Snapshot Summary

Global FX: The dollar continued its bullish run to multi-year highs

Global Rates: UST yields eased from daily highs on suspected short covering

MYR Bonds: Local govvies weakened following strong US NFP data on Friday

USD/MYR: Ringgit declined in tandem with other regional currencies

Macro News

Malaysia: Malaysia's wholesale and retail trade growth reached 4.7% y/y in November 2024, totalling RM149.3 billion, making it the second-highest sales figure of the year. Retail sales increased by 5.8% y/y, down from the four-month high of 7.1% in October. Meanwhile, wholesale trade growth slightly decreased to 4.7% from 4.8% in October, and motor vehicle sales grew by 1.4% y/y, slowing from a 2.7% increase in the previous period.

China: China's exports surged by 10.7% y/y in December 2024, surpassing market forecasts of 7.3% and accelerating from a 6.7% rise in the previous month. This marked the ninth consecutive month of shipment growth and the highest value in three years, as some manufacturers expedited orders in anticipation of further tariffs, particularly from the US under the second administration of Donald Trump. Meanwhile, imports increased by 1% y/y, surpassing market forecasts of a 1.5% drop and reversing a 3.9% fall in November 2024, marking the first increase in purchases since September and the strongest pace since July.

Fixed Income

Global Bonds: US Treasuries continued to close weaker overnight, though yields backed down from daily highs on suspected short covering after reaching 14-month highs. Overall trading sentiment remained affected by last Friday's firm NFP number, with expectations that the Fed will wait several months before considering its next rate cut.

MYR Government Bonds: The Malaysian government bond market weakened, with yields up by 2-3 bps to follow the UST yield rise after the strong NFP data last Friday. The local bond movement noted the 10Y UST yield reaching 4.80% and the likelihood of testing 5.00%. However, this week's 15Y GII auction is expected to show firm demand due to a smaller MYR4.0 billion issuance.

MYR Corporate Bonds: The onshore corporate bond market was pressured yesterday as the local govvies segment showed weakness. Losses were led by papers such as AAA-rated Air Selangor 10/36 at 4.04% (+3 bps) and AA-flat SP Setia 04/32 at 4.09% (+9 bps). However, there continued to be realignment on Air Selangor, where its 08/34 paper shed 2 bps to close at 3.97%.

Forex

US: The dollar extended its rally to multi-year highs on Monday, lifted by robust US jobs data that dampened hopes for a Fed rate cut this year. The market is starting to consider there will only be one 25 bps rate cut by the Fed by the end of 2025.

Europe: The euro and sterling held steady, as the euro touched its lowest level against the dollar since November 2022 following ECB chief economist Lane's signal of further easing, while the latter had hit a 14-month trough. Heightened concerns over rising borrowing costs and the UK's fiscal health continued to weigh on the pound, which fell 1.8% last week.

Asia Pacific: The yen gained slightly as speculation grew that the BoJ could raise its inflation forecast this month, potentially opening the door for another rate hike. The yuan edged higher on Monday after Beijing relaxed offshore borrowing rules and issued warnings to defend the currency, driving the yuan to gain 0.2%. This also follows China's external trade data, which exceeded market expectations.

Malaysia: The ringgit slipped as a delayed reaction to the blowout of US non-farm payroll data last Friday, dismissing the better-than-expected domestic IP figures. Malaysia's November retail sales went up 5.8% y/y, which was released yesterday. At the same time, the fall in ringgit was in tandem with the decline in regional currencies and stock market indices, suggesting a retreat in the global market's risk appetite as traders pared back Fed rate cut expectations.

Other Markets

Gold: Gold fell off its one-month peak as the USD surged but failed to regain its ground as the DXY turned to daily losses. Last week's US labour data tempered the Fed's rate cut outlook, and gold dipped as much as 1% on the day.

Oil: Brent and WTI crude surged to a five-month high on Monday as fresh US sanctions targeting key Russian oil producers and their shadow fleet heightened concerns over tighter global supply. The prospect of the incoming Trump administration poised to tighten curbs on Iran's rising output; the market faces added upside pressure on prices.

Source: AmInvest Research - 14 Jan 2025