Snapshot Summary…

Global FX: Dollar started the week on firmer footing, pressuring other currencies

Global Rates: Global yields closed mixed ahead of key central bank meetings this week

MYR Bonds: Ringgit bond market started the week on a weaker note after last Friday’s US jobs data

USD/MYR: The ringgit weakened, tandem with the weaknesses in local bond market

Macro News

Japan : Japan's machine tool orders declined by 13.6% y/y in November 2023, marking an improvement from October's 20.6% contraction. Domestic demand shrank significantly by 28.5% compared to the same period last year, while foreign demand decreased by 6.0%. However, on a monthly basis, machine tool orders increased by 3.4%. Despite this improvement, orders dropped by 16.0% on a year-to-date basis.

China : China's vehicle sales experienced a robust 27.4% y/y surge in November 2023, reaching 2.97 million units. This marks the fourth consecutive month of growth, with energy vehicle sales particularly notable, soaring by 30%. Over the first 11 months of the year, new vehicle sales grew by 10.8%, outpacing the 3.3% rise during the same period in 2022. Energy vehicle sales, specifically, saw a remarkable increase of 36.7%.

Malaysia: Industrial production in Malaysia increased by 2.7% y/y in October 2022, a turnaround from the 0.5% decline in the previous month and surpassing market expectations. This growth was driven by a robust upturn in the mining sector, particularly in crude oil and condensate production, which recorded double-digit growth. Additionally, manufacturing production grew by 0.9%, supported by various sectors such as transport equipment, food, beverages, and tobacco. On a seasonally adjusted monthly basis, industrial activity expanded by 2.2%, marking the third consecutive month of gains.

Fixed Income

Global bonds: Treasuries closed within a narrow range from last week's closing levels where early weakness was pared as net selling stopped ahead of the US CPI release later this week and FOMC meeting. Support for Treasuries were also noted on the back of China reporting the largest deflation numbers in three years. On the flipside, Treasuries were pressured as the USD50 billion 3Y auction met with weaker demand at 2.42x BTC (vs 2.70x average past 12 auctions). Yet, the USD37 billion 10Y auction saw steady BTC of 2.53x (vs 2.47x average past 12 auctions).

MYR Government Bonds: Ringgit bond market started the week on a weaker note after last Friday’s US jobs data beat estimates. MGS/Gll yields shifted higher by 1- 4bps. Meanwhile, there was support from reports that Bank of Japan officials see little need to rush ending their negative interest rate regime in the upcoming meeting as they await for more evidence of wage growth that would support sustainable inflation.

MYR Corporate Bonds: Ringgit corporate bonds market was mixed yesterday, coinciding with the weaker govvies trading. Nevertheless, heavier traded papers was led by gains on selected names, including 10/38 SMJ (AAA) at 4.30%, down 5 bps, 12/29 BGSM (AA3) at 4.36%, down 4 bps, and 12/30 BGSM at 4.60%, also down 4 bps.

Forex

United States: The dollar index trimmed some of the early gains and closed the day 0.1% d/d higher at 104.10, riding on the lingering sentiments from strong labour market data last Friday. According to the New York Fed, US consumer inflation expectations for one-year ahead fell to 3.4% in November 2023, the lowest level since April 2021, down from 3.6% in the prior month and in tandem with other disinflation signs seen in the economy. Market players will be cautious ahead of inflation data tomorrow and the Fed meeting decision two days later.

Europe: Amidst a lack of fresh data guidance, the EUR and GBP were little changed, both closed at 1.077 and 1.256, respectively. Similarly, investors will focus on central bank’s decisions this week including the ECB and BoE.

Asia-Pacific: The USD/JPY pair sharply rebounded to 146.16 from the recent 200- simple moving average level reached a few sessions ago which is near the 142 handle. Data showed the business survey index for large manufacturers rose to 5.7% in 4Q2023 from 5.4% in the previous quarter as business conditions continued to pickup. The survey measures the balance of percentage of firms that expect the business environment to improve minus the percentage of firms that expect it to worsen. In China, CNY weakened again by 0.1% as market players worries over the Chinese economy deepened. Meanwhile, the PBoC set the yuan fixing reference at 7.1163 vs. 7.1668 as per a Bloomberg survey.

Malaysia: The ringgit fell 0.4% to close at near its intraday low of 4.684, as a reaction from the firmer dollar after the healthier US labour market data released last Friday. On the domestic front, Malaysia’s industrial production grew 2.7% in October, beating market expectations of 2.4% y/y and recovering negative growth of 0.5% in the September 2023.

Other Markets

Gold : Gold prices continue to fall for the second straight session by 1.1% to below USD2,000/oz level, ahead of US inflation data and Fed meeting.

Crude oil: Oil prices rose slightly with Brent climbed 0.3% and WTI rose marginally by 0.1% in a lukewarm session as market players were cautious ahead of key central bank meetings this week.

FBM KLCI: Local bourse closed higher by 0.3% to 1,446. Foreign investors sold a net MYR79.5 million flow of Malaysian shares on Monday.

US Equities: All of the three major stock indices closed higher, with the Dow Jones and S&P500 climbing 0.4% while tech heavyweight Nasdaq rose 0.2%.

Source: AmInvest Research - 12 Dec 2023