| Rationale |
Summary
- Malaysia’s 1Q2024 gross domestic product (GDP) expanded to 4.2%, higher than the advanced estimate of 3.9% (4Q2023: 3.0%) on the faster expansion in the services sectors at 4.7% (advanced estimate: 4.4%, 4Q2023: 4.1%). The manufacturing sector registered a 1.9% rebound after two quarters of contraction, while growth in the construction sector accelerated to 11.9% (4Q2023: 3.5%).
- The Malaysian Government Securities (MGS) market mostly rallied in May, tracking the US Treasury (UST) market. The local corporate bond market was relatively muted for the higher-rated segment, while the A-rated segment saw better interest.
- The UST rallied in May following steady US April inflation prints and weaker-than-expected April retail sales, but the Federal Reserve (Fed) reiterated its “higher for longer” interest rate stance while seeking firmer evidence of an easing inflation trend. This aligns with our view that there is no evident disinflation trend to prompt the Fed to cut rates just yet.
- The steady eurozone April inflation has raised expectations of a rate cut by the European Central Bank (ECB) in June. The market currently expects three cuts from the ECB by year end. Going forward, the eurozone’s wage growth data will be an important sign of whether inflation will remain persistent and influence the ECB's easing path this year.
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