Snapshot Summary…

Global FX: The dollar strengthened and backed up further from its monthly low

Global Rates: Bunds and Gilts closed mixed, but the UST curve closed weaker across tenors after key US data

MYR Bonds: Local govvies traded in a tight range amidst a lack of catalyst

USD/MYR: The ringgit strengthened further yesterday to find itself closing at 4.311

Macro News

United States: The U.S. Bureau of Economic Analysis recently released the second estimate for the U.S. GDP in the second quarter of 2024, indicating a robust annual growth rate of 3.0% q/q. This figure represents an upward revision from the initial advance estimate of 2.8% q/q, primarily driven by stronger-than-expected consumer spending. The revised estimate underscores a significant improvement compared to the first quarter’s growth rate of 1.4% q/q, reflecting a resilient economy bolstered by increased consumer confidence and spending. The strong numbers suggest that the upcoming September rate cut is unlikely to be as deep as initially expected.

Japan: For August 2024, Japan’s consumer confidence index remained steady at 36.7, unchanged from the previous month. This level is below market expectations of 36.9 but represents the highest consumer morale since April. The index reflects mixed sentiments among households: while there was an improvement in willingness to buy durable goods (30.9 from 30.0) and overall livelihood (34.7 from 34.5), there was a decline in perceptions of income growth (39.7 from 40.4) and employment (41.4 from 42.0).

Malaysia: Tenaga Nasional reported its strongest quarterly net profit over five years. TNB reportedly benefitted from increased demand from industries and households. Net profit rose to MYR1.44 billion in the second quarter, ending 30 June 30, from MYR327.9 million in the previous quarter. Revenue rose 7.8% y/y to MYR14.37 billion. TNB is currently the sole electricity supplier in Malaysia.

Fixed Income

Global Bonds: During the European session, Bunds and Gilts both steepened, with gains mostly tilted towards the shorter end of both curves. Yield on 2Y Bund fell 3 bps while 2Y Gilts fell slightly, just by 0.2 bps. However, longer tenors saw losses on both curves, though they were still outperforming their UST counterparts as the latter was pressured by an upward revision on the 2Q2024 GDP and its price index. The UST 10Y yield rose by about 2.6 bps on the day while the 2Y yield climbed 2.9 bps, slightly widening the 10Y/2Y inversion to 3.2 bps.

MYR Government Bonds: Local govvies papers continued to trade within a narrow range as market players remained on the sidelines due to a lack of market catalysts. The tight trading range also can be a sign of caution ahead of the second US GDP 2nd Estimate after market hours last night and July’s PCE Price Index later tonight.

MYR Corporate Bonds: We noted slightly lighter trading volume in the corporate space at MYR750 million, but buying sentiment continues to permeate the space, especially on GG/AAA-rated papers. Among notable trades were MYR10 million on Westports Malaysia 04/26 (AAA) done at 3.654%, MYR10 million on Pengurusan Air Selangor 04/48 (AAA) done at 4.190%, and MYR10 million on Malaysia Cement 01/26 (AA3) done at 3.777%.

Forex

United States: The dollar index strengthened and backed up further from its monthly low, aided by an upward revision in the 2Q2024 US GDP, to 3.0% y/y from 2.8% y/y prior estimate. Reuters reported that economists had anticipated the reading to have stayed at 2.8%. Meanwhile, US jobless claims for the week ended 24 August fell by 2k to a seasonally adjusted 231k. The two data sets pared down expectations that the Fed was ready to cut by 50 bps at the next FOMC meeting.

Europe: The euro found support on Thursday but remained weaker for the week. The euro support was after levels again fell below 110, but the upside was limited amid Germany reporting weak inflation data. The pound fell post-release of steady US GDP data and low US weekly jobless claims data, which partly curtailed expectations of a 50 bps Fed rate cut. After the dovish Fed signals at Jackson Hole, the pound had rallied to above 1.320 this past week.

Asia Pacific: The yuan was firmer on Thursday despite the firm dollar. Reuters suggests that Chinese exporters have been hedging their positions since the recent yuan fall. There was also support for the yuan as traders await China’s PMI data, which is due for release on Saturday. Meanwhile, the Japanese yen fell amid the firmer dollar but found support near the 145 level. The Aussie dollar remained supported with sentiment sustained by the recent release of firm inflation data for July.

Malaysia: The ringgit strengthened further yesterday to find itself closing at 4.311. Despite profit-taking in the local equities market yesterday, we think the ringgit remained supported by capital market inflows. News reported that foreign investors were buyers of MYR647 million worth of Malaysian equities on Wednesday.

Other Markets

Gold: Commodities had a rosier session, with gold posted gains of 0.7% on the day but remains in a consolidation trend near its record high of USD2,531/oz level recently. This is despite the slight uptick in the UST yields across tenors.

Crude oil: Commodities strengthened with oil up by >1% overnight. Geopolitics dominated sentiment for crude oil. News of the suspension of Libya's oil exports particularly aided the price lift.

Source: AmInvest Research - 30 Aug 2024