Macro News

Indonesia : Bank Indonesia kept policy rates steady, indicating that the decision was consistent with efforts to stabilise the rupiah and ensure inflation remains within target this year. BI left unchanged its benchmark 7-day reverse repurchase rate at 6.00%, unchanged since October. Its target inflation is in the 1.5% to 3.5% range for 2024, below 2023's target of 2% to 4%. BI also maintained its growth forecast to pick up in 2024 to within a range of 4.7% to 5.5%, from 2023's forecast of 4.5% to 5.3%, on rising spending for a general election and as the current government rushes to finish infrastructure projects.

China : China's 4Q2023 GDP grew 5.2% vs 3Q2023 growth rate of 4.9%, while the fullyear 2023 GDP growth is at 5.2%, slightly more than the official target, but the recovery faces risks from deepening property crisis, deflationary risks and risks on demand.

Fixed Income

Global bonds: Continued weakness in US Treasuries was recorded overnight on signs players sustained reining in of quick Fed rate cuts. Piling on pressure on the UST was US total retail sales up 0.6% m/m in December versus the expectation of 0.4% and an unrevised 0.3% increase in November. Retail sales, excluding autos, rose 0.4% m/m versus +0.2% in November. However, the Federal Reserve's January Beige Book indicated that most Fed districts saw little change in economic activity since the previous report. The Fed reported that three districts reported modest growth while one reported a moderate decrease.

MYR Government Bonds: The local bond market continued to face net selling pressure as major central bankers resumed their pushback against market bets for interest rate cuts. We saw that the govvies were given across the curve. In addition, yesterday's UK inflation beat market expectations and contributed to the overall riskoff sentiment. The market was additionally cautious ahead of scheduled speeches from Fed officials, including New York Fed’s Williams, later this week and US retail sales data released after hours.

MYR Corporate Bonds: Another firm trading for ringgit corporate bonds despite weak performance in the government bonds segment. Several bank papers led the gains, where 04/25 Public Bank (AAA) shed 13 bps to 3.65%, and 01/31 Maybank (AA1) fell one bps to 3.88%.

Forex

United States: The Dollar remained supported as the DXY index increased by 0.1% to 103.45. Reining in quicker-than-expected Fed rate cuts lifted sentiment for the dollar alongside a continued rise in UST yields.

Europe: EUR rose despite the sustained US dollar rise, aided by the Eurozone's December CPI up 0.2% m/m, which met expectations versus -0.6% the month before. Eurozone’s CPI was also higher by 2.9% y/y, meeting the forecast and above +2.4% the prior month. The December core CPI was up 0.5% m/m (expected 0.4%; last - 0.6%) and +3.4% y/y, as expected (previous month +3.6%). However, the GBP fell though UK inflation beat expectations. UK CPI for December was up 0.4% m/m (expected 0.2%; previous -0.2%) and rising 4.0% y/y (expected 3.8%; previous 3.9%). December Core CPI was up 0.6% m/m (expected 0.4%; previous -0.3%),

Asia-Pacific: The yuan continued to weaken yesterday, pressured by the firm US dollar, despite the better GDP data release. China's 4Q2023 GDP grew at a stronger pace of 5.2% versus 4.9% in the previous quarter. Prior to the market's opening, the PBoC set the midpoint USD/CNY rate at 7.1168 or 34 pips, weaker than the previous fix at 7.1134.

Malaysia: In line with regional currencies, MYR extended its decline versus the USD yesterday as markets continued to reassess US Fed interest rate cut timing and quantum. USD/MYR was up 0.5% to close above 4.700 yesterday at 4.717.

Other Markets

Gold : Gold prices continued to see profit-taking pressures, though sentiment remained guarded amid the rise in the USD and bond yields.

Crude oil : Mixed performance in oil markets overnight amid speculation of global monetary policy direction. However, China's GDP release supported crude prices while OPEC reiterated its 2024 demand forecast, eyeing 2.2 million barrels per day more this year over 2023.

FBM KLCI: The FBM KLCI fell yesterday to follow the global performance. The benchmark FBM KLCI fell 0.2% to close at 1,491.21

Source: AmInvest Research - 18 Jan 2024