Macro News

Malaysia : Malaysia’s headline inflation rate remained at 1.5% y/y in December 2023, the same as November’s figure and generally in line with market’s expectations. The increase in the price index was led by the Restaurant & Hotels category (3.7% y/y), Food & Non-Alcoholic Beverages (2.3%), and Housing, Water, Electricity, Gas & Other Fuels (1.6%). Meanwhile, the Communication category decreased by 3.7% y/y, the same pace as in November 2023. Excluding volatile prices of items for fresh foods as well as administered prices of goods by the government, core inflation growth was slower at 1.9% y/y compared to 2.0% in the prior month.

Fixed Income

Global bonds: There was a lack of fresh market drivers yesterday although the US Treasuries market began this week on a steady note, which we think owed to bargainhunting interest after the past week's weakness. By the close, the 2Y UST edged 1 bp higher to 4.39% but the 10Y UST shed 2 bps to 4.11%. There was only one print of macro data of note to influence trading sentiment; the Conference Board Leading Economic Index fell 0.1% in December 2023 which is higher than the consensus of - 0.3% and the prior month's -0.5%.

MYR Government Bonds: Ringgit government bonds were supported as sentiment was cautiously upbeat on this week’s OPR decision. Market generally expects the policy rate to remain unchanged following Malaysia's CPI released yesterday which was flat against the previous month's reading. Meanwhile, a bull flattening stance seems underway with buying interests heard at the far end of the yield curve.

MYR Corporate Bonds: Relatively light trading flows were seen in the ringgit corporate bond space yesterday, but it was still dominated by net buying activity. Flows were led by higher-rated papers. The more notable trades include 04/27 MAHB (AAA) at 3.81% (-34 bps) and long tenor 10/48 Air Selangor (AAA) unchanged at 4.51%.

Forex

United States: Amidst muted data day, the price action on the DXY index was muted. Investors braced for a heavy global central bank week prior to the US Fed meeting day next week starting from 30thJanuary 2024. The index rose slightly by 0.04% to close Monday at 103.33.

Europe:The EUR and GBP movements were muted as well as both closed the day at 1.088 and 1.271, respectively. This week, the focus will be on the ECB’s meeting decision on where the rates are expected to be maintained but investors will be on the lookout for any hint of a possible rate cut timeline amidst slowing growth. Meanwhile, the UK’s Flash Composite PMI is also crucial for investors to get a clearer picture of the UK’s economic prospects after last week’s retail sales unexpectedly contracted at a much faster pace.Asia-Pacific:Ahead of the BoJ’s monetary policy decision, the USD/JPY pared its losses after it dropped to its session low of 147.62. While the market is still looking at BoJ’s continuous persistence in keeping the interest rate unchanged for now, the recent currency weakness renewed speculations on BoJ’s intervention. In China, the yuan offshore firmed slightly by 0.1% to 7.191. This is after the PBoC maintained its loan prime rate for one-year and five-year both unchanged at 3.45% and 4.20%, respectively.Malaysia:The ringgit depreciated 0.3% to start the week on weaker footing, and closed Monday at 4.731, its weakest level since early November last year. The currency lost ground further after Malaysia’s inflation rate for December showed the same reading as the prior month at 1.5% y/y. It is the lowest level since February 2021.

Other Markets

Gold: Gold prices fell 0.4% to USD2,022/oz amidst risk-taking mode which prompted performance in stocks.Crude oil: Oil prices soared with Brent surging 1.9% to USD80 per barrel while WTI gaining 2.4% to USD75 per barrel. Concerns about global energy supplies were sparked following Ukraine’s drone strike on Russia’s Novatek fuel terminal.FBM KLCI:The FBM KLCI rose 0.3% to 1,491. Foreign investors bought a net of MYR127.8 million Malaysian shares.

Source: AmInvest Research - 23 Jan 2024