Snapshot Summary…

Global FX: Dollar Was Boosted by Firm US Economic Data But Was Also Aided by Safe Haven Demand

Global Rates: Yields fell in developed bond markets, directed by weak data and global safe haven demand

MYR Bonds: MGS Yields and IRS Rates Fell on Growth Risks

USD/MYR: USD/MYR Rose Amid Strong USD and Cautious BNM Statement

Macro News

China: In August 2023, China's exports declined by 8.8% y/y to USD284.87 billion, marking the fourth consecutive month of export contraction. Over the first eight months of the year, exports were down 5.6% compared to the same period in 2022, totalling USD2.22 trillion. Imports to China also decreased in August, falling by 7.3% y/y to USD216.51 billion, which was a milder decline compared to the previous month. This marked the seventh decline in imports this year. Imports of unwrought copper and steel products saw notable declines, while purchases of crude oil, natural gas, and coal increased. Imports from various countries, including Japan, South Korea, and the US, declined, while purchases from countries like Australia and the EU remained relatively stable.

Euro Area: Euro Area GDP only grew by a modest 0.1% in the 2Q2023, a downward revision from the initial estimate of 0.3% growth. Household consumption remained stable, government expenditure rebounded, and gross fixed capital formation increased. However, exports decreased by 0.7%, while imports rose by 0.1%. In terms of specific countries, Germany's economy stalled, France saw a 0.5% expansion, Spain grew by 0.4%, and Italy contracted by 0.4%.

Malaysia: Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 3.00% in the second last scheduled Monetary Policy Committee (MPC) for the year. This decision reflects the necessity for monetary policy to remain accommodative, aiming to support the domestic economy, especially in the face of ongoing pessimistic external factors which was reflected via Malaysia’s slower GDP growth of 2.9% y/y in 2Q2023.

Fixed Income

Global bonds: US Treasuries posted strength on Thursday especially with solid gains seen on shorter tenors after three days of weakness. The market was aided by the surprise decrease to 216K (from 229K) in US weekly jobless claims. The decline in oil price also aided sentiment for UST, which yields had risen in past few days on fears higher oil prices (boosted by Russia and OPEC+ planned output cuts) will stoke incoming inflation.

MYR Government Bonds: OPR being unchanged at 3.00% at yesterday’s MPC saw a dovish tint as the previous descriptions of the rate being "slightly accommodative" and that "further normalisation would be data dependant" were not found in the latest statement. Post MPC, MGS interest recovered from the past 1-2 days with trading activity picking up though overall volume remain muted. IRS rates fell, down 2 bps on the 5Y tenor.

MYR Corporate Bonds: More buying interest seen in the PDS market yesterday though total traded volume fell to about MYR370 million. Notable trades include quasi paper DanaInfra 09/30 at 3.85% (-3 bps) on MYR30 million volume. Also, AAA Tenaga 08/37 was dealt at 4.27% (-13 bps) on MYR30 million flows.

Forex

US: Dollar was boosted by firm US economic data but was also aided by safe haven demand particularly risks to China’s growth as its exports fell further in August. The DXY closed above the 105 level after mainly gyrating between 103 and 105 in the past month. The index rose 0.2% to close at 105.06.

Europe: EUR and GBP sustained weakness alongside the strong USD. The Bank of England Decision Maker Panel survey showed a fall in 3-month inflation expectations to 4.9% from 5.2% while the outlook for the year ahead was cut to 4.9% from 5.4%. Germany's July industrial production 0.8% m/m (consensus: -0.5%; June: -1.4%).

Asia-Pacific: CNY fell further. USD/CNY ended at 7.329 or the weakest since 2007. China's August trade surplus fell to USD68.36 billion from USD80.60 billion as exports fell 8.8% y/y (consensus: -9.2%; July: -14.5%). AUD and NZD fell amid risk aversion in Asia. Australia's July trade surplus fell to AUD8.04 billion from AUD10.3 billion as Australia's exports fell 0.2% in July vs decline of 3% in the prior month as mining exports such as of gold, iron and coal fell.

MYR: The slant of the MPC statement yesterday of risk to growth while amid a decline in global oil price pressured the ringgit. USD/MYR rose 0.03% to 4.677.

Other Markets

Gold: Gold rose but in a cautious mood as traders stood watching USD strength and global interest rates signalling.

Crude Oil: Crude oil prices snapped its 9-day winning streak amid risk aversion in global markets, despite latest US weekly crude oil inventories declined by 6.307 million barrels after decreasing by 10.584 million barrels a week ago.

FBM KLCI: The Malaysian stock market closed slightly lower on Thursday, due mainly to late net selling pressure. The benchmark FBM KLCI index declined by 0.04% at 1,460.07. Foreign investors were net buyers of a relatively light MYR11.8 million shares.

US Equities: The S&P 500 index fell for its third consecutive day on Thursday. Sentiment remained wary over the Fed’s interest rate direction. Tech stocks were additionally pressured by a sell-off in Apple shares.

Source: AmInvest Research - 8 Sept 2023