Snapshot Summary…

Global FX: Dollar index retreated slightly to below 107-level, benefitting other major currencies

Global Rates: UST, Bund, and Gilt markets rallied following mixed economic data

MYR Bonds: Selling pressure in the government bond market intensified ahead of 20Y MGS auction

USD/MYR: Ringgit depreciated again as market was in a wait-and-see mood

Macro News

United States : In August 2023, the ISM Services PMI unexpectedly surged to 54.5, indicating the strongest growth in the services sector in six months, surpassing both the July figure of 52.7 and the forecasted 52.5. Notably, there were faster increases in business activity, new orders, employment, and inventories, alongside improved supplier deliveries. However, price pressures intensified, reaching 58.9, while the backlog of orders contracted significantly from 52.1 to 41.8. Over the past six months, the average reading of 47.7 suggests the quickest supplier delivery performance since June 2009.

Malaysia : Prime Minister has stated that government subsidies for various essential needs such as electricity, fuel, and food are expected to surpass RM81 billion this year. He also highlighted subsidies, such as those for chicken and eggs totalling RM3.8 billion, are vital in easing the burden on the people, and a more resilient policy, like the rationalization of subsidies, is needed to manage them effectively.

Fixed Income

Global bonds: Overnight, the UST market ended the session on a better note as yields fell 6 – 10 bps across the curve following mixed economic data released. The deterioration in US ISM Services PMI reflects the slowing momentum of economic growth while ADP employment change showed the smallest increase since January 2021 may suggest labour market is cooling. On the other hand, factory orders in the US unexpectedly surged for the month of August, as reported by US Census Bureau. In Europe, the Bund and Gilt market were also fairly supported as 10Y Bund yield fell 5 bps, alongside Gilt 10Y yield falling 2 bps. Retail sales in the Eurozone contracted 1.2% m/m, larger than market expectations of 0.3% contraction. In the UK, the Composite PMI was revised higher to 48.5 from 46.8 but remained at its lowest level since January 2023.

MYR Government Bonds: The selling pressure in the local bond space intensified with MGS/GII yield curve shifted higher by 6 – 12 bps across the tenors moving in tandem with regional markets which saw similar movements after the bid sell off in USD rates overnight following strong US job openings. Market participants will be looking at the reception of the upcoming MYR3.5 billion 20Y MGS reopening tender with the stock last traded at 4.453% in the cash market.

MYR Corporate Bonds: Trading volume in the PDS market continued to dwindle to MYR245 million from MYR471 million during the previous session. Gainers and losers were fairly balanced throughout the session. Among notable trades were MYR20 million on 09/25 Prasarana Malaysia (GG rated) done at 3.60%, MYR10 million on

Forex

US: The US dollar closed weaker on Wednesday, coming on the back of mixed US economic data. These include the September ISM Services PMI down to 53.6 from 54.5, though factory orders surged 1.2% m/m in August vs a 2.1% decline in July. The ADP said 89K private-sector jobs were added in September vs 177K in August.

Europe: The Euro and GBP rose as the US dollar fell. However, both currencies remained near their weakest YTD. Eurozone's August PPI rose 0.6% m/m but down 11.5% y/y. Germany's September Services PMI rose to 50.3 from 47.3. The UK September Services PMI fell to 49.3 from 49.5.

Asia-Pacific: The yen rose slightly on Wednesday, moving down further from the 150 levels against the USD. The brief surge during prior day stoked speculation that Japanese authorities could have intervened to support the currency. Japan's top Ministry of Finance official responsible for FX policies, Masato Kanda, said he would not comment on whether authorities had intervened in the market, although he said that 'we have only taken steps that have the understanding of U.S. authorities'. By the end of the day, the JPY lost its ground and weakened to 149.12 as the currency remained pressured by the stark difference of policy stance between the BoJ and the US Fed. AUD was spotted firmer but in a tight range yesterday and remained near YTD lows after RBA held rates this week.

MYR: The ringgit closed modestly weaker yesterday as the market was in a wait-andsee mood due mainly to external factors, which in the short term comprise jobs data in the US. MYR closed 0.1% weaker at 4.730.

Other Markets

Gold: Gold prices continued to retreat despite the fall in UST overnight but reflecting the recent jump in bond yields as gold is now at its lowest since February.

Crude Oil: Crude oil prices slumped on Wednesday. News indicates Russia may lift its diesel ban. The EIA report showed crude stocks fell by 2.2 million barrels to 414.1 million barrels last week, but stocks at Cushing, Oklahoma rose for the first time in two months. OPEC+ made no changes to its planned output cuts for this quarter.

FBM KLCI: Amid the cautious global markets, Malaysia’s stock index closed 0.3% lower at 1,416. Foreign investors were net sellers of a large MYR397.6 million Malaysian shares yesterday.

US Equities: Us stocks rose amid some relief after UST yields fell from recent highs. The Nasdaq index rallied by 1.35% while the Dow rose 0.39%.

Source: AmInvest Research - 5 Oct 2023