Snapshot Summary…

Global FX: Dollar play continues to dominate the market as DXY index marked five consecutive days of a bullish run

Global Rates: UST Market Was Steady But Bund Market Slightly Weakened

MYR Bonds: MGS Yields Rose While Firmer Activity Was Seen in the PDS Market

USD/MYR: Ringgit weakened to close near its intraday high amidst generally weak regional performance

Macro News

United States: The S&P CoreLogic Case-Shiller 20-city House Price Index edged up 0.1% y/y in July 2023, the first increase in five months. Compared to the previous month, house prices were 0.6% higher, after a 0.9% rise in June. House price growth peaked in 2022 and slowed sharply this year, amid base effects, increases in mortgage rates and general economic weakness.

Malaysia: Producer prices decreased by 1.8% y/y in August 2023 (July 2023: -2.3%). This marks the seventh consecutive month of declining producer prices, but the rate of decline has eased, being the softest since February. Prices decreased less in the mining and quarrying sector, while they tumbled for electricity and gas supply. Manufacturing prices also continued to decline, although at a slightly slower rate. Additionally, prices slowed in sectors such as agriculture, forestry, fishing, and water supply. On a monthly basis, producer prices increased by 0.3% in August, compared to a 0.2% rise in July.

Fixed Income

Global bonds: US Treasuries steadied overnight after early net selling was met by net buying interest. Safe-haven demand was noted amid continued China’s real estate market credit worries. A couple of weak economic data releases also supported UST. New home sales declined 8.7% m/m in August. The Conference Board's Consumer Confidence Index fell to 103.0 in September though the August number was revised upward to 108.7 (from 106.1). Aside, to allay a government shutdown, House Speaker McCarthy is expected to bring a stopgap funding bill for vote this week. Meanwhile, European bonds closed slightly weaker. Overnight, Germany's finance ministry announced that debt issuance in the fourth quarter will be EUR31 billion lower than the existing plan.

MYR Government Bonds: In the MGS market yesterday, early weakness was reversed by the afternoon session as players picked up bonds at the current attractive levels. The GIl 07/28 WI level saw the yield initially given at 3.83% but was later taken back at 3.82% ahead of the reopening tender scheduled today. The 10Y MGS closed 2 bps up at 4.00%.

MYR Corporate Bonds: Firmer activity was seen in Malaysia’s credit market yesterday. Traded volume was lower but remained heavy at about MYR818 million. Meanwhile, gainers include short-dated government-guaranteed GovCo papers. GovCo 02/24 fell 10bps to 3.39% while GovCo 09/24 shed 8 bps to 3.51%.

Forex

US: The DXY index continued its bullish run for the fifth straight day, posting 0.2% gains to settle at its 10-month high of around 106.23. Minneapolis Fed’s Neel Kashkari said the US economy is more likely to experience “soft landing” than not, and there are possibilities that Fed will need to raise interest rates “meaningfully” to beat inflation. On the data front, unexpectedly better house price index reading provided support for the USD despite weaker consumer confidence data.

Europe: The EUR and GBP were on the downside again, falling 0.2% and 0.4% respectively, as dollar play dominated the market. ECB Robert Holzmann stated there are potential hikes in peak borrowing costs, depending on wage negotiations and rising oil prices despite the uncertain economic outlook. On another note, investors will be looking at final estimation of UK’s GDP due later this week. The previous estimation was shown at 0.4% y/y for 2Q2023 after 0.2% y/y in 1Q2023.

Asia-Pacific: The PBoC remained stern in preventing the yuan from getting weaker as it sets CNY daily fixing at 7.1727, or 1,447 pips stronger than market expectation. It was the largest spread from market projections on record, according to Reuters. The Japanese yen found some support after official warned against the weakening currency. Finance Minister Shunichi Suzuki stated that the government is “watching currency moves with a high sense of urgency”. The JPY ended the day at 149.07 or 0.1% weaker.

MYR: The ringgit weakened slightly by 0.1% to close near its intraday high at 4.691. Looking at the data front, the decline in Malaysia’s producer inflation in August 2023 marked the seventh straight months of contractions, reflecting tepid inflationary pressure in Malaysia.

Other Markets

Gold: Gold Price Fell 0.8% as USD and Bond Yields Climbed and Sent the Price to Test USD1,900.

Crude Oil: Oil prices closed mixed. Brent rose 0.7% y/y while WTI fell 0.3% as tight supply concerns outweighed economic uncertainties.

FBM KLCI: The FBM KLCI rose 0.1% to close at 1,446 after it opened lower than the previous day’s close. Foreign investors were the net buyers of Malaysian shares of RM91.5 million.

US Equities: Wall Street closed lower after on the back of mixed economic data. The Dow Jones index fell 1.1%, the S&P500 fell 1.5% and tech-heavy Nasdaq fell 1.6%.

Source: AmInvest Research - 27 Sept 2023