Tresor Pulse – Forex, Treasuries, Bonds, Stocks
Global Forex Market
INVESTORS ‘appetite for risk in global markets was mixed during the week amid end of month / quarter flows. Investors were watching a series of US Tier 1 data releases to gauge the direction of US interest rates and inflation expectations.
The dollar dominated the forex market due to favorable risk sentiment as well as the release of better-than-expected national data. At the end of the week, the dollar hit a new 15-month high at 92.60 or 0.81%.
The ADP’s employment development publication in June showed that private companies in the United States hired 692,000 workers in June compared to 886,000 in May, more than the consensus of 600,000.
Hiring activity has been concentrated in the service sector as businesses begin to reopen at full capacity across the country.
Meanwhile, initial jobless claims, a measure of people claiming unemployment benefits, fell to 411,000 as of June 19 from 418,000 the week before.
Separately, President Joe Biden sealed the bipartisan infrastructure deal of US $ 580 billion (RM 2.3 trillion). According to researchers at the Wharton School, they estimate that new infrastructure spending would increase domestic production by 0.1% and reduce US debt by 0.9% by 2050.
The euro depreciated 0.71% to 1.19, following the strengthening of the dollar as well as growing concerns over the increase in Covid-19 cases in the bloc, fueled by the Delta variant.
Nonetheless, the data released was generally positive, but it did little to help the euro regain momentum. The final euro area IHS Markit manufacturing PMI figure hit a record high of 63.4 in June from 63.1 in May. Meanwhile, the euro area unemployment rate fell to 7.9% in May 2021, the lowest level since May of last year (April: 8.1%).
The pound failed to shake off the strength of the dollar, weakening 0.81% to 1.38, the weakest in 10 weeks. In addition, the pound suffered after a dovish trend in Bank of England Governor Andrew Bailey’s comment, citing that it was “important not to overreact to temporarily strong growth and inflation,” an warning that a premature tightening could undermine the recovery.
The Japanese yen was unable to take advantage of its safe haven status, losing 0.70% to 111.5, the weakest in 14 months. The evolution of the data was still positive, with consumer confidence in June rising to 37.4 from 34.1 in May, while the Tankan index of large manufacturers in the second quarter of 2021 rose to 14 points from five points previously.
The peso was the week’s worst performer, down 1.32% to 49.1, the weakest in 11 months.
Meanwhile, the baht hit a new 13-month low, down 0.82% to 32.1 while the rupee fell to a more than two-month low, down 0.54% at 14,503, weighed down by an increase in local coronavirus cases amid a stronger dollar.
The ringgit recorded the region’s smallest loss, slipping 0.05% to 4.16. Sentiment in the ringgit market remained cautious as the government announced enhanced MCO (EMCO) in several parts of Selangor and KL to curb the surge in new infections.
US Treasury Bills (UST)
Market Purchases on the US Treasury market were maintained despite positioning at the end of the month and at the end of the quarter. Nonetheless, the surge of the Delta Covid-19 variant despite the high vaccination rate has raised some concerns, further fueling investor interest in taking on the security assets. By the end of the week, the US Treasury flattened to the upside, with the front end yielding 1 to 3 basis points while the back end fell 6 to 8 basis points. The closely watched 10-year yield fell 6.6bp to 1.458%, the lowest in two weeks. As of this writing, investors are awaiting June US labor market data, which is expected to be released later yesterday. On Friday, the benchmark 2, 5, 10 and 30-year UST yields were 0.25%, 0.89%, 1.46% and 2.06%, respectively.
Malaysian bond market
A buying frenzy was also observed in the local debt market with an easing of the AMS curve from 1 to 7 basis points with notable interest on the front as the renewed bets of an accommodating Bank Negara during its next monetary policy committee after the government announced ECMO in several parts of Selangor. and KL.
However, most of the focus has been on the 150bil RM National Recovery Plan for People’s Welfare and Economic Recovery (Pemulih).
The week saw the 20-year MGS auction with an issue size of RM4.0bil, including the private placement RM2.0bil. It closed with a rather strong BTC of 2.651x and an average of 4.254% with strong demand observed from both local and foreign real money investors. The 3, 5, 7, 10, 15, 20, and 30-year Benchmark AMS yields on Friday stood at 2.23%, 2.53%, 2.99%, 3.27%, 3.81 %, 4.18% and 4.27. %, respectively
Ringgit Interest Rate Swap Market (IRS)
The IRS curve fell 3-6 basis points across the curve while the 3-month Klibor stood at 1.94%. Elsewhere, 5-year CDS fell 1.0% w / w to 43.4bp.
Malaysian equity market
During the week (25 June-1 July), the FBM KLCI lost 21.48 points or 1.38% to 1,534.23 points, underperforming both the Dow Jones Industrial Average (+1.28 %) and the MSCI Emerging Markets index (+ 0.06%).
Globally, investors turned to risk as they believed growth should outstrip a more hawkish Fed, although they became cautious in emerging markets due to a less favorable US rate outlook. Meanwhile, the local market has been weighed down by a sharp drop in the IHS Markit Malaysia Manufacturing Purchasing Managers ‘Index (PMI) from June 2021, EMCO in several parts of the Klang Valley from today’ today until July 16. Foreign investors offloaded RM471.3 million worth of Malaysian stocks during the week, pushing the year-to-date net outflows to RM 4.3 billion.
Local institutional and retail investors continued to dominate the market with participation rates of 46.3% and 38.6% in June respectively (up from 44.2% and 38.1% in May respectively). Foreign investors remained passive with a participation rate of 15.2% in June (against 17.8% in May).
Meanwhile, foreign investors invested in Malaysia Government Securities (MGS) for the 13th consecutive month with a net inflow of RM 2.4 billion in May 2021 (up from RM 4.7 billion in April 2021). Equity trading activity improved with an average daily traded value (ADVT) of RM3.5 billion in July (up from RM3.3 billion in June). Likewise, the rotation speed rose to 49.2% in July (vs. 46.0% in June).
During the week, all sectors of Bursa Malaysia fell into negative territory. The best performing sector was industrial goods and services (-0.3%) as the manufacturing sector had not been as badly affected as other industries during the current lockdown. The worst performing sector was construction (-3.4%) as investors weighed in on potential new flows on the political front. Over the coming week, investors will keep a close eye on:> the Eurozone Markit PMI (June) on July 5;
> US Markit PMI (June) July 6;
> Interest rate decision in Malaysia on July 8;
> Malaysian labor force statistics as of July 8;