AmInvest Research Reports

Fixed Income & FX Research - 25 September 2023

Publish date: Mon, 25 Sep 2023, 09:27 AM
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Snapshot Summary…

Global FX: The US Dollar Climbed While Other Major Currencies Were Mixed

Global Rates: UST Posted Gains After Preliminary PMI Data Drove Safe Haven Bids

MYR Bonds: Malaysia’s Government Bond Market Saw Losses in Tandem With Lower Volume in PDS Space

USD/MYR: MYR Was Stronger Amidst the Intraday Tight Range of 4.685 – 4.695

Macro News

United States: The US Manufacturing PMI for September 2023 improved to 48.9 from 47.9 in August. This was due to softer contractions in production and new orders. Firms reduced their purchasing activity due to ample stock and lower demand, which improved supplier performance. Staffing increased, and input prices went up, primarily due to higher fuel costs, but output prices only rose slightly.

Malaysia: The Consumer Price Index (CPI) grew 2.0% y/y in August 2023, bringing the year-to-date inflation to 2.9% (2022: 3.4%). Core inflation, which excludes volatile items and controlled prices, eased to 2.5% y/y in August 2023 (July 2023: 2.8% y/y). On a year-to-date basis, core inflation stood at 3.4% (2022: 3.0%). Within the CPI basket, most of the major items are experiencing a disinflationary trend throughout the year, including food items, and restaurants & hotels. The exception however is education inflation due to higher pre-primary & primary education.

Fixed Income

Global bonds: US Treasuries closed Friday with gains across the curve, partly reversing the losses that were recorded after the FOMC meeting. UST found support from preliminary PMI data which showed slowing growth momentum among private businesses. The S&P Global US Manufacturing PMI rose to 48.9 in September from 47.9 in August. The Services PMI fell to 50.2 in September from 50.5 in August. Meanwhile, the Eurozone's flash September Manufacturing PMI fell to 43.4 from 43.5 and flash Services PMI rose to 48.4 from 47.9.

MYR Government Bonds: The narrative of "higher-for-longer" which sent the UST yield above 4.50% for the past week, sent local government bonds mostly weaker on Friday. Though there were hints of interest on some papers, overall yields still climbed by 1 – 3 bps.

MYR Corporate Bonds: Generally weaker trading was seen in MYR corporate bond market last Friday, mirroring the sentiment in the govvies segment. Total traded volume was MYR397 million vs MYR286 million the day before. Notable trades included AAA rated MAHB 11/27 (+3 bps) and AAA Amanat Lebuhraya 10/30 (+2 bps). Quasi bond LPPSA 08/29 rose 2 bps.


US: USD posted gains on Friday to complete a firm week highlighted by the hawkish tone from FOMC meeting. DXY index was additionally aided by PMI data - though the PMI for US was mixed, they were still showing better reading vs Europe. By the end of the session, the USD index gained 0.2% to settle at 105.58.

Europe: Both the EUR and GBP remained weak. On the macro front, Germany's flash September Manufacturing PMI rose to 39.8 from 39.1 and the flash Services PMI rose to 49.8 from 47.3. The UK flash September Manufacturing PMI rose to 44.2 from 43.0 and flash Services PMI fell to 47.2 from 49.5. UK August Retail Sales were up 0.4% m/m (July: -1.1%, cons.: 0.5% m/m) but down 1.4% on yearly changes (July: -3.1%, cons.: -1.2% y/y).

Asia-Pacific: The Chinese yuan recovered some strength as PBoC set the yuan fixing firmer, combined with dollar selling by state-banks The JPY continued to be pressured by the USD following hawkish FOMC meeting, alongside still dovish tone communicated by BoJ in its Friday meeting. Its Chief Kazuo Ueda provided little signal as to when an exit from negative interest rates would occur. The Aussie dollar rose 0.4% after preliminary PMI data showed Composite PMI rebounded to above 50-level, attributed by growth in services sector.

MYR: The Ringgit moved moderately firmer last Friday, ranging between 4.685 - 4.695 during the trading session. Malaysia’s CPI came in unchanged from the month before, provided little in terms of driver for the local currency.

Other Markets

Gold: A Slight Pullback in UST Yields Had Pushed Gold Prices Higher by 0.3% to USD1,925/oz.

Crude Oil: Brent fell slightly by 0.03%% while WTI edged rose 0.8% on Friday as market players were mixed after the FOMC meeting against tight supply concerns.

FBM KLCI: The FBM KLCI rose 0.2% on Friday to close at 1,450, snapping its four-session losing streak. Foreign investors were net buyers of MYR121.3 million shares.

US Equities: Wall Street closed in red as cautious sentiment post-FOMC meeting lingered. Dow Jones fell 0.3%, S&P500 fell 0.2% while Nasdaq edged lower 0.1%.

Source: AmInvest Research - 25 Sept 2023

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