Snapshot Summary…

Global FX: Dollar demand subdued following weaker economic data

Global Rates: Major bond markets rallied on Friday as the expectations for the US Fed to cut its rate are getting louder

MYR Bonds: Local bond market saw sideways movement due to profit-taking activities but pockets of net buying as well

USD/MYR: The ringgit firmed weakened slightly amidst mixed Asian currencies

Macro News

United States : The ISM Manufacturing PMI remained unchanged at 46.7 in November 2023, the same as in October, signalling continued contraction in the manufacturing sector. Production moved into contraction, and employment fell further, while the Supplier Deliveries Index indicated faster deliveries for the 14th straight month. New orders and inventories contracted at a slower pace, and prices fell less, indicating some price stability due to easing in energy markets, despite increases in the steel markets.

Euro Area : The HCOB Eurozone Manufacturing PMI was slightly revised higher to 44.2 in November 2023, up from October's 43.1, marking the highest level since May. Despite this improvement, it still indicated the seventeenth consecutive month of contraction in the manufacturing sector.

United Kingdom: In November 2023, the S&P Global/CIPS UK Manufacturing PMI was revised upward to 47.2 from the initial estimate of 46.7, marking the highest level since April. However, it still indicated the 16th consecutive month of contraction in the manufacturing sector. Output continued to decline due to weakened domestic demand, reduced new export business, and destocking activities.

Malaysia : The S&P Global Malaysia Manufacturing PMI increased to 47.9 in November 2023 from October's eight-month low. Despite marking the 15th consecutive month of factory activity decline, it was the softest contraction since April. Factors included a slower reduction in output and new orders. Employment neared stabilisation, backlogs of work fell softer, and purchasing activity and inventories showed milder declines.

Fixed Income

Global bonds: UST curve posted a rally with yields falling by 10 – 15 bps across the tenors, following weaker ISM Manufacturing data which prompted safe-haven demand and US Fed Chair Jerome Powell remarks which sounded less than hawkish. The market is now pricing in a rate cut to take place in March 2024 meeting, compared to previous pricing of rate cut by May 2024. Bund and Gilt markets also rallied in tandem with that of UST market.

MYR Government Bonds: Ringgit bonds traded sideways but remained fairly supported as profit-taking actions intersected with some net buying flows. MGS/GII yields ended the day little changed as market attention shifted to Powell’s remarks after-hours last Friday for insights into the future direction of US interest rates.

MYR Corporate Bonds: Trading volume in the PDS market saw lower volume on Friday, in tandem with smaller volume traded in sovereign space. We saw gainers outpacing losers as most yields closed lower by 1 - 24 bps. Among notable trades were MYR160 million on 12/38 PLUS done at 4.25%, MYR40 million on 07/24 Cagamas (AAA) done at 3.59%, and MYR20 million on 06/28 SP Setia (AA) done at 4.21%.

Forex

United States: The FX market took Fed Chief remarks dovish when he said that the risk of under- or over-tightening is now more balanced. Alongside ISM manufacturing numbers showing continued contractionary activity, the dollar depreciated 0.2% to settle the day at 103.27.

Europe: The euro fell despite the weaker dollar, as sentiment for a quicker dovish turn next year was also noted in the FX markets. Meanwhile, PMI data for the eurozone and for Germany, UK and France all ticked higher but remained in sub-50 zone. However, the GBP rose amid the weaker USD.

Asia-Pacific: China’s November Caixin Manufacturing PMI rose to 50.7 from 49.5 but this was in contrast to prior day release of the official manufacturing PMI declining to 49.4 from 49.5. CNY weakened, also as the PBoC set the midpoint rate at 7.1101 on Friday, weaker than the previous fix of 7.1018. In Japan, the final November Manufacturing PMI fell to 48.3 from 48.7. However, the JPY was steady coinciding with the weak USD.

Malaysia: The BNM governor said the current 3% OPR is slightly accommodative and appropriate for the economy, adding that policymakers will place domestic considerations, including inflation and growth in deciding on rates and will be less pressured by the need to attract inflows. The ringgit weakened 0.2% to close the day at 4.673.

Other Markets

Gold : Gold prices rose 1.8% to USD2,072/oz as the expectations for the US Fed to begin rate cut soon are getting higher.

Crude oil: Oil prices fell as the weak US manufacturing PMI data on Friday prompted recessionary concerns. Brent sank 4.8% while WTI dropped 2.5%.

FBM KLCI: The FBM KLCI climbed 0.3% to 1,456. Foreign investors were the net buyers of Malaysian stocks with RM111.5 million net inflow.

US Equities: As the market saw the US Fed Chair Jerome Powell’s speech as less than hawkish, US stock markets performed well. Dow Jones rose 0.8%, S&P500 climbed 0.6% and Nasdaq rose 0.6%.

Source: AmInvest Research - 4 Dec 2023