Snapshot Summary…

Global FX: Firm US data aided the dollar on top of recent reining in of quicker-thanexpected Fed interest rate cuts.

Global Rates: The UST market mostly closed weaker, pressured by strong economic data

MYR Bonds: There was little movement in the local bond market ahead of today’s 5Y GII auction

USD/MYR: MYR extended its decline versus the USD

Macro News

Global: The International Energy Agency (IEA) said global oil markets are likely to remain “reasonably well-supplied” this year, as long as there are no major disruptions, and production outside OPEC+ climbs. The Paris-based IEA, which advises major economies, upped its forecasts for supply growth outside the cartel by 25% to 1.5 million barrels a day, on gains in the US, Canada, Brazil and Guyana. With world oil demand growth set to decelerate significantly, markets may face a supply surplus from next quarter through to the end of the year, it said.

Australia: The Australian employment rate fell in December after two months of strong growth, while the jobless rate stayed near an 18-month high. The Australian Bureau of Statistics on Thursday indicated that net employment fell 65k in December from a month prior when it surged by a revised 72.6k. Market expectations were for about a 17.6k increase.

Fixed Income

Global bonds: The UST market mostly closed weaker, pressured by strong economic data. These comprise housing starts in the US at a smaller than expected decrease in December by 4.3% m/m to a seasonally adjusted annual rate of 1.46 million units (consensus 1.42 million) while building permits increased by 1.9% m/m to a seasonally adjusted annual rate of 1.495 million (consensus 1.478 million). Meanwhile, initial jobless claims decreased to 187k in the week ended 13 January (consensus 206k) from 203k the prior week.

MYR Government Bonds: Overall, there was little movement in the local bond market despite the overnight release of US retail sale data beating market expectations. However, there was noted support for bonds along the belly of the curve. In addition, we have a tender of the 5Y GII today and the When-Issued (WI) level was last quoted around 3.63/3.60, which is relatively flat to the 5Y MGS.

MYR Corporate Bonds: Ringgit corporate bonds saw a mixed trading session yesterday, alongside a lack of interest in the govvies segment. Flows were led by higher grade names including 06/27 PASB (AAA) at 3.85% (+3 bps) on MYR60 million volume and 11/25 PASB (AAA) at 3.72% (-2 bps) on MYR40 million volume. Meanwhile, 10/28 Imtiaz II (AA2) was unchanged at 4.02% on MYR50 million volume.

Forex

United States: The Dollar was supported as the DXY index increased by another 0.1% to 103.54. Firm US data aided the dollar on top of recent reining in of quicker-thanexpected Fed interest rate cuts.

Europe: Even though the USD remained firm, there was also support for both EUR and GBP. Drivers for Europe’s currencies include European Central Bank policymaker Nagel saying that Germany’s growth outlook looks ‘better’ this year with further improvement expected in 2025. Earlier this week Nagel said it was too early to discuss interest rate cuts.

Asia-Pacific: The JPY weakened and saw a lack of support yesterday on the back of firm USD during the Asian session after the strong US retail sales data and hawkish remarks from Fed officials. JPY trading was also cautious before the release of the latest Japanese inflation numbers today. That data has come out today with core inflation at 2.3% y/y which is the slowest since June 2022. Meanwhile, CNY remained pressured amid net selling on the onshore stock market and despite firm CNY fixing by PBoC at 7.1174 versus the average estimate of 7.1961 in a Bloomberg survey. Aside, the AUD appreciated towards the 0.657 area, after intraday trading found support near 0.6525.

Malaysia: The MYR continued to be in line with regional currencies, as the USD/MYR pair was up by 0.5% to close at 4.717. On top of pressures from the firm USD, regional currency traders were left unimpressed by China’s release of its full-year 2023 GDP at 5.2%, which is slightly more than the official target of 5%.

Other Markets

Gold: Gold prices were steady overnight whilst the USD level was showing less upward impetus from the current 103.50 level.

Crude oil: Oil prices strengthened with Brent up 2.1% and WTI up 1.6%. The IEA revised its oil demand projection to 1.24 million bpd for 2024, up by 180k bpd. WTI was aided by inventories in the US declining by 2.49 million barrels last week.

FBM KLCI: The FBM KLCI fell yesterday alongside weakness in regional markets. The benchmark FBM KLCI fell 0.8% to close at 1,479.

Source: AmInvest Research - 19 Jan 2024