Snapshot Summary…

Global FX: Dollar demand was further subdued by Fed-speak

Global Rates: UST market closed mixed but maintaining its rally for the week

MYR Bonds: Malaysia's government bonds closed in a narrow range for a second day

USD/MYR: Ringgit firmed moderately following healthier 3Q2023 Malaysia GDP data

Macro News

United Kingdom: In October 2023, retail sales in the United Kingdom declined by 0.3% m/m, following a revised 1.1% decrease in September. Automotive fuel sales dropped by 2.0%, impacted by cautious consumer spending and adverse weather. Food store receipts were down 0.3%, with specialist food stores and alcohol/tobacco stores reporting declines.

China: In the first ten months of 2023, Foreign Direct Investment (FDI) into China decreased by 9.4% y/y to CNY987.01 billion as reported by the Ministry of Commerce. FDI in the service sector declined by 15.9% to CNY 672.10 billion, while in manufacturing, it increased by 1.9% to CNY 283.44 billion. Notably, high-tech manufacturing saw a 9.5% rise, with medical equipment and electronic communication equipment manufacturing growing significantly.

Malaysia: In the 3Q2023, Malaysia's GDP growth was confirmed at 3.3% y/y, surpassing market expectations and rebounding from the previous quarter. This growth was fuelled by increased private consumption (4.6%), notably in transport, food, and housing; and higher government spending (5.8%). However, fixed investment slightly slowed (5.1%), and net trade contributed negatively due to a faster decline in exports (12.0%) and imports (11.1%). On the production side, construction (7.2%) and services (5.0%) recorded growth, while the agriculture sector rebounded (0.8%). On a seasonally adjusted quarterly basis, the economy expanded by 2.6%.

Fixed Income

Global bonds: UST market closed mixed last Friday but maintaining its rally for the week. Friday's losses were found on shorter tenors up to 5Y maturities where yields rose 3-5bps but still closed 15-21bps lower w/w. Strong US housing starts pressured yields higher on Friday, as well as the rebound in crude oil prices off their lowest since July. FOMC voter and Fed governor Barr said rates are at or near peak. Elsewhere, Bunds and Gilts closed little changed from the previous day. Eurozone CPI for October was +2.9% y/y, down from 4.3% y/y the month before. UK retail sales fell 2.7% y/y in October vs the smaller 1.3% decline in September.

MYR Government Bonds: Malaysia's government bonds closed in a narrow range for a second day with flows on benchmark papers relatively thin. Though the whole of past week's movement remained mixed, the gains recorded in the past month where yields are down 10-20bps remained mostly intact. There was little reaction to the final reading of the 3Q2023 GDP at 3.3% y/y.

MYR Corporate Bonds: Ringgit corporate bonds closed slightly firmer. However, reflecting better risk appetite, the traded volume of PDS papers including NR surged to MYR1.28 billion from MYR812 million the day before, but this was due to debut of MYR600 million AAA 11/28 Cagamas at 4.27%. Meanwhile, there was heavy trading on 10/38 LPPSA (GG) at 4.19% and 05/25 Danum (AAA) at 3.82%.

Forex

United States: Softer demand towards dollar sent the DXY index 0.4% lower to close Friday at below 104-level. The subdued performance can be attributed to the lingering sentiment from the lower CPI data earlier during the week. In addition, Fed speeches on Friday pointed towards the US Fed is nearing its rate hike cycle peak though Boston Fed President Susan Collins said it is too soon to declare victory over high inflation.

Europe: As the dollar fell, the common currency Euro rose 0.6%, benefitting from the bet that the US Fed has already done enough in fighting inflation, taking cue from the recent inflation data. In addition, speeches from ECB hawks seemed to support the currency, staying above the 200-day Moving Average line of 1.0806. Bundesbank President Joachim Nagel said that policymakers must not loosen policy until they are absolutely certain of inflation sustainably going down. Austria’s Robert Holzmann also argued that a cut in 2Q2024, as per what market participants are currently pricing in, is too soon. The British pound also posted gains against the dollar but these were limited due to the unexpectedly large decline in retail sales.

Asia-Pacific: The CNY firmed 0.4% to settle at 7.214. On Friday, the PBoC set the yuan fixing at 7.1728 per dollar, compared to average estimates in Bloomberg survey of 7.2500. China President Xi Jinping delivered speech at a CEO forum held in California, vowing to make it easier for foreigners to do business in his country by creating “world-class business environment and improve mechanisms for protecting the rights of international investors. At the same time, the JPY strengthened 0.7% to 149.63. BoJ Governor Kazuo Ueda said that Japan’s economy is recovering moderately and will continue to be so moving forward; thus the central bank will patiently maintain the easy policy.

Malaysia: As the USD continued to trend down, ringgit firmed moderately on Friday by 0.1% to settle at 4.681 and traded within the range of 4.677 and 4.686. Malaysia’s GDP grew by 3.3% y/y in 3Q2023 which confirms the advanced reading released last month of same quantum. It also confirms the healthier growth vis-à-vis 2Q2023 growth of 2.9% y/y and beating market median forecast of 3.2% (forecast range: 1.7% - 3.5%) provided by 14 economists surveyed by Bloomberg.

Other Markets

Gold : Gold price was held at USD1,981/oz as the market was betting that the US Fed is already done with its rate hike.

Crude oil: Oil prices surged with both Brent and WTI gained 4.1%, as supply concerns were sparked after the US imposed sanctions on maritime companies and vessels for shipping Russian oil which are sold above the G7 price cap.

FBM KLCI: The local bourse’s KLCI fell 0.3% amidst mixed regional stock index performances. Foreign investors were the net sellers with MYR58.2 million ouflow.

US Equities: Wall Street closed slightly higher with Dow Jones gained 0.01%, S&P500 rose 0.1% and Dow Jones rose 0.1%.

Source: AmInvest Research - 20 Nov 2023