Snapshot Summary…

Global FX: The dollar index fell on the back of lessened safe-haven demand

Global Rates: It was a mixed showing overnight amid the slight downward revision in the 3Q2023 GDP as players still await the US Core PCE data release

MYR Bonds: Ringgit bonds were traded sideways amid a lack of fresh drivers

USD/MYR: The Malaysian currency, along with most regional currencies, continued to take advantage of the weak USD

Macro News

United States: The US economy expanded at an annualized rate of 4.9% in the 3Q2023, slightly below the second estimate but matching the advanced estimates. Consumer spending rose less than expected (3.1%), and private inventories contributed 1.27 percentage points to growth. Non-residential investment was revised higher to a 1.4% rise, while residential investment saw its first increase in almost two years (6.7%). Government spending also rose to 5.8%.

United Kingdom: The UK faced a higher-than-expected budget deficit of GBP14.3 billion in November. The country's borrowing for the first eight months of the financial year reached GBP116.4 billion, indicating a GBP24.4 billion increase compared to the same period the previous year. This elevated deficit raises concerns about the UK government's ability to implement pre-election tax cuts.

Indonesia: Bank Indonesia (BI), maintained its main policy rates, including the sevenday reverse repurchase rate at 6.00%, signalling potential room for monetary easing in the second half of 2024. The decision comes amid faster-than-expected cooling of inflation, but economic growth has weakened due to declining exports, influenced by falling commodity prices and sluggish global trade.

Malaysia: Malaysia will maintain the export tax for crude palm oil at 8% in January and has raised the reference price to RM3,679.50 per metric tonne, up from RM3,589.09 in December. The export tax structure starts at 3% for crude palm oil in the RM2,250 to RM2,400-per-tonne range and reaches a maximum of 8% when prices exceed RM3,450 a tonne. Malaysia is the world's second-largest palm oil exporter.

Fixed Income

Global bonds: It was a mixed showing in the Treasuries market overnight amid the release of the slight downward revision in the 3Q2023 GDP as players still await the US Core PCE data release. There were gains in long bonds but shorter dated 2Y UST rose 2 bps while the 10Y rose 4 bps overnight. In addition to the PCE inflation data, the market will also face other data today such as the University of Michigan Consumer Confidence Survey, Durable Goods Orders, and New Home Sales.

MYR Government Bonds: Ringgit bonds were traded sideways and yields saw minimal movements, amid a lack of fresh drivers and trading volume remained subdued. Some profit taking was noted as we approach the year-end but market was fairly supported given the recent rally in the global bond space. Investors await the release of Malaysia’s November CPI with economists expecting a continued decline in inflation.

MYR Corporate Bonds: Corporate bond yields continued to mostly fall in keen trading interest. Gains were seen on AAA, AA and also single-A segments. These include 08/30 Sarawak Hidro (AAA) at 3.94% (-13 bps), 03/30 YTL Power (AA1) which closed at 4.06% (-14 bps), 10/33 Bank Islam (A1) at 4.34% (-16 bps).

Forex

United States: The dollar index continued to fall on the back of lessened safe-haven demand as US equities market rebounded from the previous day’s loss and news of the slight downward final 3Q2023 reading, as traders await the US PCE data. However, as for the GDP data release, traders were cautious seeing the consumer spending level was revised downward to 3.1% from 3.6% in the previous estimate.

Europe: As the USD fell further, to below the 102 level, the EUR and GBP both appreciated. The EUR rose 0.6% while the GBP was better performing at +1.1%. ECB policymaker de Guindos saying that it is premature to be talking about rate cuts aided the EUR.

Asia-Pacific: CNY pared gains on news that the US may raise tariffs on China's goods. Most of other regional currencies performed better than the CNY despite gains seen in China's government bonds yesterday on reports that large banks are contemplating cuts on deposit rates (pursuant lower savings and costs for banks are perceived as positive for the economy). Meanwhile, JPY appreciated versus a weak USD yesterday as UST yields continued near weekly lows. Aside, AUD was aided by weak USD and amid noted rise in iron ore prices.

Malaysia: MYR strengthened further against the USD yesterday with the USD/MYR down by 0.1%, seen at 4.655. The Malaysian currency, along with most regional currencies, continued to take advantage of the weak USD, but there may be some cautious trading vis-à-vis the USD today ahead of the US PCE data release.

Other Markets

Gold: Gold prices rallied amid the weak USD. As the DXY index fell 0.6%, gold rose 0.7%.

Crude oil: Crude oil prices slipped overnight, backtracking from recent gains. There was also some pressure upon news Angola saying it will exit OPEC.

FBM KLCI: The FBM KLCI fell by 0.6% on continued downward rebound after its recent a week-long rally.

US Equities: US equities rose overnight. Slight revision to the US 3Q2023 GDP did not deter sentiment while gains were buoyed by rallies in tech stocks.

Source: AmInvest Research - 22 Dec 2023