Snapshot Summary…

Global FX: The US dollar fell further to below 105-level following better development in the Middle East conflict

Global Rates: Treasuries rallied on Monday after it reached above 5.0% for the first time since 2007

MYR Bonds: More net selling action hit the MGS market as rising UST yield and weak MYR weighed on sentiment

USD/MYR: USD/MYR pair hit its new all-time high record at 4.794 amidst wide trading range during the day

Macro News

United States : In September 2023, the Chicago Fed National Activity Index (CFNAI) increased to +0.02, up from a revised -0.22 in the previous month. The increase was driven by a rebound in manufacturing activity, which contributed +0.03 to the CFNAI, up from -0.10 in August. Additionally, the sales, orders, and inventories category showed improvement, moving up to -0.01 from -0.06. Employment-related indicators contributed +0.01, slightly up from a neutral contribution in August, and the personal consumption and housing category also improved to -0.01 from -0.06 in the index.

Singapore : Singapore's annual inflation rate increased to 4.1% in September 2023, up from August's 19-month low of 4.0%. The rise was driven by higher costs of transport (6.3% vs. 4.8% in August), particularly private transport, and healthcare (4.5% vs. 4.3%). However, prices eased for housing (3.7% vs. 3.8%), mainly due to accommodation; recreation and culture (4.3% vs. 5.1%), driven by holiday expenses; education (2.4% vs. 2.6%), primarily in tuition and other fees; and miscellaneous goods and services (2.6% vs. 4.2%), supported by personal care. Food prices increased by 4.3%, the least since April 2022, following a 4.8% gain in August.

Malaysia : The Ministry of Investment, Trade and Industry (MITI) is actively reviewing the Strategic Trade Act (STA) 2010 with the goal of streamlining regulations to better control strategic goods and technology within specific industry segments. The Minister mentioned that this review will also address any aspects of Strategic Trade Management (STM) that might inadvertently hinder growth, particularly in the defence industry. The rapid pace of technological advancements and the evolving landscape of dual-use technologies underscore the need to balance technological leadership, economic competitiveness, and national security, as emphasised in research on Emerging Technologies and Trade Controls in 2020.

Fixed Income

Global bonds: Treasuries rallied on Monday; 10Y yield reversing down after it crossed 5.0% for the first time since 2007, which in turn was driven by expectations the Fed will maintain elevated interest rates and that the US government will further boost bond sales to cover the widening deficit. But on Monday, we saw a couple of key market figures making bullish remarks on bonds. Pershing Square Capital’s Bill Ackman said that he has covered his UST short positions as the US economy is slowing faster than suggested by data. Meanwhile Bill Gross of Pacific Investment Management Co. told Bloomberg that the economy is slowing significantly.

MYR Government Bonds: More net selling action hit the MGS market as rising UST yield and weak MYR weighed on sentiment. Safe haven bid also waned as Israel held off its ground invasion of Gaza amid diplomatic efforts to secure the release of more hostages. The 7Y MGS 04/30 reopening posted the weakest demand YTD with BTC 1.406x as investors were cautious due to the weakness in global bond space and in anticipation of higher-than-expected MGS/GII issuance size for the year. MGS/GII yield rose by 3 – 8 bps while Ringgit was traded weaker against the greenback.

MYR Corporate Bonds: Malaysian corporate bonds continued to weaken. Yesterday’s losses were made on heavier/lighter volumes traded where total flows were MYR146 million, up/down from MYR433 million the day before. Heavier flows with losses included 03/26 UEM Sunrise (AA-) done at 4.71% and Genting (AA1) done at 5.04%. On the GG segment, 08/52 Danainfra was dealt at 4.75%, up 21 bps.

Forex

United States: The DXY index retraced further to below 105-level, tracking the fall in UST yields after it hit 5.0% level. Investors also were cautious on the development of the ongoing Middle East conflict as diplomatic efforts were seen to contain the conflict and ahead of several key data this week including US GDP advance estimate for 3Q2023 (consensus: 4.3% q/q), Fed-preferred inflation gauge; PCE Price Index (consensus: 0.3% m/m), and flash composite PMI data.

Europe: Taking advantage from the lower USD, the Euro climbed 0.7%. Eurozone’s consumer confidence held steady at -17.9 in October 2023 but beaten the market forecast of -18.3. The GBP also was on the upside, gaining 0.7% to settle at 1.225. Data on UK’s economy scheduled to be released this week include the number of people claiming unemployment benefit for the month of September (consensus: 2.3K, Aug: 0.9K).

Asia-Pacific: The CNY closed at 7.315 and remained pressured by its struggling economic performance and widening yields with its US counterpart. To note, the UST10Y was at 4.85% while China 10Y Government Bond was at 2.71%. Official data showed that in September, China posted USD19.4 billion outflows under foreign exchange sales and settlement business for customers, the highest monthly amount since late 2016. The Japanese yen appreciated by a slight 0.1% to close at 149.71 after it reached intraday high at 150.11, raising intervention risk.

MYR: The Ringgit traded in a wide range of 4.773 and 4.794 amidst geopolitical risk and the expectations that the central bank will keep the interest rate higher for longer duration. Meanwhile, Bank Negara Malaysia (BNM) Governor Datuk Abdul Rasheed Abdul Ghaffour said that while the ringgit’s level versus the US dollar has touched the Asian financial crisis level, the country is not in a crisis based on its strong fundamentals reflected by its economic growth and well-capitalised banking system.

Other Markets

Gold: Gold price had a slight pullback by 0.4% to settle at USD1,973/oz on the development of Middle East conflict.

Crude Oil: Brent dropped 2.5% while WTI dipped 2.7% as traders took the diplomatic efforts in the Middle East as good news and easing concerns on potential supply disruptions.

FBM KLCI: The FBM KLCI fell 0.2% to 1,438 as foreign investors sold a net of MYR41.3 million Malaysian shares on Monday.

US Equities: Wall Street closed mixed as Dow Jones shed 0.6%, S&P500 dipped 0.2% but Nasdaq rose 0.3%.

Source: AmInvest Research - 24 Oct 2023