Macro News

Japan : The BOJ kept its short-term rate at -0.1% and the target for the 10-year JGB yield at 0% with an upper bound of 1.0%. BoJ Governor Ueda said he sees positive developments in the wage-price cycle. He then added that the BOJ would consider ending its current easy policy, including the negative rates policy, though he did not mention a timeframe. He added that there would be little “discontinuity” in its policy, which could mean that short- and long-term yields will be restrained even after the central bank ends its yield curve control (YCC) and negative rates policy.

Singapore: Singapore’s CPI inflation rose to 3.7% y/y in December, up from 3.6% y/y in November. The December CPI was above the consensus of 3.5%, and the uptick alongside ongoing upside risks to the price outlook could mean that the Monetary Authority of Singapore will maintain its tight policy stance at its next policy meeting scheduled for 29 January. According to Bloomberg, elevated inflation suggests MAS will continue to be wary of rising import costs.

China: Bloomberg reported that Chinese authorities are considering measures to stabilise its stock market by seeking to mobilise funds of about CNY2 trillion (USD278.5 billion), mainly from offshore accounts of state-owned enterprises. This measure will reportedly be part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link. Reuters then reported that the planned stimulus came after a cabinet chaired by Premier Li Qiang on Monday. The meeting concluded that the government would step up fund injection in the capital market to strengthen stability and development.

Fixed Income

Global bonds: There was a cautious retreat in the US Treasuries market overnight amid a lack of fresh drivers. On the other hand, China announcing a possible fresh stimulus of about USD280 billion and BoJ not adjusting its YCC policy negatively affected overall sentiment in bond trading.

MYR Government Bonds: The local government bond market was losing steam following BoJ holding both interest rates and its YCC policy unchanged. Besides, the policy statement from BoJ didn't offer any hint on the timing of exit from negative rates, thus sending a bearish signal to Japan's bond market. Trading was mixed with bull flatteners still underway but pared with some caution before the MPC meeting. We saw continued support at the long end of the curve while some profit took place at the front and belly of the curve.

MYR Corporate Bonds:We saw modest trading interest in the corporate bond market yesterday, though there were more net papers with gains than losses. Amongst the more heavily traded were AAA Cagamas; 12/27 Cagamas was dealt 3 bps lower to 3.79%, while 08/28 Cagamas was unchanged at 3.83%.

Forex

United States:The dollar rose 0.3% to 103.62, alongside the climb on certain tenors of UST yields. On the data front, the market shrugged off the downside surprise in the Richmond Fed Manufacturing Index, suggesting its focus is turned towards the Fed may not cut interest rates aggressively as initially thought.Europe:The EUR shed 0.3% after the Eurozone’s consumer sentiment fell to -16 during January 2024, much worse than the market forecast of -14.3, which points towards a gloomy economic outlook. The British pound was also on the downside, falling 0.2% for the day.Asia-Pacific:The JPY whipsawed following the BoJ’s decision. It firmed by as much as 0.8% right after the policy meeting but later gave up the gains to end the day weaker by 0.2% at 148.35. The BoJ maintained its policy rate and YCC parameters but also signalled that the central bank could raise interest rates in the future. However, the details on the specific timing of when that could happen remain unclear. In China, the yuan gained against the stronger dollar after the stimulus to support China’s stock market rout was announced. The CNY rose 0.3% to 7.172.Malaysia:Ahead of the BNM MPC meeting decision, the ringgit strengthened slightly by 0.1%. Throughout the day, it reached an intraday low of 4.740 before recovering some grounds to finish at 4.728. On the OPR outlook, we believe the interest will be flat at 3.00% throughout 2024. We argue as such based on these premises: 1) inflation pressure in Malaysia remains tepid compared to other major economies, with the latest reading being low at 1.5% y/y in December 2023, and 2) the current interest rate level continues to be accommodative as Malaysia’s latest growth print coming in lower-thanexpected amid external headwinds.

Other Markets

Gold: Gold prices rose 0.4% to USD2,029/oz, erasing the prior session’s losses despite the rise in dollar and yields.Crude oil: Oil prices edged lower slightly as market players weigh rebounding crude oil supplies in the US after being shut down due to extreme cold weather against the ongoing geopolitical uncertainty. Both Brent and WTI fell 0.6% on the day.FBM KLCI:The FBM KLCI rose 0.3% to 1,496. Meanwhile, foreign investors sold a net of MYR66.6 million Malaysian shares.

Source: AmInvest Research - 24 Jan 2024