Snapshot Summary…

Global FX: Dollar held steady ahead of Fed scheduled meeting

Global Rates: Global bond markets saw mixed performance as weaknesses were led by the lower Bund and followed by US Treasuries

MYR Bonds: The local bond market generally remained on sell-off risk yesterday

USD/MYR: The ringgit was lower versus the steadier dollar yesterday and was mixed against regional currencies

Macro News

Japan: Japan’s core machinery orders, a highly volatile data which excludes those for ships and electric power companies and regarded as a leading indicator of capital spending in the six to nine months ahead, dropped 1.7% m/m in January, swinging from 1.9% m/m gains in the prior month and worse than market expectations of 1.0% m/m drop. The drop was on the back of a weak manufacturing sector. On an annual basis, the same number fell 10.9% y/y, down from a 0.7% y/y decline in December 2023.

Malaysia: Malaysia’s total external trade for February 2024 grew 3.3% to MYR211.8 billion after imports showed an increase of 8.4% y/y to MYR100.5 billion but exports declined 0.8% to MYR111.3 billion. This also translates into a wider trade surplus at MYR10.9 billion compared to January’s reading of MYR10.2 billion. Singapore and China remained the main export destination with a contribution of 29.6% to Malaysia’s total exports.

Fixed Income

Global bonds: Global bond markets saw mixed performance as weaknesses were led by the lower Bund performance, marking its sixth day of slump. This was despite a dovish-tilted speech by ECB Governing Council member Mario Centeno, saying the euro-area recession could be avoided by cutting borrowing costs soon. Its yield curve shifted higher with the 10Y Bund yield rising 2 bps. It was then followed by the decline in US Treasuries as market players prepared for the US Fed policy meeting on Thursday night (Malaysia time). Fed Funds Futures are also pricing in lower probability for the first rate cut to happen in June 2024 from a 59.6% probability of a 25 bps cut to 50.7% as of writing, according to the CME FedWatch tool. The total 25 bps rate cut was also reduced for the whole of 2024 from four cuts to three cuts.

MYR Government Bonds: The local bond market generally remained on sell-off risk yesterday due to hawkish sentiments play in the US, but we still see strong support by the local players resisting the bond yield from moving any higher.

MYR Corporate Bonds: Trading flow in the PDS market was lower at MYR608 million at the start of the week amidst a sell-off in the sovereign space. Although, we continue to see buying interests persist and overwhelm the market. Among notable trades were MYR30 million on 10/30 PTPTN done at 3.79%, MYR50 million on 04/26 InfracapResources (AAA) done at 3.68% and MYR34 million on perpetual 11/17 HLFG (A1) done at 4.77%.

Forex

United States: The dollar held steady ahead of the Fed meeting this week. Data was supportive of the dollar. The NAHB Housing Market Index rose to 51 in March (consensus 49) from 48 in February.

Europe: The euro fell amid a firm dollar move overnight. The final inflation data came mostly in line with expectations. Eurozone's February CPI rose 0.6% m/m, as expected (January -0.4%), rising 2.6% y/y, as expected (January 2.8%). February Core CPI was up 0.7% m/m, as expected (January -0.9%), and rising 3.1% y/y, as expected (January 3.3%).

Asia-Pacific: CNY fell amid a cautious trading tone ahead of global central banks policy meetings this week, despite the release of encouraging China economic data. China reported February retail sales which grew 5.5% y/y (consensus 5.6%; last 7.4%), and February industrial production which rose 7.0% y/y (consensus 5.3%; last 6.8%). Also, February fixed asset investment increased 4.2% y/y (consensus 3.2%; last 3.0%) but the January unemployment rate rose to 5.3% from 5.1% (consensus 5.1%). The JPY was supported ahead of the BoJ policy meeting with some speculation the central bank is mulling a rate hike this year.

Malaysia: The ringgit was lower versus the steadier dollar yesterday and was mixed against regional currencies amid the cautious mood before FOMC this week. USD/MYR rose 0.2% to settle at 4.718. Data did not support the ringgit as exports of manufactured goods in February fell 2.4% y/y in February on lower exports of E&E products, petroleum products and chemicals and chemical products.

Other Markets

Gold: Gold remained supported whilst the dollar and US bond yields rose. Gold price increased 0.2% to settle at USD2,160 per oz.

Crude oil: Prices found support from the release of upbeat Chinese economic data and the ongoing Russia-Ukraine war potential escalation. Brent settled at USD86.9 per barrel, up 1.8%.

Source: AmInvest Research - 19 Mar 2024