Snapshot Summary…

Global FX: The USD trended lower amidst improvement in risk appetite

Global Rates: UST curve flattened after initial jobless claims signalled softer labour market condition

MYR Bonds: MGS/GII rallied taking cue from the overnight rally in Treasuries from the previous session

USD/MYR: The ringgit firmed up after the BNM decided to hold its OPR at 3.00%

Macro News

United States: New orders for manufactured goods in the US unexpectedly grew faster at 2.8% m/m during September 2023, the fastest pace since January 2021, compared to market expectations of a 2.4% m/m rise. New orders for manufactured durable goods soared 4.6% m/m, led by transportation equipment (+12.7% m/m). Excluding the transportation equipment segment, new factory orders rose 0.8%, easing from 1.5% in the prior month.

United Kingdom: The Bank of England held interest rates at its 15-year high as it kept up its fight against the inflation. BOE said it does not expect to cut rates any time soon. Despite publishing forecasts which now show the UK economy may be close to a recession the BOE held rates at 5.25% for the second meeting in a row after 14 backto-back increases.

Malaysia : In the final scheduled MPC meeting for 2023, BNM kept the OPR at 3.00% as expected. The MPC statement pointed out that growth in 2024 will be driven mainly by resilient domestic expenditure, with some support emanating from the expected recovery in E&E exports. Overall, the current monetary policy stance is assessed to be supportive of the economy. Our baseline view is for OPR to remain unchanged at 3.00% until the end of 2024 on the back of 4.5% GDP growth.

Fixed Income

Global bonds: The UST curve noticeably flattened as yields on shorter tenor climbed while yields on longer tenor tumbled. The 2Y UST yield rose 5 bps but the 10Y yield fell 8 bps. On the data front, the initial jobless claims rose to 217K during the week ended 28th October, up from 212K in the prior week and higher than the market forecast of 210K. This data helped prop up the view of softening labour market and US economy is starting to show apparent signs of slowing. In Euro Area, German Bund yields flattened as well amidst the expectations that the ECB is already done with rate hikes. Yield on 10Y Bund fell 5 bps to close at 2.72%.

MYR Government Bonds: MGS/GII rallied taking cue from the overnight rally in Treasuries from the previous session following dovish comments from Fed Chairman Powell after the Fed meeting as well as lower-than-expected US Treasury planned sales of longer-term securities in its quarterly debt-issuance plan. Meanwhile, the BNM kept rates unchanged at 3%, in line with market expectations. MGS/GII yields eased by 3-9 bps across the curve.

MYR Corporate Bonds: Trading in the PDS market was mixed with few papers making its debut during the session. Volume traded improved to MYR775 million from MYR448 million. Among notable trades were MYR200 million on 09/32 0% coupon paper Khazanah Nasional closed at 4.20%, MYR60 million on 10/31 Amanat Lebuhraya (AAA) done at 4.45%, and MYR30 million YTL Power done at 4.40%.

Forex

United States: The dollar fell on Thursday alongside the dip in UST yields, while demand for riskier currencies grew as markets bet the Fed may be done raising interest rates.

Europe: Both the EUR and GBP rose against the weaker USD. Traders then heeded signals from ECB and BOE. ECB policymaker Knot said that tight policy will have to remain in place for some time while policymaker Nagel said that the German economy will resume growing in 2024. The Bank of England kept its bank rate at 5.25%, as expected, but ruled out quick interest rate cuts in view to fight inflation.

Asia-Pacific: The PBOC set the midpoint fixing rate for the USDCNY at 7.1797 which is the weakest level since 16 October 16. The action is likely to readjust the fix back towards market levels and to take advantage of US dollar weakness post FOMC. USD/CNY closed at 7.314. USD/JPY fell 0.3% to close at 154.45. Japan’s government compiled a package of stimulus measures to help prop up the economy from the downside of inflation which will involve spending of more than JPY17 trillion (USD113 billion). The package includes temporary cuts to income and residential taxes, payouts to low-income households and subsidies on gasoline and utility bills.

MYR: MYR posted gains of 0.5%, along with the weaker USD. The decision to hold the OPR was already anticipated by the market and the statement also elaborated that the USD strength in this cycle is a result of “higher-for-longer” US interest rates coupled with escalating geopolitical risks.

Other Markets

Gold: Gold prices rose as the dollar fell on the heels of the Fed action and signals. Gold rose 0.2% overnight.

Crude Oil: As risk appetite was boosted post FOMC, crude oil prices also rose. Brent rose 2.6% while WTI rose 2.5%.

FBM KLCI: Bursa Malaysia finished higher on Thursday after BNM held the OPR and pledged for monetary policy to remain supportive to the economy. The FBM KLCI closed 0.3% higher. Foreign investors were net buyers of MYR83.3 million shares.

US Equities: US equities rallied with the Dow Jones industrial up 1.7% as risk appetite increased. Equities also rose on the back of strong corporate earnings releases.

Source: AmInvest Research - 3 Nov 2023