Snapshot Summary

Global FX: USD remained on strong footing

Global Rates: Bunds consolidate after recent weakness, ahead of ECB decision

MYR Bonds: Government bonds weakened, and IRS rates rose as markets expect a slower Fed

USD/MYR: In tandem with weakness in the yuan and other Asian currencies, the ringgit weakened as well

Macro News

Singapore: The Monetary Authority of Singapore maintained the slope, width and centre of its currency band yesterday. The decision comes with its statement saying that risks to inflation have become more 'balanced' and consistent with 'medium-term price stability'. A Bloomberg survey had expected MAS not to have altered its policy yesterday, though the decision may be in contrast with the rate cuts at most other central banks. An advanced reading from the Ministry of Trade and Industry (MTI) showed Singapore's growth was 4.1% y/y in 3Q2024, accelerating from a 2.9% gain in the previous quarter. The manufacturing sector led the solid growth (3Q2024: 7.5% vs. 2Q2024: -1.1%). For the rest of 2024, the country's sustained growth is anticipated amid ongoing upswing in the electronics and trade cycles and the easing in the global financial conditions. Therefore, the central bank expects Singapore's full-year GDP to come around the upper end of its 2%-3% range.

China: The country's exports slowed sharply in September when it grew by just 2.4% y/y (August: 8.7%) as global demand weakened, increasing worries over how to stimulate the growth of the world's second-largest economy. Meanwhile, imports rose 0.3% y/y, moderating from a gain of 0.5% in the previous month, reflecting slack demand partly due to a prolonged slump in the property market. Over the weekend, Finance Minister Lan Foan reiterated that the government is considering various ways to boost the economy, yet did not state the size of stimulus plans.

Fixed Income

Global Bonds: As the US was closed for Columbus Day, Bunds consolidated after their recent weakness and coming ahead of the ECB meeting this week when the expectation is for Europe's central bank to cut rates by 25 bps to 3.40% (Main Refi Rate). Meanwhile, Germany cut its 2024 GDP forecast to -0.2%, which would mean a second consecutive year of recession.

MYR Government Bonds: Government bonds weakened while IRS rates rose on Monday. The bond weakness was slanted towards medium to longer tenors amid the reopening of GII 11/34, generating a low BTC of 1.60x following last Friday's losses in global bonds.

MYR Corporate Bonds: Very little trading was recorded yesterday in the ringgit credit market. Amongst the few papers that were traded, notable trades involved AAA-rated Danga 01/30 at 3.82% (unch) and Danainfra 03/27 (GG) at 3.45% (+5 bps).

Forex

US: On Monday, the USD surged to a nine-week high amid light trading, continuing its recent bullish momentum driven by shifts in expectations for the Fed's rate policy. Minneapolis Fed President Neel Kashkari said 'further modest' rate cuts may be necessary in the coming quarters to meet the Fed's dual mandate of maintaining low unemployment and stable inflation. The dollar was also boosted by global concerns after China's stimulus plans announced over the weekend failed to boost confidence in the country's growth expectations.

Europe: The euro fell for the 11th time in 12 sessions as traders priced in a near-certain 25 bps rate cut at Thursday's ECB meeting, driven by signs of slowing activity. As Germany cut its 2024 growth outlook, Fitch downgraded France's outlook from "Stable" to "Negative," citing growing fiscal and political risks.

Asia Pacific: In Asia, trading was primarily influenced by Beijing's fiscal stimulus briefing, with China's offshore yuan down 0.3% against the dollar. Additional pressure on the yuan was slower growth in both imports and exports, which suggests the economy is still struggling to claw out of the structural problems it is currently facing. The JPY was traded thin as Japanese markets were shut for a bank holiday.

Malaysia: With weakness in the yuan and other Asian currencies, the ringgit weakened but remained within the consolidation range since last week. The next leg for the currency tilts towards the upside, as viewed from the macro side, the Fed is still expected to cut its rate, though the pace is up for debate. However, near-term risks, such as the US election, geopolitical tensions, and further paring down of the Fed's rate cut pricing could dampen the ringgit's strengthening path.

Other Markets

Gold: Gold was weighed down by gains in the USD. The metal gave up last week's gains after China's finance ministry fell short of announcing new stimulus measures in specific terms and while markets pared down their aggressive Fed rate cut pricing.

Oil: Oil fell 2% on Monday, driven by concerns over China's weakening economy following the disappointing trade data.

Source: AmInvest Research - 15 Oct 2024