Snapshot Summary…

Global FX: The DXY index held steady as the market digest Fed speech and strong retail sales data

Global Rates: UST market continued its bearish performance as healthy data bolster the case for ‘higher-for-longer’

MYR Bonds: The MGS market yields climbed, tracking global yields

USD/MYR: The ringgit was held at above 4.73-level amidst mixed performance in regional currencies

Macro News

United States: Retail sales in the US continued to show strength by increasing 0.7% m/min September 2023, following an upwardly revised 0.8% gain in August. The largest increases in sales were observed in miscellaneous store retailers (3%), nonstore retailers (1.1%), motor vehicles and parts dealers (1%), and gasoline stations (0.9%). However, sales declined for electronics & appliances (-0.8%), clothing stores (-0.8%), and building material & garden equipment (-0.2%).

Euro Area: The ZEW Indicator of Economic Sentiment for the Euro Area showed improvement, reaching 2.3 in October 2023, up from -8.9 in the previous month. This is the highest reading since April 2023. The sentiment survey indicates that 53.7% of analysts expect economic stability, while 24.3% anticipate an improvement, and 22% foresee a decline.

Singapore: Singapore's non-oil domestic exports (NODX) contracted by 13.2% y/y in September 2023, marking the 12th consecutive month of decline but showing the softest reduction since April. This downturn was driven by softer drops in both electronic and non-electronic products. Electronic product shipments decreased by 11.6%, primarily due to declines in integrated circuits (ICs), PCs, and parts of PCs. Non-electronic product exports also fell by 13.6%, with notable declines in nonmonetary gold, pharmaceuticals, and food preparations.

Malaysia: Malaysia's efforts to promote the use of the ringgit for trade have made significant progress and received positive responses from China and ASEAN countries. Prime Minister revealed that 25% of the total trade with China now occurs in ringgit and renminbi, amounting to RM39.2 billion out of a total trade value of RM157 billion. Additionally, with ASEAN countries, a substantial portion of trade with Indonesia and Thailand utilises the ringgit and local currencies, accounting for 16.7% of total trade with Indonesia and 19.6% with Thailand.

Fixed Income

Global bonds: Sell-off in the UST market continued after retail sales data surprised to the upside (Sept: 0.7% m/m vs. consensus: 0.3% m/m). Excluding Gas and Autos category, the growth of retail sales remained robust at 0.6% m/m after previous month’s reading of 0.3% m/m. Industrial production also unexpectedly grew 0.3% m/m compared to market expectation of stagnation. Minneapolis Fed Neel Kashkari said that inflation is taking much longer than expected to come down and it is “still too high”. The UST10Y yield surged 13 bps to close at 4.83%.

MYR Government Bonds: In the local space, govvies echoed global yield movements, tracking the sell-off in the UST curve from the previous session and saw the MGS/GII yield curve shifting 1 – 4 bps higher alongside light selling trend. The MGS 10Y yield climbed 1 bps to close at 4.06%.

MYR Corporate Bonds: The volume traded in the PDS market surged to MYR1.06 billion from MYR616 million in the prior day as losers outpaced gainers. Heavy volume was seen with MYR200 million on 05/46 Danainfra Nasional closed at 4.59%, and MYR400 million on 01/37 PLUS Bhd (AAA rated) done at 4.51%.

Forex

US: The US dollar reversed early gains due to dovish Fed comments. Richmond Fed President Barkin said the path for inflation is not clear and that there is time to decide the next step in terms of policy action. The early dollar gains were on the back of better data for US retail sales and industrial productions expectations.

Europe: Europe currencies ended mixed with the Euro firmer but the pound closing weaker. The EUR moved in reverse to the USD movement, reacting to US data and Fed comments. GBP fell as the August Average Earnings Index and Bonus rose 8.1% y/y but lower than expected 8.3% and July’s 8.5%.

Asia-Pacific: CNY was steady against the USD yesterday, seen around 7.316. Traders were still awaiting the 3Q2023 GDP release which is due today. Meanwhile, yesterday traders were watching developments concerning Country Garden - it have to pay USD15 million coupon latest by today, failure to pay of which its entire offshore debt will be considered in default. News report suggested the BoJ was considering raising its forecast for core CPI for 2023 and 2024 fiscal years. This supported JPY to move below 149. However, reports also indicated the BoJ will maintain its inflation outlook for 2025, which sent JPY back to above 149. The AUD was above 0.63-level as RBA minutes showed policymakers mulling a shift in interest rates at its recent meeting though decided against that as minutes also show policymakers viewing inflation as well above the 2% target.

MYR: USD/MYR was relatively flat against the US dollar yesterday, closing 0.04% down at 4.736. Ringgit was supported along with other regional currencies as dollar was pressured by past week’s dovish Fed comments. However, limiting ringgit upside was continued risk aversion from the Middle East crisis.

Other Markets

Gold: Gold rose 0.2% to USD1,923/oz as Middle East geopolitical risk buoy demand for safe-haven gold.

Crude Oil: Crude oil rose ahead of US President Joe Biden trip to the conflict region to contain the conflict from spreading. Brent rose 0.3% to USD89 per barrel.

FBM KLCI: Malaysian equities rose yesterday along with regional markets. Risk averse sentiment lingered but the market was supported by firmer MYR vis-a-vis the weak USD during the Asian session. FBM KLCI rose 0.4% to 1,444, supported by net buying from local institutions with MYR85.6 million flow.

US Equities: Wall Street closed mixed as investors continue to assess the development in Middle-East conflict. Dow Jones climbed slightly by 0.04% while S&P500 fell 0.01%.

Source: AmInvest Research - 18 Oct 2023