Snapshot Summary…

Global FX: USD index was flat as cautious sentiment permeated as markets await central bank meetings this week

Global Rates: There was pressure in UST amid better global risk appetite after news that China’s Politburo officials pledged stimulus

MYR Bonds: Malaysian government bonds saw active trading flows yesterday while yield movements were mixed for MGS but lower for PDS

USD/MYR: MYR rebounded slightly after declining in the past week. Despite a steady USD, support for MYR came from firmer CNY

Macro News

Global: The International Monetary Fund (IMF) has updated its World Economic Outlook, indicating that the global economy is more resilient than previously expected. It now forecasts a global growth rate of 3.0% for both 2023 and 2024, an increase of 0.2 percentage points for 2023 from its earlier estimate. Although some risks have diminished, the IMF warns that challenges could still lie ahead. Global economic activity has shown resilience in the first quarter of the year, leading to a brighter economic outlook for 2023. However, the IMF notes that global growth is still weaker compared to historical standards. The economic outlook has improved due to the waning impact of the Covid pandemic, smoother supply chains, and steady economic activity supported by robust labor markets.

South Korea: South Korea's economy accelerated in the 2Q2023, growing by 0.6% q/q, surpassing market expectations of 0.5% expansion. Private consumption fell slightly by 0.1%, with a decline in spending on services, while government consumption decreased by 1.9%. Construction and facilities investments also contracted. Exports decreased by 1.8%, but semiconductors and motor vehicles showed growth, while imports dropped by 4.2% due to reduced crude oil and natural gas imports.

Malaysia: Malaysia's leading economic index rebounded by 1.8% m/m in May 2023, recovering from a 1.6% drop in April. The increase was driven by rises in various components, including the number of new companies, real imports of semiconductors, and the Bursa Malaysia industrial index. However, expected sales value, manufacturing & real money supply, M1 fell during the same period. On a yearly basis, the leading index shrank by 1.1% in May, marking the third consecutive month of decline.

Fixed Income

US Treasuries: With major central bank decisions incoming, bond markets were in pause mode. Treasuries weakened as sentiment was cautious ahead of the anticipated Fed’s 25 bps hike this week. There was also a sell down in UST amid better global risk appetite after news that China’s Politburo officials pledged stimulus to aid economic growth. In US data, the Conference Board's Consumer Confidence Index rose to 117.0 in July from an upward revised 110.1 (from 109.7) in June.

Other Major Bonds: Germany's July ifo Business Climate Index fell to 87.3 from 88.6. German 10Y bonds saw a small move up to 2.43%. In the UK, its 10Y bond edged 1 bp higher to 4.27%. UK’s bond yields remained near 2-month lows after earlier this week’s weak UK PMI numbers.

MYR Government Bonds: Malaysian government bonds saw active trading flows yesterday but yield movements were largely mixed amid the cautious global bond markets. Benchmark MGS papers on the 3Y and 10Y each were little changed at 3.40% and 3.81% respectively.

MYR Corporate Bonds: Even though govvies saw a lack of strong support yesterday, ringgit PDS market was on firm footing as past couple of week’s move down in MGS yields remain a positive for credits. Total traded volume surged to RM1,041 million from RM842 million prior day. Notable trades include those in AA and A rated segments, as well as select power sector names. We saw A+ SUKE 11/27 at 5.61% on RM80 million flow and AA2 Press Metal 08/25 on RM70 million done at 4.05%. AAA rated Sarawak Energy 07/33 fell 2 bps to 4.15% on RM30 million volume.

Forex

DXY Index: The USD index was flat as cautious sentiment permeated as markets await central banks’ monetary policy signals. Despite the better reading in the Conference Board consumer confidence index, the dollar index was closed at 101.35.

EUR: There Was Modest Decline in the EUR Overnight, Where EUR/USD Was Hovering at 1.1049.

GBP: Flat USD and global currencies markets affected GBP which remained below 1.30 against USD. Aside, latest Reuters poll for BOE policy, 42 out of 62 respondents see a 25 bps hike next with the remaining see a larger 50 bps hike.

JPY: USD/JPY upward movement was stalled yesterday, as cautious mood hung over markets. There was still some apprehension over possibility BOJ this week altering its yield curve control targets higher, which would positive for the JPY. June BoJ Core CPI rose 3.0% y/y, in line with expectations and versus 3.1% the previous month.

CNY: CNY was boosted as the top government party meeting saw pledge of stimulus support to the economy, with a focus on aiding domestic demand. The currency was also aided by state-run banks move to sell dollars and buy yuan. Yesterday PBOC set the yuan fixing at a firm 7.14106. USD/CNY trading was steady at 7.136.

AUD: The Australian dollar was also boosted yesterday on news that China is targeting stimulus. Meanwhile, AUD market remained focused on Australian CPI to be released this week, where expectations is for a slightly slower rate in June from 5.6% in May.

KRW: Korean won firmed to 1.275 close from prior session at 1,280. Won was aided by Korea’s GDP numbers. Meanwhile, Asian currencies were supported as USD saw tight movements during the day.

MYR: The ringgit rebounded slightly after declining in the past week. Despite a steady USD, support for MYR came from firmer CNY as well as the firm global crude oil price. USD/MYR hovered near 4.563 yesterday versus 5.567 the prior day.

Other Markets

Gold: Gold Rose by 0.2%, Seeing Support After Prior Day’s 0.1% Loss.

Crude Oil: WTI was spotted 1.4% higher. The American Petroleum Institute (API) said there was an increase of 1.319 million barrels of US inventories for the week ended 21 July. Recent OPEC and Russia output cuts and China’s stimulus news aided oil.

FBM KLCI: The Malaysia’s stocks strengthened for its fourth day, KLCI up 0.85% yesterday to 1436.79. Foreigners were net buyers of RM140 million Malaysian stocks yesterday.

US Equities: DJIA’s gains extended for its 12th session. it’s at its highest since February 2022. Anticipation of strong corporate earnings buoyed US stocks overnight.

Source: AmInvest Research - 26 Jul 2023