Snapshot Summary…

Global FX: Dollar rose further but the market may turn cautious ahead of the US inflation data release

Global Rates: US Treasuries posted gains aided by modest NY Fed inflation expectations

MYR Bonds: Sentiment remained affected by the higher UST yields

USD/MYR: The ringgit traded weaker against the firm US dollar

Macro News

Malaysia: The number of employed persons in December 2023 rose 0.2% or +26.6K persons to a total of 16.5 million persons (November 2023: 16.4 million persons. The number of unemployed persons in the same month decreased further to 567.8K persons. This translates into unemployment rate of 3.3%, the same as prior month’s reading.

China: Banks in China extended CNY4.92 trilllion new loans in January 2024, a record high since the record began in 2004, beating forecast of CNY4.5 trillion. This is amidst Chinese authorities are trying to prop up the economy and seasonal demand at the start of the year. In tandem, total social financing, a broad measure of credit and liquidity, rose to record high of CNY6.5 trillion.

Fixed Income

Global bonds: US Treasuries posted gains but lacked support from Asia being on extended holiday. However, the market received a boost when New York Fed’s Survey of Consumer Expectations showed no change in its year-ahead and five-year (2.5%) inflation expectations at 3.0% and 2.5%, respectively. The market now awaits the US January CPI where consensus expectation is for a rise of 2.9% y/y versus 3.4% y/y in the month before.

MYR Government Bonds: Last Friday, as was the day previously, the ringgit government bond market was traded mixed. Sentiment remained affected by the weaker US Treasuries market. After the previous week's rate decisions and rush of economic data, traders continue to await fresh market guidance, including incoming Fed officials' speeches and some US economic data including the January CPI, January Retail Sales. As for onshore, we await the final reading for Malaysia’s 4Q2023 GDP. Aside, last Friday we saw details for 20Y GII (GII 08/43) reopening. There will be MYR3.0 billion for the public tender and MYR2.0 billion private placement. Closing date is 15 February.

MYR Corporate Bonds: There was very light interest in Malaysia’s corporate bond market last Friday, ahead of the long Lunar New Year weekend, with most investors already away from their desks. Amongst the little that were traded, we noted pickup on some AA power bonds; 12/27 Malakoff Power (AA-) traded at 4.68% (-13 bps) and 08/32 YTL Power (AA1) at 3.97% (13 bps).

Forex

United States: The Dixie rose 0.1% on Monday amidst muted Asian session as most major Asian markets were closed due to holiday. This week the focus would turn towards US inflation and retail sales data which could prompt the DXY to trend upwards if both surprises to the upside.

Europe: The euro was down 0.1%, alongside with the rangebound pound, amidst the strong dollar. Over the weekend, ECB Governing Council Member Fabio Panetta said that the central bank will soon need to cut interest rates as the disinflation progress towards 2.0% continues to be rapid. Aside, there will be more data coming out from the UK including inflation and GDP number which could influence the sterling’s direction moving forward.

Asia-Pacific: The CNY was steady ahead of the Lunar New Year break even as the USD showed ongoing strength. Lack of interest with traders already away from their desk meant some consolidation for the CNY, but it was also aided by support from PBoC fixing the CNY at firm levels. The PBoC set the midpoint for the USD/CNY at 7.1036 per dollar, 27 pips firmer than the previous fix of 7.1063. Focus next turns to the PBoC's medium-term policy loan rollover on 18 February. A Reuters poll suggest the central bank will stand pat on the key policy rate.

Malaysia: Last Friday saw the ringgit traded weaker against the firm US dollar and completing a mixed weekly performance for the Malaysian currency. USD/MYR approached the 4.78 last week, when the MYR succumbed to the firm USD and repricing of a Fed cut towards later this year.

Other Markets

Gold: Gold prices fell from the previous day, down about 0.2%, amid a cautious mood ahead of the US CPI release.

Crude oil: Crude oil prices were mixed overnight, as sentiment was still cautious amid the geopolitical tensions. Talks in Beirut regarding the Gaza issue and Red Sea troubles continued to sway sentiment.

Source: AmInvest Research - 13 Feb 2024