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Snapshot Summary…

Global FX: Dollar settled Friday lower after PMI data showed weaknesses in the manufacturing sector

Global Rates: UST, Bund and Gilt market closed last Friday on a weaker note

MYR Bonds: MGS market also closed weaker with yields climbing 1 - 2 bps

USD/MYR: Ringgit lost its ground further, almost approaching the 4.69-level despite the lower trending dollar

Macro News

United States: The S&P Global US Manufacturing PMI declined to 49.4 in November 2023 from 50 in October, marking the most significant contraction in operating conditions for manufacturing firms in three months. This restarts a period of contraction observed over much of the past year, with businesses reducing stocks of purchases and finished items amid supply chain improvements, subdued demand, and costcutting efforts. Purchasing activity also contracted, reflecting weak demand for inputs.

Japan: In September 2023, Japan's coincident economic indicators index, covering various data like factory output, employment, and retail sales, remained at 114.7, matching the preliminary reading and indicating the highest level since June. Despite growing pressure for salary hikes on companies, the Japanese central bank maintains a dovish stance, deviating from the global trend of monetary policy tightening by other central banks.

Malaysia: In October 2023, Malaysia's annual inflation rate unexpectedly decreased to 1.8%, the lowest since March 2021. This decline was attributed to the smallest increase in food prices in nearly two years (3.6% vs 3.9% in September). Additionally, costs eased for various categories, including alcoholic beverages, tobacco, household maintenance, and miscellaneous goods & services. However, prices rose for health, recreation & culture, education, and restaurants. Core consumer prices, excluding volatile items, increased by 2.5% y/y.

Fixed Income

Global bonds: UST market closed last Friday on a weaker note with yields up 4-6 bps across the curve. This resulted in a slightly weaker close on a weekly basis after mostly firm trading was seen earlier in the week before the Thanksgiving break. Also last Friday, there were slightly weaker close for Bunds and Gilts. Bank of England Chief Economist Pill cautioned that the central bank may not ease policy because inflation remains high. Aside, JGBs saw modest weakness as well. Japan's October CPI rose 0.9% m/m (September 0.3%), and up 3.3% y/y (expected 3.4%; last 3.0%). October Core CPI was up 2.9% y/y (expected 3.0%; September 2.8%).

MYR Government Bonds: MGS market is seen to be slightly on bearish trend after the 10Y UST level continues its upwards trajectory towards the 4.50% level. The short term MGS particularly 1 - 3 years maturity was seen to be up by 1 - 2 bps while long end remain well supported with players looking for yield pickup.

MYR Corporate Bonds: Mostly gainers were noted in the MYR PDS segment last Friday though there were some weaker traded papers as well. Gainers were on select AA names including SP Setia 06/26 and 04/29 at 4.18% and 4.29% respectively and bank papers HLFG and Maybank.

Forex

United States: The dollar edged down Friday on thin interest amidst the shorter trading week. Expectations of Fed not hiking anymore this year (and will start its next rate cutting cycle next year) remained main driver for USD weakness. On Friday, the flash November S&P Global US Manufacturing PMI fell to 49.4 from October's final reading of 50.0, prompting slowing growth concerns in the economy among investors.

Europe: Both the EUR and GBP gained over the weak USD. Friday saw mixed data for Germany. Its final 3Q2023 GDP contracted 0.1% q/q, as expected (last 0.0%), and declined 0.4% y/y (expected -0.3%; last 0.1%). The November Ifo Business Climate Index rose to 87.3 from 86.9 (expected 87.5).

Asia-Pacific: Last Friday saw gains for JPY and AUD, but CNY consolidated after its early week rally. Most Asia FX were steady against the USD but profit taking ahead coming week release of China manufacturing PMI data pressured CNY. JPY was supported after an upside surprise was seen on Japan’s CPI reading, supporting the case for the BoJ to exit the negative interest rate environment.

Malaysia: The ringgit closed weaker vs the dollar last Friday but remained supported below the 4.690 level. There was modest pressure on the Malaysian currency post release of the slowest y/y monthly CPI since March 2021. However, longer term, we don’t expect monetary policy to loosen via OPR cuts until 2025, which should support the MYR. We see support for MYR at 4.645 in the coming week.

Other Markets

Gold : Gold price climbed 0.4% to end Friday at above USD2,000/oz level benefitting from the slow growth concerns following lower PMI reading in the US.

Crude oil: WTI price was held at USD76 per barrel while Brent price fell 1.0% to USD81 per barrel as markets were concerned on the postponed OPEC+ meeting, prompting expectations that the group of producers may not cut supplies after all.

FBM KLCI: The FBM KLCI closed flat on Friday alongside weak regional markets. The index closed at 1,454, up 0.04%.

US Equities: The US stock market saw shortened trading hours on Friday but still eked out gains. The S&P 500 rose 0.1%, though the tech-heavy Nasdaq fell 0.1%, but the blue-chip Dow Jones index gained 0.3%.

Source: AmInvest Research - 27 Nov 2023