Snapshot Summary…

Global FX: DXY Gained Further and Hit 106-level While Other Major Currencies Fell

Global Rates: UST Posted Losses on “higher for Longer” Theme

MYR Bonds: MGS Market Closed Mixed While Trading Volume in PDS Market Reached Above MYR1.0 Billion

USD/MYR: MYR Marked Second Days of Gains Amidst Mixed Regional Performances

Macro News

Singapore: The annual inflation rate in August 2023 decreased slightly to 4.0% (July 2023: 4.1%), aligning with market expectations. This marks the lowest rate of inflation since January 2022. The decline was influenced by lower inflation in categories such as food, household durables and services, and recreation and culture. However, prices increased notably in the transport and healthcare sectors. Core inflation also eased to 3.4%, the lowest since April 2022.

Malaysia: Malaysia's leading economic index fell by 0.7% m/m in July 2023, marking the second consecutive monthly decline. This drop was primarily driven by decreases in the real money supply, M1, and other factors like real imports of certain metals and the number of registered companies. Additionally, the expected sales value in manufacturing saw a slowdown. On a yearly basis, the leading index decreased by 0.9% in July 2023.

Fixed Income

Global bonds: The longer tenor US Treasuries ended sharply weaker where the 10Y and 30Y yields moved 10 bps and 14 bps higher. However, on the front of the curve, the 2Y was little changed. On top of higher for longer outlook theme, weakness followed better news on labour disputes as United Auto Workers reportedly made progress in talks with Ford while Hollywood studios reached a deal with striking writers. Meanwhile, the weak sentiment sent German yields to highest levels since 2011, though European Central Bank policymakers Villeroy de Galhau, De Cos, and Kazaks spoke in favour of pausing hikes at the October meeting.

MYR Government Bonds: MGS market closed mixed yesterday. There were hints of bargain hunting, after the recent sell down post FOMC, but yesterday’s continued UST weakness ended up with another bout of net selling activity in MGS in the afternoon session. The 10Y MGS closed unchanged at 3.99%.

MYR Corporate Bonds: Better performance was seen in the MYR corporate bonds market yesterday, after past week’s weakness. Total traded volume was MYR1.19 billion vs MYR397 million on Friday. Notable trades include AAA SEB 07/33 at 4.24% and GG Prasarana 02/40 at 4.29%.

Forex

US: Investors continue to digest the “higher-for-longer” rates narrative following last week’s hawkish FOMC meeting. The bid for dollar drove the currency against a basket of major currencies higher by 0.4% to settle at 106.00, near its 10-month high.

Europe: Speeches by ECB officials on Monday hinted towards an imminent rate hike pause for future meetings. Governing Council member Villeroy de Galhau warned that the ECB should not test the economy until it breaks, preferring duration strategy rather than level. Also, ECB’s President Christine Lagarde stated that the current policy rates level that will make substantial contribution to fighting inflation if maintained for sufficiently long time. By the end of the day, the EUR closed 0.6% lower and found little support from unchanged Ifo Business Climate data. The GBP was also lower by 0.2%. The Confederation of British Industry balance of retail sales improved to -14 in September 2023 from -44 in the prior month, which may reflect slower decline in retail sales for the month and slight optimism following better inflation data reading last week.

Asia-Pacific: The JPY hit its weakest level in 11-months and raised the risk of intervention by authorities as BoJ retained its dovish stance during Friday meeting. The CNY cut its early gains and ended the day weaker by 0.2% as the PBoC continued its months long stronger daily fixing trend. In addition, news flows suggest that dollar demand among households and corporates was strong ahead of the one-week National Day holiday next week.

MYR: The ringgit posted second consecutive days of gains, retreating away from its 11-month low it reached recently. Malaysia’s leading economic index for July fell 0.7% m/m after it fell 0.5% m/m in the prior month, weighed by the subdued outlook for the economy amidst slowing global trade.

Other Markets

Gold: Gold price eased further by 0.5% to USD1,916/oz as yields and USD rose on higher and longer rate sentiment.

Crude Oil: Oil prices closed mixed with Brent was flat at USD93 per barrel while WTI fell 0.5% to USD90 per barrel. Investors mulling over interest rate expectations which can dampen demand, against tight supply concerns.

FBM KLCI: The FBM KLCI fell 0.5% on Monday to close at 1,443. Foreign investors were the net sellers of MYR89.8 million of Malaysian shares.

US Equities: Wall Street closed higher despite Dow Jones rising 0.1%, S&P500 climbing 0.4% and Nasdaq rising 0.5%.

Source: AmInvest Research - 26 Sept 2023