Snapshot Summary…

Global FX: DXY, AUD and GBP Closed Lower While EUR Was Stronger

Global Rates: Major Bond Markets Closed Mixed With German Bund Fell While UK Gilt Was Firmer

MYR Bonds: The local bond market traded sideways as most players stayed on the side-line ahead of the release of the US CPI

USD/MYR: MYR Strengthened in Tandem With Firmed CNY

Macro News

China: China's consumer prices dropped by 0.3% y/y in July, the first decrease since February 2021, with food costs falling 1.7%. Non-food prices remained stable, and core consumer prices rose by 0.8% y/y. Despite this decline, China's statistics agency expects the decrease to be temporary, gradually picking up due to fading impacts from the previous year's high base. On a monthly basis, consumer prices unexpectedly rose by 0.2%, the first increase in six months.

Malaysia: In June 2023, the wholesale & retail trade sector in Malaysia saw a 4.3% y/y growth in sales value, reaching RM138.5 billion, with all sub-sectors contributing positively: Retail Trade (5.8%), Motor Vehicles (3.4%), and Wholesale Trade (3.1%). The volume index also increased by 3.1% y/y to reach 148.8 points, driven by wholesale trade (4.5%) and motor vehicles (3.1%). However, the seasonally adjusted volume index decreased by -2.2% month-on-month in the same period.

Malaysia: The Bank Negara Malaysia (BNM) Financial Market Committee (FMC) noted that there was an increase of conversion of export proceeds into the ringgit, hence explaining the recent strengthening by the local currency. This can also be reflected to non-residents’ interest in local assets, with RM22.5 billion inflow into recorded into Malaysia’s government bond as at end-June.

Fixed Income

Global bonds: US Treasuries closed mixed with longer tenors firmer but shorter tenors closing weaker. The market was readying for release of the US July CPI where consensus expectation is for a 0.2% m/m print vs 0.2% in June, but a larger 3.3% y/y consensus vs 3.0% y/y actual in June. There was early support for global bonds after China’s CPI for July was down 0.3% y/y vs zero in June. Nonetheless, by the end of the day, German Bund yields rose while UK Gilt yields fell slightly amid risk aversion after weak China trade numbers and US banks ratings downgrade the day before. UK’s National Institute of Economic and Social Research expects inflation will be above the 2.0% target for the next four years.

MYR Government Bonds: The local bond market continued to trade sideways as most players stayed on the side-line ahead of the release of the US CPI. Benchmark MGS/GII yields eased slightly except for the 5Y MGS which saw players trimmed positions. Market participants are awaiting the announcement of the 5Y MGS reopening with the expected issue size of around RM4.5 - RM5.0 billion. The 10Y MGS fell 0.5 bps to 3.85%.

MYR Corporate Bonds: Ringgit corporate bonds closed firmer yesterday alongside heavy trading activity at RM1.1 billion amount of papers traded. Leading the flows yesterday were a couple of AAA rated papers. AAA PLUS 01/36 was dealt at 4.28% on RM60 million volume and AAA Sarawak Energy 07/33 at 4.17% on RM40 million.

Forex

US: Amidst lack of data releases, the dollar index trimmed some gains from the previous session, tumbling to as low as 102.3 before ending the day at 102.49 ahead of US inflation which will be released later tonight.

Europe: European currencies closed mixed. The EUR gained 0.2% to settle at 1.097. News flow showed that European natural gas benchmark futures surged by more than 20% on the jittery of potential supply disruptions due to the possibility of workers strikes in Australia. To note, the Euro Area imported EUR3.87 billion mineral fuels from Australia in 2022 or 24.6% from the total Australia imports. Meanwhile, the GBP fell 0.2% to 1.272.

Asia-Pacific: The People’s Bank of China (PBoC) has set yuan reference rate at 7.159, 548 pips stronger than the average Bloomberg survey estimates. This provided support for the currency as the yuan strengthened 0.1% against the dollar to settle at 7.211. However, the recent deflationary signs in China signal still weak growth in the economy. This will put pressure on authorities to step up monetary and fiscal support, which ultimately may pressure the yuan. In tandem, South Korean won posted gains of a marginal 0.01%. However, the JPY weakened 0.2% to 143.73 while AUD fell 0.2% to 0.653.

MYR: The ringgit strengthened 0.2% to 4.573, in parallel with firmer CNY. It was traded within the wide range of 4.566 and 4.591. Partly supporting the currency was the faster growth in retail sales; 5.8% y/y in July 2023 compared to 5.0% y/y in the prior month.

Other Markets

Gold: Ahead of the US Inflation Data, Gold Price Fell 0.6% to USD1,914/oz.

Crude Oil: Oil prices closed higher on the prospect of tight supplies. Brent climbed 1.6% to USD87 per barrel, its highest level since January 2023, while WTI added 1.8% to USD84 per barrel.

FBM KLCI: Local bourse’s rose 0.8% to 1,462. Detailed transactions showed that foreign investors were the net buyers of Malaysian stocks with RM209.8 million flow.

US Equities: US equities fell as the S&P 500 dipped 0.7%, Dow fell 0.5% and Nasdaq dropped by 1.2%.

Source: AmInvest Research - 10 Aug 2023