Snapshot Summary…

Global FX: The dollar started 2024 on stronger footing amidst safe haven bid

Global Rates: UST yields shifted higher, rebounding from the recent low

MYR Bonds: Local bond market saw weaker movements to during the first year of 2024

USD/MYR: The ringgit traded weaker amidst risk aversion mood and bearish movement in regional currencies

Macro News

Euro Area : The HCOB Eurozone Manufacturing PMI for December increased slightly to 44.4, exceeding preliminary estimates of 44.2. However, the manufacturing sector remained in contraction for the seventh consecutive month, with continued output and job losses. Some sub-indices showed signs of improvement, such as an easing in the reductions of new orders and purchasing activity. Business confidence also reached an eight-month high. Despite this, companies continued to reduce stocks due to weak demand, while suppliers' delivery times improved, suggesting increased capacity. Firms lowered prices to boost sales, taking advantage of lower costs.

Australia : The Judo Bank Australia Manufacturing PMI for December 2023 was revised lower to 47.6 from the preliminary estimate of 47.8. This indicates the tenth consecutive month of deterioration in the manufacturing sector, and the quickest pace of decline since May 2020. Demand conditions, both domestically and internationally, continued to worsen, resulting in a sharper decline in output. Purchasing activity, input inventory holdings, and employment levels also decreased in line with the reduction in production. Despite sustained supply-side pressures leading to extended lead times and a slight increase in inflationary pressures, sentiment about the year ahead improved.

Malaysia : The S&P Global Malaysia Manufacturing PMI for December 2023 remained unchanged at 47.9, maintaining the same level as November's seven-month high, indicating the sixteenth consecutive month of decline in factory activity. New orders moderated, and new export orders fell for the eighth consecutive month, while output contracted for the seventeenth month in a row. Employment increased for the first time in eight months, though the pace of job creation was only fractional. Purchasing activity continued to be scaled back due to a muted outlook for new businesses. Lead times for the delivery of items lengthened the least in three months. Input cost inflation eased for the first time in three months, reaching the slowest pace since September. Consequently, output cost inflation moderated and remained stable for the past four months.

Fixed Income

Global bonds: The UST market closed weaker on the first day of 2024, consolidating some of the gains made ahead of the new year recently, with yields climbed higher by 4 – 8 bps across the benchmark tenors, after selloff was seen on European government bonds. Bunds yields rose around 4 – 5 bps while Gilt saw higher quantum of 7 – 10 bps movements.

MYR Government Bonds: The local bond market saw weaker note as optimism momentum which was seen ahead of the new year seen to have died down. We think that the movement on sovereign yields today may be vulnerable to the upside, taking hints from the higher global yields overnight.

MYR Corporate Bonds: Meanwhile, we saw most papers traded at positive note and most yields dropped 2 – 184 bps. Among notable trades were MYR100 million debut on 06/26 Cagamas done at 3.74%, MYR10 million on 12/24 UniTapah done at 3.72%, and MYR1 million on 03/27 done at 5.85%.

Forex

United States: Dollar demand resurfaced as yields surge despite lower revision of US manufacturing PMI, coupled with safe haven bid due to the escalation of geopolitical conflict recently in the Middle East. DXY index gained 0.9% to 102.20 and outperformed against most of other currencies.

Europe: Both the EUR and GBP fell 0.9% against the exceptional USD performance. On the data front, the manufacturing PMI for UK was revised lower to 46.2 (prelim.: 46.4) while Eurozone’s manufacturing PMI was revised slightly higher to 44.4 from 44.2.

Asia-Pacific: Amidst risk averse environment and higher USD, the CNY weakened 0.6% to start the year 2024 and closed at 7.143, above the 200-day moving average line at 7.140. The PBoC set the yuan fixing at 7.0770, much firmer compared to Bloomberg survey of 7.0962. Manufacturing PMI by Caixin showed that the headline reading improved to 50.8 in December from 50.7 in the prior month, contrasting with national manufacturing PMI which remained below the growth level of 50. In the meantime, the JPY also weakened by 0.8% to close at 141.99.

Malaysia: The ringgit weakened by 0.3% to settle at 4.606 and traded within the range of 4.589 and 4.607. This is after it closed last Friday at below 4.60-level and amidst hampered risk-taking mood and higher global yields.

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 - 3 Jan 2024