Global Forex Market

ALTHOUGH the US unemployment rate rose to 4.8% in January, 227,000 jobs were injected into the economy. Trade deficit narrowed to US$44.2bil in December from its last peak of US$45.7bil in November led by higher exports compared with imports. These factors had led to the dollar index to rise this week by 0.7%, closing at 100.62 on Thursday. Meanwhile, the president’s plan to announce a much-anticipated tax reform in the next few weeks caused the S&P 500 to rally by 0.5% with funds flowing into consumer staples, info tech, consumer discretionary, industrials, healthcare and utilities.

Euro depreciated against the dollar by 0.8% amid the stronger dollar and political uncertainty in Europe causing the Euro Stoxx 50 to climb by 0.2%. On Monday, Mario Draghi said that despite inflation in the eurozone remaining subdued, the ECB is prepared to increase the size and/or duration of its asset purchase program if necessary. 

The pound/dollar currency pair appreciated by +0.3% as the European Union (notification of withdrawal) bill was approved by the House of Commons without any alterations, allowing the formal Brexit process to begin. Despite the stronger pound, the FTSE 100 rose by 0.6%.

Japanese yen appreciated by 0.9% against the dollar as cautious sentiment over the looming political situation in Europe had increased the yen’s safe-haven appeal. During the week, foreign reserves had increased to US$1231.bil in January from US$1216.9bil in December, its highest level since October 2016.

All Asia ex-Japan currencies appreciated against US dollar except Singapore dollar. After two consecutive months of negative growth, Malaysia’s exports and imports rebounded in November, up +7.8%yoy and +11.2%yoy respectively. Imports improved across the board while agriculture also picked up though mining exhibited a mixed trend. Owing to stronger imports growth compared with exports, the overall trade surplus narrowed in November by RM0.8bil to RM9.0bil, while in the US dollar terms it was at US$2.1bil in November from US$2.3bil in October.

Indonesia’s economy grew at the slowest pace in 2016. GDP in 4Q2016 eased for the third consecutive month to +4.9%yoy, while on qoq basis the economy declined -1.8%. Slower growth was due to cooling of household consumption, which saw a steady 5% yoy growth for the second consecutive quarter while government spending fell for the second month by -4.0%yoy. Headline inflation in the Philippines accelerated further to its fastest pace in over two years with January’s reading at +2.7% yoy. Meanwhile, the core-inflation, which excludes the prices of food and energy, was unchanged at +2.5% yoy. The higher inflation was due to non-food inflation, supported by higher transportation fares driven by higher prices of petroleum products. On the flipside, Producer Price Index (PPI) continued to contract since October 2014 albeit at a smaller decline, down by -2.9% yoy.

UST Market

This week, buying flows were seen on the back of UST dropping on the back of chatters about less confidence on Trump’s policies which resulted in global yields easing slightly. On Friday’s 11am pricing, the 2-, 5- and 10-year UST traded at 1.19%, 1.88% and 2.41%.

Malaysian Bond Market

Trading activity improved post Chinese New Year celebrations this week, with the local market taking a break yesterday in conjunction with the Thaipusam festival.

Benchmark local govvies registered a much higher trading volume of RM12.5bil compared with preceding week’s trading volume of RM6.12bil. On Friday’s 11am pricing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at a respective 3.36%, 3.66%, 3.90%, 4.11%, 4.54%, 4.63% and 4.75%.

The secondary corporate bonds market also recorded significantly higher trading activities compared to last week. Week-to-date, total trading volume, almost 24 times higher stood at RM2.5bil compared with last week’s total of only RM105mil. About 60% of the trading volume was contributed by the GG/AAA, 39% by the AA segment and the remaining 1% by the A segment.

In the GG/AAA segment, notable trades included tranches of Cagamas 2017-2025 which recorded a trading volume of RM452mil, saw yields closing lower or remaining unchanged at 3.66% to 4.41%. Prasarana Malaysia tranches 2024-2029 recorded a trading volume of RM232mil where yields closed mixed between 4.15% and 4.93%. The toll road sector garnered some interest this week with Projek Lebuhraya Usahasama tranches of 2024-2029 where yields closed lower between 4.38% and 4.72% with a collective trading volume of RM175mil. Sarawak Hidro tranches 2023-2028 also garnered some interest with a trading volume of 160 million while yields closed at 4.38%-4.72%.

Elsewhere in the AA segment, trading was moderately high relative to previous weeks. Notable trades comprised largely from the banking sector this week with RHB Bank tranches 2017-2020 yields closing mixed at 4.19%-4.83%. The toll road sector also garnered some interest with Kesas tranches2018-2023 recording a trading volume of RM170mil with yields closing mixed at 4.24%-4.62%. Public Bank ‘08/17 and ‘09/18 also saw yields closing mixed at 4.01%-4.54% with a total trading volume of RM121mil. UEM Sunrise tranches 2018-2023 yields closed lower at 4.63%-4.86% with RM81mil changed hands.

MYR IRS Market

As at Friday’s 11am pricing, IRS curve fell slightly due to lower level of one-month US dollar/ringgit volatility alongside the weakening of ringgit. Elsewhere, the three-month KLIBOR remained at 3.43%.

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