six-month low of 46.3 in June 2023. This indicates the slowest deterioration in operating conditions in the manufacturing sector in the current three-month sequence of decline. Output levels remained broadly unchanged, and there was a smaller drop in new orders. However, manufacturers continued to decrease input buying and preand post-production inventories due to weak domestic and international demand.

Japan: The Jibun Bank Japan Composite PMI remained unchanged at 52.1 in July 2023, marking the seventh consecutive month of growth in private sector activity. However, the pace of expansion was the slowest since February, mainly due to lingering global economic uncertainty. The services sector continued to grow for the 11th straight month, while manufacturing activity experienced its sixth contraction this year.

Malaysia: Malaysia’s headline inflation continued its downward trend, easing to 2.4% y/y in June 2023 (May 2023: 2.8% y/y). This brings the year-to-date inflation to 3.2%. On a month-on-month basis, headline prices increased by 0.2% m/m, a similar pace relative to May’s (year-to-date average: 0.2%). Core inflation (excluding volatile items and controlled prices) also eased to 3.1%y/y in June 2023 (May 2023: 3.5% y/y). On a month-on-month basis, core inflation increased by 0.2% (April 2023: 0.3%, year-todate average: 0.2%).

Fixed Income

US Treasuries: The preliminary S&P US Manufacturing PMI for July print at an improved 49.0 from June’s 46.3, but still below growth threshold of 50.0, sent UST yields lower in early US trading. UST players were busy with the USD42 billion 2Y auction where BTC was 2.78x against past 12 auction average of 2.66x. Nevertheless, UST ended the day weaker after profit taking emerged in the late session.

Other Major Bonds: Germany’s 10Y yield fell about 10 bps intraday upon release of weak Eurozone PMI numbers. Weak UK Manufacturing PMI at 45 also sent UK 10Y down 10 bps intraday before turning higher as the market headed towards closing hour.

MYR Government Bonds: Malaysian government bonds strengthened though mainly on the belly of the curve. The 10Y MGS shed 1 bps yesterday to close at 3.82%. We think some bargain hunting was in play amid expectations of no more domestic rate hikes. Sentiment was also buoyed by release of slower inflation numbers. Malaysia’s bond yields remained near three week lows.

MYR Corporate Bonds: Ringgit corporate bonds closed strong with gainers far outpacing losers yesterday. With govvies yields near three week lows, risk appetite was healthy for credits. Total traded volume was RM842 million. Short tenor AAA rated PLUS 01/24 saw heavy trades totalling RM50 million done at 3.74%. Meanwhile, AADuke 3 08/38 was dealt at 5.64% on RM30 million volume.

Forex

DXY Index: The dollar index started the week stronger, gaining 0.3% to 101.35 as preliminary PMI data indicated stronger US economic condition compared to slowing Eurozone economy, which raises the expectations of further rate hike by the US Fed. Overall, the US Composite PMI reading fell to 52.0 from 53.2 but remained in growth region.

EUR: The euro shed 0.5% to 1.106 against stronger dollar. The Eurozone’s Composite dropped further into contractionary region at 48.9 from 49.9 and falling short from market expectation of 49.7.

GBP: The pound remained on bearish trend for the seventh consecutive sessions, losing 0.2% to 1.283, weighed by the worse than expected flash PMI data. UK’s Composite PMI dropped to 50.7, indicating a marginal growth in economic activity, from 52.8 (cons.: 52.4).

JPY: The Japanese yen managed to buck the trend and strengthened against the USD early during the session following the steady Composite PMI data revealed at 52.1, unchanged from June’s reading. The yen ended the day at 141.48 or 0.2% stronger on daily changes.

CNY: USD/CNY closed relatively unchanged at 7.187 following the pledges by top Chinese officials during the Politburo meeting (a monthly meeting between the top party officials) to ramp up the support for the economy through more stimulus and will focus on domestic demand. This is after the local economy posted lower-thanexpected GDP growth last week.

AUD: The AUD rose 0.1% to 0.674 despite the mixed Australia’s PMI data. The Composite PMI fell to 48.3 from 50.1, driven mainly by the drop in services PMI at 48 (from 50.3) against the improvement in manufacturing PMI at 49.6 from 48.2.

KRW: Korean won firmed 0.3% to close the session at 1,280 despite the general cautious sentiment in the market ahead of key central bank meetings.

MYR: The ringgit continued to depreciate against the US dollar yesterday, its fifth consecutive day of declines amid cautious sentiment ahead of key economic events. Release of slower CPI added to MYR’s decline as this further reduced pressure for monetary policy tightening, which was also reflected in the slightly lower MGS yields yesterday. MYR weakened 0.1% to 4.567.

Other Markets

Gold: Gold prices traded in tight range and ended the day 0.4% lower at USD1,955/oz as gold players await for the US Fed meeting.

Crude Oil: Oil prices surged on the prospect of tight supplies and hopes for more stimulus by the Chinese government to ramp up its local economy. Brent rose 2.1% to USD82 per barrel while WTI climbed 2.2% to USD78 per barrel.

FBM KLCI: The FBM KLCI rose 0.8% to 1,425. Detailed transactions showed that local institutions were the sole net buyers of RM54.0 million flows, while being offset by the net selling flow from local retailers and foreign investors with RM35.4 million and RM18.6 million, respectively.

US Equities: Wall Street closed in green across the board as the Dow Jones rose 0.5% to 35,411, the S&P500 gained 0.4% to 4,555 and Nasdaq climbed 0.2% to 14,059.

Source: AmInvest Research - 25 Jul 2023