Snapshot Summary…

Global FX: USD and JPY Went Down While AUD, EUR and GBP Gained

Global Rates: UST Yields Closed Lower, in Contrast With Bearish Sentiment Seen in Bund Market

MYR Bonds: Ringgit bonds traded sideways and was fairly supported despite the stronger US Dollar and higher US Treasuries yields

USD/MYR: With Fed indicating potential for another hike and expectations that BNM will not raise the OPR, MYR lost out against the USD

Macro News

Australia: Retail sales in Australia rebounded in July 2023, rising by 0.5% m/m, surpassing market expectations of 0.3%. This recovery follows a decline of 0.8% in the previous month. Various non-food sectors showed growth, particularly department stores (3.6%), clothing and footwear (2.0%), and other retail categories (0.3%). Household goods retailing experienced a slight decline (-0.2%). Food-related spending was mixed, with cafes and restaurants showing growth (1.3%) while food retailing remained unchanged.

Malaysia: Producer prices in Malaysia continued to decline in July 2023, falling by 2.3% y/y. This marked the sixth consecutive month of contraction, but the rate of decline eased compared to the previous month. Prices in the mining and quarrying sector dropped less sharply, while agriculture, forestry, and fishing prices rebounded. Manufacturing prices, however, continued to shrink. Prices for water supply increased slightly, while electricity and gas supply prices also saw a minor rise. On a monthly basis, producer prices increased by 0.2% in July, reversing a decline from the previous month.

Fixed Income

Global bonds: US Treasuries bull flattened with more gains were seen in the shorter end part of the curve as the lingering safe-haven demand bids from the weak PMI indicators last week remained. The 2Y UST yield fell 3 bps to close at above 5.00% while the 20Y yield fell only by 1 bps. This week, market players will be looking at US labour market data to get clearer picture on US Fed interest rate outlook. On the other hand, the Bund market bear flattened after Bundesbank President Joachim Nagel hawkish speech, saying that underlying inflation in the region remained sticky and monetary policy needs to be more “stubborn” than price growth. This is in tandem with ECB policymaker Robert Holzmann’s similar hawkish tone. The UK bond market was closed due to the Summer Bank Holiday.

MYR Government Bonds: Ringgit bonds traded sideways and was fairly supported despite the stronger US Dollar and higher US Treasuries yields due to hawkish remarks by Fed Chairman Powell during the Jackson Hold Symposium. He indicated that additional interest rate hikes are still on the table and rates could remain elevated for longer than expected until the Fed is confident that inflation is moving sustainably down toward their objective. Market participants will be looking at the reception of the upcoming 15Y MGS reopening tender with the WI last quoted at 4.06-4.04%.

MYR Corporate Bonds: Gainers were seen outpacing losers in the PDS market with a decent trading volume at MYR497 million, slightly better compared to MYR470 million last Friday. Volume traded were led by GG Danainfra 04/35 at 3.55% on MYR40 million volume, and AAA PLUS 01/28 on MYR30 million volume last dealt at 4.00%.

Forex

US: The US dollar slipped slightly overnight alongside the lower UST yields. Dollar attractiveness as a safe haven took a modest hit in the Asian and European session after stock markets rallied.

Europe: The Euro was supported by hawkish comments by ECB Governing Council member Robert Holzmann who remains wary over inflation and sees “a case for pushing on with rate increases without taking a pause.” GBP was little changed on Monday as outlook for BOE to hike rates meant pound was supported despite hawkish stance by Powell.

Asia-Pacific: CNY was slightly weaker, hovering near 7.289 late yesterday vs the USD. Despite USD sustained above 104 (hovering about 104.10 in late Asian session), and Chinese authorities announcing stimulus to the stock market, China said it would halve the stamp duty on stock trading, slow the pace of IPOs and increases regulation on major shareholders' stake reductions. CNY remained pressured by China’s credit issues concerning its real estate market. Elsewhere, AUD posted gains. Australia data on Monday was nominal retail sales up 0.5% in July (vs Reuters consensus of +0.3%). Meanwhile, the JPY was about 0.15% weaker. On Saturday, Chief Kazuo Ueda said BOJ will maintain its ultra-easy policy as underlying inflation remains "a bit below" target.

MYR: The ringgit closed weaker yesterday in tandem with regional currencies after recent weak global economic data, comprising PMI numbers in major economies. USD/MYR was seen at 4.654 late yesterday after ending last Friday at 4.641. With Fed’s Powell indicating potential for another Fed hike, and expectations that BNM will not raise the OPR after releases of slower CPI and 2Q2023 GDP, MYR lost out against the USD.

Other Markets

Gold: Gold Was Supported by Lower UST Yields. Price Was About 0.3% Stronger Overnight.

Crude Oil: Rally in stock markets aided crude oil prices. This was despite news that the US was in talks with Venezuela for temporary lifting of US sanctions, including Venezuela oil export, in exchange for allowing fair elections next year.

FBM KLCI: KLCI rose on Monday aided by in tandem rise in regional stock markets on the heels of stimulus pledge by Chinese authorities to support its stock market. Local institutions were net buyers of MYR40 million of stocks while foreign investors were net buyers of MYR12.2 million.

US Equities: US equities market rose for a second consecutive session. Sentiment was aided by combination of bargain hunting and upbeat outlook in earnings and economic performance. The DJIA index rose by 213 points or 0.6%.

Source: AmInvest Research - 29 Aug 2023