Snapshot Summary…

Global FX: Support for US stock markets in turn meant there was less liquidity demand for the dollar

Global Rates: Treasuries continue to be pressured even though there was a lack of fresh market drivers on Monday

MYR Bonds: The MGS market weakened by another 2 - 3 bps

USD/MYR: The ringgit closed lower against the dollar, which was supported by the stronger-than-expected US non-farm payrolls released last Friday

Macro News

Malaysia: The Department of Statistics Malaysia (DoSM) reported the country’s Industrial Production Index (IPI) grew by 3.1% y/y in February 2024 (January 4.3% y/y), supported by positive momentum in all sectors. The moderation was due to the slower growth in the manufacturing sector, which grew 1.2% compared with 3.7% in January 2024. The mining and electricity sectors rose 8.1% (January 2024: 5.0%) and 10.9% (January 2024: 8.3%) respectively. Domestic-oriented industries fell 7.5% vs an increase of 4.9% in January. Meanwhile, export-oriented industries returned to negative territory of -0.1% in February against +1.6% the previous month.

Germany: Germany reported that its February Industrial Production number rose by 2.1% m/m (consensus 0.6%; January 1.3%). Leading the monthly increase was a 7.9% rise in the construction sector, which could be due building projects benefiting from the milder weather.

Fixed Income

Global bonds: Treasuries continue to be pressured even though there was a lack of fresh market drivers on Monday. We figure sentiment is likely to remain guarded as we have US CPI and PPI due to be released later this week. In Europe, ahead of ECB meeting, though there’s expectations that policymakers will mention outlook for incoming rate cuts, the cautious sentiment permeated as well, to follow the generally weak UST.

MYR Government Bonds: The MGS market weakened by another 2 - 3 bps whilst the strong NFP last week continued to drive 10Y UST higher to 4.45%. The sell-off in local market was less severe as we sensed players were picking up papers on dips. Meanwhile, we think that there should be MGS support should the 10Y UST find resistance above 4.50%.

MYR Corporate Bonds: The weak global bond sentiment caught up with the ringgit credit market. However, we found total flows were lacking aa we head towards the midweek Eid holiday. Leading the flows include 10/30 Air Selangor (AAA) which rose 4 bps to a last dealt level of 4.94%. Meanwhile, 08/40 Tenaga (AAA) closed unchanged at 4.20%.

Forex

United States: Post the firm US jobs report we noted US stock markets were supported and that in turn meant there was less liquidity demand for the US dollar which subsequently fell on Monday. We saw the DXY was back down to near the 104.0 level.

Europe: The euro rose, aided by the lower USD and higher Bund yields, including after Germany’s industrial production rose more than forecast. However, there’s likely cautious sentiment for the euro later this week as markets focus on the ECB meeting.

Asia-Pacific: The PBoC continues to place firm CNY fixing which we think comes in the face of more CNY risks due to the sluggish China economic outlook and with that calls for easier monetary policy. Caution on CNY also comes ahead of China inflation data due this week. Meanwhile, the JPY remained pressured but was in held in range below the 152-mark. Pressure from recent firm US jobs numbers and risk that the Fed will delay its first rate cut played on the JPY. However, market talk that the BoJ may opt to lessen JPY depreciation via market intervention supported the JPY.

Malaysia: The ringgit closed lower against the dollar, which in turn was supported by the stronger-than-expected US non-farm payrolls released last Friday. Aside, news reports quoted Bank Negara Malaysia (BNM) saying that coordinated efforts by GLCs, GLICs, and Malaysian corporates especially exporters, via FX conversions, have strengthened the ringgit. BNM was quoted as saying that since 26 February, the ringgit was the sole regional currency that has strengthened against the US dollar, gaining 0.6%.

Other Markets

Gold: Gold prices strengthened further by 0.4% to USD2,339/oz, amid reports of central bank buying to shore up reserves.

Crude oil: Prices fell, tumbling 0.9% for the Brent, amid reported move towards a Middle East ceasefire.

Source: AmInvest Research - 9 Apr 2024