Snapshot Summary…

Global FX: Dollar fell on Monday on risk-seeking appetite in global markets

Global Rates: Bonds closed weaker after last week’s rally

MYR Bonds: The local government bond market closed little changed last Friday ahead of long weekend holiday

USD/MYR: The ringgit closed at 4.721 on Friday on dollar demand sentiment

Macro News

China: China’s unemployment rate was flat at 5.0% in May 2024 and was unchanged for two consecutive months, signalling an ongoing labour market recovery. On another note, retail sales grew 3.7% y/y, beating the market forecast of 3.0% y/y. On a monthly basis, the reading rose 0.51% m/m, the fastest pace since October 2023, which may indicate a further recovery in consumer sentiment.

United States: US export prices declined 0.6% m/m in May 2024 as lower prices for non-agricultural exports outweighed agricultural prices. Additionally, import prices decreased by 0.4% m/m, lower than market expectations of a 0.1% increase. The sluggish global energy market negatively impacted fuel import prices by 2.0%, while prices for non-fuel imports declined by 0.3%.

Fixed Income

Global bonds: US Treasuries ended with losses on Monday. Drivers for the move include the release of a better-than-expected Empire State Manufacturing index at -6.0 in June against the consensus of -13.0. Treasuries were also pushed back due to the release of mixed industrial and retail sales figures in China, as well as comments from Bank of Japan Governor Ueda, saying next month there could be the announcement of a significant reduction to the central bank's asset purchase program. Last Friday, the UST market strengthened slightly and completed the week’s rally, driven by safe-haven demand due to ongoing political risks in Europe and following the weaker-than-expected June University of Michigan Consumer Sentiment index.

MYR Government Bonds: Last Friday, the local government bond market closed little changed. There was support on the back of lower UST yields on the heels of last week’s encouraging US inflation data. However, the lack of strong support from onshore players as they wound down trading before the long weekend resulted in the rangebound close for the day.

MYR Corporate Bonds: Ringgit corporate bonds space saw heavy flows, but yields moved mixed last Friday ahead of the long weekend amid rangebound govvies trading. Meanwhile, notable trades on heavy flows include 08/37 BGSM (AA3), which re- emerged at 3.99% (unchanged) on MYR100 million flows. Also, 10/29 ALR (AAA) was dealt at 3.89 on MYR60 million volume. We noted mixed trading on Prasarana and Danainfra papers on the GG curve as their yield levels realigned.

Forex

United States: The dollar posted decent gains on Friday but later was pared during Monday's session as it closed at 105.32 or down 0.2% d/d. We suspect the lingering safe-haven demand sentiments from last week, prompted by the hawkish-sounded Fed meeting and updated FOMC projections, have died out, and risk-seeking appetite has recovered. This is taking a cue from the surge in tech heavyweight index Nasdaq and the climb in oil prices.

Europe: The euro took advantage and gained 0.3% against the dollar on Monday, while the GBP only rose by 0.1%. The market participants are cautious ahead of the BoE meeting and the UK’s inflation this week.

Asia-Pacific: The yuan was stable against softer USD and closed Monday at 7.256 after local economic data showed mixed developments. China’s retail sales grew faster in May at 3.7% y/y compared to April’s 2.3% y/y, but industrial productions expanded slower at 5.6% y/y, down from 6.7% y/y in the prior month. Meanwhile, the JPY weakened 0.2% after the BoJ decided last Friday to keep interest rates unchanged, and cuts on bond-buying activities will only be announced at the July meeting.

Malaysia: The ringgit dropped 0.2% last Friday to close the week at 4.721 on dollar demand sentiment post-FOMC meeting. The level was unchanged on Monday due to Raya Haji holiday.

Other Markets

Gold: Gold prices fell by 0.6% to USD2,319/oz as investors wait for more clues on the path of US Fed interest rates.

Crude oil: Brent rose 2.0% while WTI gained 2.4% after risk-on mode recovered in the markets.

Source: AmInvest Research - 18 Jun 2024