Snapshot Summary…

Global FX: The US dollar fell following US Fed Chair Jerome Powell speech

Global Rates: UST curve steepened with yield on 10Y ended the day just below 5.00%

MYR Bonds: MGS curves continue its bearish tone with yields edging higher by 1 – 4 bps across the curve

USD/MYR: The USD/MYR pair hit 4.77-level amidst sustained downside factors on the currency

Macro News

United States: Existing-home sales in the US decreased by 2% m/m in September 2023, reaching a seasonally adjusted annualised rate of 3.96 million units. This marks the fourth consecutive monthly decline, and the sales level is the lowest since October 2010. Single-family home sales also fell by 1.9% from the previous period, reaching a seasonally adjusted annualised rate of 3.53 million units in September, while co-op sales saw a decline of 2.3% to an annual rate of 430K units.

Indonesia: In an unexpected move, Bank Indonesia raised its interest rate by 25bps to 6.00% during its October 2023 meeting. This decision represents the first interest rate hike since January, aiming to stabilise the rupiah, which has been under pressure from rising global uncertainty, including US monetary tightening and the Middle East tensions.

China: In September 2023, the average new home prices in China's 70 major cities experienced a decline of 0.1% y/y, marking the third consecutive month of a 0.1% decline. Among China's largest cities, home prices dropped in Shenzhen (-3.0%, unchanged from August) and Guangzhou (-1.7%, up from -1.4% in August). However, prices increased at a slower rate in Chongqing (1.7%, down from 1.8%) and remained unchanged in Tianjin (0.6%). On the other hand, Beijing (2.9%, up from 2.8%) and Shanghai (4.4%, up from 4.1%) saw faster year-on-year price increases.

Malaysia: Malaysia's total trade declined by 12.6% y/y (August 2023: -19.9% y/y) to MYR224.4 billion, with exports falling by 13.7% y/y (August 2023: -18.7%) to MYR 124.5 billion and imports declined by 11.1% y/y (August 2023: -21.2% y/y) to MYR 100.0 billion. The trade surplus widened to MYR 24.5 billion (August 2023: RM17.2 billion). On a month-on-month basis, both exports and imports increased by 8.2% m/m and 2.1% m/m respectively. On the year-to-date basis, exports have now declined by 7.5% on average (2022: 25.5%), and imports declined by 7.8% on average (2022: 31.6%).

Fixed Income

Global bonds: Overnight, the UST curve steepened with yield on UST 10Y climbed and ended the day just shy away from 5.00% while short-dated yields fell as the following US Fed Chair Jerome Powell’s comments on the resilience of US economy, though Powell also signalled there is possibility that the central bank may not raise the interest rate at the upcoming November meeting, in lieu of incoming data. The weak sentiment for UST was also prompted by lower initial jobless claims at 198K in week ended 7th October compared to the previous week of 211K and market consensus of 212K. Gilt curve also steepened after recent data showed wage growth has slowed down to 8.1% y/y for August, compared to market forecast of 8.3% y/y and 8.5% y/y in July.

MYR Government Bonds: MGS continued its bearish tone with yields edging higher by 1 – 4 bps across the curve but lagged against the IRS movement which jumped by a bigger magnitude, by 8 – 12 bps. The weakness was also fuelled by USD/MYR breaking above the 4.7500 psychological levels before closing at 4.770. Meanwhile, BNM announced the reopening of 7Y MGS 04/30 with an issue size of MYR5.0 billion, within market expectation. WI quotes was at 4.08% - 4.03%.

MYR Corporate Bonds: Volume traded in the PDS market continued to decline, down to MYR226 million from MYR649 million the prior day as losers were seen outpacing gainers amidst the weak MGS trading. Among notable trades were MYR20 million on 04/48 Danainfra Nasional (GG rated) done at 4.70%, MYR10 million on 04/26 Westports Malaysia (AAA rated) done at 3.95%, and MYR 30 million on 06/28 PONSB Capital (AA3 rated) done at 4.25%

Forex

US: The dollar fell overnight after comments from Fed chairman Jerome Powell which sounded there’s possibility of policymakers will not raise interest rates at the next FOMC meeting. Powell said the decision on rates will depend on ‘´the totality of the incoming data, the evolving outlook, and the balance of risks."

Europe: EUR/USD closed firmer as the US dollar slipped after Powell’s comments. Meanwhile, ECB policy meeting is scheduled for next week and with recent data in Europe mostly coming in within expectations, ECB is also anticipated to hold rates, but overnight EUR movements owed largely to USD sentiment. EUR/USD rose 0.4% to end at 1.058.

Asia-Pacific: China’s yuan fell to 5-week low amid the dollar strength during the Asian session. A Reuters survey showed that the PBOC is widely expected to leave loan prime rates (LPR) unchanged at the monthly fixing due today. Further risk to yuan emerged as Country Garden missed a USD15 million coupon repayment, placing it at risk of a group-wide default. Bondholders were reportedly seeking sessions with the company and its advisers, possibly for debt restructuring options. Aside, top Japan FX official Masato Kanda added more remarks though nothing seemed concrete as to whether authorities will step in soon to bolster the JPY. Kanda said excessive FX moves could warrant intervention but said that "it would be better if we don't have to do anything in markets,".

MYR: Malaysia’s ringgit continued to post weakness, seen depreciating by 0.5% yesterday and USD/MYR pair closing above the 4.760 level. Sustained negative factors pressing down the currency include dollar strength on the back of Fed policy direction and risk aversion amid the geopolitical risks.

Other Markets

Gold: Safe-haven demand and slip in the as dollar sustained another day of gains for gold prices. Gold remained near 2-month highs at USD1,974 per oz after rising 1.4%.

Crude Oil: Middle East crisis and traders continuing to worry about supply limitations sent crude oil prices higher. Brent rose 1.0% overnight and was hovering above USD92 per barrel.

FBM KLCI: Malaysia’s equity market fell to follow the downtrend in regional markets, after US stocks tumbled the night before and amid the risk averse sentiment. The FBM KLCI index fell 0.3% to 1,443.

US Equities: US stocks had posted early gains, on the heels of strong U.S. jobs data and corporate earnings, but retreated after bond yields leapt higher. The Dow Jones index fell 0.7% and the S&P 500 fell 0.8%.

Source: AmInvest Research - 20 Oct 2023