Snapshot Summary

Global FX: USD steady in thin volume during year-end trading

Global Rates: 10Y UST yield was supported below the 4.60% level

MYR Bonds: Lower UST yields in the past week and suspected year-end demand aided local government bonds

USD/MYR: MYR ended 2024 with a 2.7% gain for the year

Macro News

China: China reported its official manufacturing PMI index number at a lower 50.1 for the month of December against 50.3 in November and below consensus expectation of 50.2. Despite this, it marked the third consecutive month of expansion in factory activity, bolstered by a series of support measures from Beijing since late September. On the other hand, the non-manufacturing PMI number surged strongly to 52.2 from 50.0 the month before and beating consensus expectation of 50.2.

South Korea: South Korea's inflation rate climbed to 1.9% y/y in December, up from 1.5% in November, exceeding market expectations of 1.7%. This represented the highest inflation rate since August, driven by the most significant rise in food prices in five months (2.5% vs. November: 1.3%) and a rebound in transport prices (1.3% vs. November: -1.1%). However, inflation remained below the central bank's 2.0% target for the fourth consecutive month.

Fixed Income

Global Bonds: US Treasury yields rose slightly to end the year but was supported below the 4.60% level. After opening the day on weak footing, there was support for bonds after the US house price index rose by a smaller 0.4% in October vs. +0.7% the month before. We also suspect some month-end buying especially amid the attractive yield levels contributed to the late gains.

MYR Government Bonds: On the final trading day of 2024, the ringgit government bond market closed slightly firmer. On top of suspected year-end portfolio rebalancing, UST yields finding support below 4.60% also aided sentiment on local shores. As we moved into year 2025, we anticipate support for local govvies from fresh investment mandates amongst local institutional investors.

MYR Corporate Bonds: The corporate bond market was traded mixed to close out the year and we noted that this was due to some last-minute portfolio rebalancing as well, similar to the govvies segment. Gains include AAA rated Tenaga 11/41 which fell 1 bp to 4.09% and Tenaga 06/42 which fell 1 bps to 4.10%. Meanwhile, losses include AAA rated Air Selangor 10/33 which rose 1 bp to close at 4.01%.

Forex

US: Amidst thin volumes traded on Tuesday, the dollar closed out 2024 by climbing to a 2-year high. For the remaining two days of this week, we think traders will focus on the ISM PMI data, which may provide clearer picture of economic conditions during the last month of 2024.

Europe: EUR/USD dipped on Tuesday pressured by expectations of sharper ECB rate cuts than the Fed, while GBPUSD eased but remains the top-performing major against the dollar, down just 1.6% on yearly basis. Not much will be coming out of the region for the rest of this week.

Asia Pacific: The USD/CNY grinded higher and inching closer to key 7.30-level. This is despite good news seen in the latest official PMI number where the non-manufacturing PMI print surged to 52.2 in December from 50.0 in November and compared with market forecasts of 50.2. Meanwhile, the JPY slipped again, but remained within the new consolidation range of 156-158.

Malaysia: Ringgit dipped lower to 4.472 and ended the year with yearly gains of 2.7%. Today's Malaysia PMI data will be interesting to watch as the headline figure had already been hovering below 50 since June 2024.

Other Markets

Gold: Gold rose and posted a 21% annual gain driven by safe-haven demand amid geopolitical tensions, monetary easing, and central bank buying. Thin holiday trading keeping prices rangebound.

Oil: Crude oil was supported on the last day of 2024, aided by China's release of firm services PMI number.

Source: AmInvest Research - 2 Jan 2025