Snapshot Summary…

Global FX: The dollar index ended 2023 slightly on stronger note, pressuring other major currencies except JPY

Global Rates: The UST market saw mixed movements during the final day of 2023, with 10Y UST yield rose 3 bps to 3.88%

MYR Bonds: Ringgit bonds remained fairly supported with the yields inching higher only slightly

USD/MYR: The Malaysian currency firmed and closed Friday slightly below 4.60-level

Macro News

United Kingdom : The Nationwide House Price Index in the UK dropped by 1.8% y/y in December 2023, marking the 11th consecutive month of decline. Prices were almost 4.5% below the all-time high recorded in late summer 2022. On a monthly basis, prices remained unchanged. Housing activity continued to be subdued in 2023, and a rapid market recovery in 2024 appears unlikely due to weak consumer confidence and subdued buyer interest.

China : China's official NBS Manufacturing PMI unexpectedly fell to 49.0 in December 2023 from the previous month's 49.4, marking the third consecutive month of contraction and the steepest pace in six months. The decline was attributed to challenges in the property market, deflationary risks, and global headwinds. New orders and foreign sales both contracted, while buying activity and employment saw notable declines. Output growth reached a five-month low, and input cost inflation increased, while output prices continued to fall.

Malaysia : The Central Database Hub (Padu), will aid the Malaysian government in accurately identifying recipients eligible for targeted subsidies. Domestic Trade and Cost of Living Minister highlighted that Padu allows for more specific criteria, such as the number of dependents, to determine subsidy recipients, ensuring a more precise distribution. This system aims to prevent misappropriation and ensure that the RM81 billion allocated for government subsidies is fairly distributed to those in genuine need.

Fixed Income

Global bonds: The UST market saw mixed movements during the final day of 2023, with 10Y UST yield rose 3 bps to 3.88%, not that far away from when it ended 2022 at 3.87% after a much volatile year which saw 10Y UST yield touched 5.0%, a level we have not seen since 2007. It retreated recently, however, as market participants expect the Fed to start cutting interest rate in 2024. According to the CME FedWatch tool, the market is already looking for a rate cut as early as March meeting with 73.5% probability. Meanwhile, yields on Bund shifted higher by 2 – 8 bps.

MYR Government Bonds: In the local bond market, trading activities picked up slightly and dominated by some profit taking activities ahead of the long weekend. However, Ringgit bonds remained fairly supported with the yields inching higher only slightly.

MYR Corporate Bonds: Gainers outpaced losers in the PDS market amidst subdued traded volume. Yields mostly shifted lower by 1 – 39 bps. Among notable trades were MYR60 million on 04/26 Sabah Development Bank (AA1) and MYR10 million on 01/36 PLUS (AAA).

Forex

United States: The DXY closed 2023 at 101.33, up 0.1% d/d but 2.1% down on yearto-year basis as investors priced in interest rate cut expectations by the Fed amid signs that US inflation is already cooling and soft patches in the economy have become apparent. Investors now will focus on key labour market and PMI data this week to kickstart the year 2024.

Europe: Currencies performance in the region were on back footing as the EUR fell 0.2% d/d and the GBP dipped slightly by 0.02% d/d. But on yearly changes, the former was up 3.1% while the latter chalked up around 5.4% gains throughout the year. Investors are anticipating that both the ECB and the BoE to hold its interest rate steady for longer period of time compared to their US counterpart, thus explaining the currencies’ performance.

Asia-Pacific: The JPY firmed 0.3% to 141.04 and continues to trade on strengthening bias, up from the low of 151.7 in early November, as the noises relating to the BoJ exiting its negative interest rate policy are getting louder. Though it posted the third consecutive yearly decline in 2023. On another note, an earthquake struck central Japan on Monday, prompting cautious mode recently. In China, the CNY closed at seven months high 7.100 on Friday as interest rate cut expectations by the US Fed benefitted other major and emerging market currencies. However, it set second straight year of falling as China’s economic prospect remained dim. Over the weekend, official manufacturing PMI fell short from market expectations at 49.0 vs. cons. 49.5, underpinning still shaky condition in the economy.

Malaysia: The ringgit firmed 0.3% during the last trading day of 2023, to close below 4.60-level at 4.594, the highest level since last August. It traded within the range of 4.578 and 4.615. While we think further upside for the ringgit remains, cautious trading for the currency is still possible ahead of few US economic data this week.

Other Markets

Gold : Gold prices fell 0.1% to USD2,063/oz and posted a large gain of 13.1% for 2023.

Crude oil: Crude oil prices slipped as Brent shed 1.7% while WTI fell slightly by 0.2% as demand concerns and scepticism on OPEC+ committing its pledge on supply cuts remain.

FBM KLCI: The FBM KLCI fell by 0.2% to 1,455 as investors remained cautious. Foreign investors were the net sellers of Malaysian shares with MYR57.5 million outflow.

US Equities: US equities fell during the last day of 2023. Dow Jones dipped 0.1%, S&P500 fell 0.3% and Nasdaq shed 0.6%.

Source: AmInvest Research - 2 Jan 2024