Snapshot Summary…

Global FX: Dollar was relatively muted as the US market was on holiday

Global Rates: The UST market was closed, but Bund yields sustained around their four-week high

MYR Bonds: Malaysia’s bond market began an expected cautious week on a weaker footing

USD/MYR: Ringgit weakened sharply amidst a wider trading range

Macro News

Malaysia: The S&P Global Malaysia Manufacturing PMI remained at 49.7 in August 2024 for the second consecutive month, marking its lowest level in three months. This figure reflects subdued trends in the manufacturing sector, with new orders declining and output falling for the third straight month. Employment decreased for the second month, and outstanding business fell at its fastest rate since April.

China: The Caixin China General Manufacturing PMI increased to 50.4, up from 49.8 in July and surpassing market expectations 50.0. This rise was driven by a rebound in new orders, leading to quicker production growth amid improved demand conditions. However, foreign demand experienced a slight decline for the first time this year, attributed to reports of worsening conditions.

Fixed Income

Global Bonds: The US market was on holiday on Monday. Over in the German bond market, yields were sustained near a four-week high. Though expectations are for the ECB to cut rates this month, preliminary data show Eurozone inflation fell to +2.2% in August, the lowest since July 2021. Meanwhile, core inflation fell to +2.8% after three months at a +2.9% pace. Besides, some political risks were rising in Germany when the ruling coalition lost two regional elections, losing to the far-right Alternative for Germany and the centre-right Christian Democratic Union parties.

MYR Government Bonds: Malaysia’s bond market began an expected cautious week on a weaker footing, to follow UST yields higher post-release of last Friday’s US PCE data and weak movement in the ringgit. MYR IRS rates also rose. There may be cautious trading in the bond market this week ahead of the MPC meeting, though expectations largely remain for BNM to hold the OPR this time around.

MYR Corporate Bonds: Flows were thin in the ringgit corporate bond market as we began the MPC week. We noted net buying interest in utilities and construction-related names. Notable trades include AA1 rated YTL Power 08/38, which shed 1 bp to 4.16% on MYR60 million volume, and AA3 Gamuda 11/29, which fell 7 bps to 3.90% on MYR30 million flows.

Forex

United States: The dollar was relatively muted due to the Labour Day holiday but remained close to its highest level in nearly two weeks as investors shifted their attention to an upcoming US jobs report set for release at the end of the week.

Europe: The EUR and GBP both took advantage of the muted dollar to start the week on greener grass. The gains in EUR were partly supported by an upward revision in the Eurozone Manufacturing PMI. In the UK, the data flow was rather quiet.

Asia Pacific: The yen marked the fourth straight day of a bearish trend as it weakened to 146.92, leading to losses among Asian and major currencies. In China, the yuan also fell on Monday by 0.4% as concerns about China’s structural problem heightened and underpins the need for further government intervention if the growth target wants to be kept in sight. Meanwhile, the AUD rose 0.4% on the day.

Malaysia: The USD/MYR rebounded 0.9% to close above the 4.35 level amidst a wide trading range of 4.318 – 4.359. An expectation for the BNM to maintain its OPR during this upcoming September meeting could bode well for the ringgit amidst the Fed's about to cut its FFR for the first time in the current cycle.

Other Markets

Gold: Prices fell slightly but were supported above weekly lows. Incoming Fed rate cut sustained gold prices after the 2% rise in August.

Crude oil: Brent closed lower by 1.6% d/d as concerns on China’s economic outlook counteract supply disruptions in Libya amidst political chaos. Libya’s state oil firm declared force majeure on a key field as the power struggle in the country heightened.

Source: AmInvest Research - 3 Sep 2024