Global & Regional Equities
US
US equities tumbled last week, with the S&P 500 falling 2.2%, as investors reacted to a much weaker-than-expected July jobs report which raised fresh concerns about the health of the US economy.
Non-farm payrolls rose by just 73,000 in July, well below consensus expectations of 110,000. However, the real surprise came from sharp downward revisions to the previous two months, where May and June payrolls were revised down by a combined 258,000. As a result, the 3-month average of job gains has now plunged to just 35,000, down from 150,000 previously which show signs of rapid softening in the US labour market.
Despite leaving rates unchanged at its July FOMC meeting last week, Fed Chair Jerome Powell maintained a hawkish tone, reiterating that inflation remains a concern. But with such a weak jobs report, that stance now looks increasingly out of step with slowing economic momentum. Bond markets have since ramped up expectations of a rate cut as soon as September, which is now almost fully priced-in.
Meanwhile, the Bank of Japan (BOJ) kept its policy rate unchanged, as expected. However, the central bank raised its inflation forecast to 2.7%, signalling concerns over persistent price pressures. This raises the possibility of 1 more rate hike later this year, as part of the BOJ’s cautious policy normalisation.
In the bond market, US Treasury yields rallied, with the 10-year yield falling to around 4.25%, reflecting slower economic growth and a swift repricing of Fed rate cut expectations.
Asia
Asian equities ended the week lower, with the MSCI Asia ex-Japan Index down 1%, dragged by losses in China (-2.1%).
The decline in Chinese equities came after markets were left underwhelmed by the outcome of the latest Politburo meeting. Despite rising expectations for additional policy support, the meeting minutes signalled that policymakers were less concerned about near-term growth or the escalation of US-China trade tensions.
With 1H 2025 GDP growth at 5.3%, policymakers appear confident in meeting their 5% full-year target, reducing the urgency for further stimulus. On the trade front, recent bilateral discussions including a meeting in Sweden hinted at a potential 90-day extension of the current truce, further easing tensions. However, this hands-off stance disappointed markets, which had been hoping for more decisive action to support the economy.
That said, China still retains a policy backstop. In the first half of 2025, Chinese authorities purchased an estimated RMB 190 billion of domestic ETFs, while southbound flows into H-shares amounted to USD 94 billion. These interventions reflect the so-called “China put”, aimed at stabilising local markets when sentiment sours.
Elsewhere, US trade tariffs were largely met with neutral market responses for the Asian region. The only exception was India which was hit with a 25% tariff. This is notably higher than the 15–20% range imposed on other Asian markets. The move was seen as a reaction to India’s continued energy and military purchases from Russia.
In terms of fund flows, India recorded the largest outflows, totalling USD2.2 billion for the week. ASEAN markets also saw net foreign selling, while Taiwan and Korea registered modest inflows.
Updates on Malaysia
Back home, the KLCI ended flat during the week, but sentiment was supported by a more favourable outcome on the US tariff announcement. The US confirmed a reduced tariff rate of 19% for Malaysia, down from the earlier proposed 25% announced on July 8. The new rate aligns Malaysia with its regional peers including Thailand, Indonesia, and the Philippines, while Vietnam faces a slightly higher tariff of 20%.
The decision was better than market expectations and seen as a relief for exporters, especially after earlier concerns that tariffs could have gone as high as 25%.
Meanwhile, on the domestic policy front, Prime Minister Anwar Ibrahim unveiled the 13th Malaysia Plan, outlining the country’s strategic development roadmap for the next five years. For a detailed breakdown of the 13th Malaysia Plan and its implications for key sectors, visit our Insights page here: aham-my.com/13mp
Fixed Income Updates & Positioning
Regional Fixed Income
Asian credit markets maintained firm sentiment for most of last week despite a heavy data calendar. Spreads touched a historical low of around 63 bps on Thursday before reversing on Friday as traders reduced inventory ahead of the new month. Week-on-week, Asian Investment Grade (IG) spreads widened by 4 bps to 69 bps, while Asian High Yield (HY) widened by 20 bps. This mirrored movements in US credit, where US IG and US HY widened by 4 bps and 27 bps, respectively. Despite this, buying interest remained healthy, led by Chinese IG TMT names and selective HY names. Local currency credit markets were slightly softer, with CNH spreads wider by 5–10 bps and AUD credit spreads 2–3 bps wider.
The weaker tone extended into Monday (4 August), with spreads widening by a further 5–10 bps across the board as markets reassess Fed rate cut expectations following the release of weak US jobs data last Friday.
The primary market was relatively quiet, consistent with the heavy data flow in Asia, recording only USD 750 million in issuance. In global bond market, notable transactions included UBS Group AG’s issuance of two Additional Tier 1 (AT1) perpetual bonds to refinance upcoming 2026 callables, with a 2031 callable at 6.6% and a 2035 callable at 7%. The longer 10-year callable structure performed better, tightening by 10 bps in the secondary market, while the 2031 tranche traded flat.
Local currency issuance was more active. In the CNH market, we participated in Chubb Insurance’s senior 2035 bond at 2.75%, which priced strongly with a three-times covered book and is now trading around par. In Singapore, Keppel REIT issued a perpetual bond, while SATS Ltd priced a 2032 note—both well-received with order books four and seven times covered, respectively. In Australia, explosives manufacturer Dyno Nobel priced a 10-year bond alongside a shorter-dated tranche, with the 10-year achieving an eight-times bid-to-cover ratio.
From a portfolio perspective, we took profit on select recent issues, including USD-denominated Softbank bonds and CNH Swire Property, while participating in new opportunities such as Chubb Insurance’s CNH senior deal, Keppel REIT’s SGD perpetual, and SATS’ 2032 note. Cash levels remain at around 2–3%.
Domestic Fixed Income
The Malaysian fixed income market rallied strongly in July, supported by the Overnight Policy Rate (OPR) cut during the month. Yields ended the month lower, led by the long end: the three-year Malaysian Government Securities (MGS) yield fell 7 bps to 3.08%, the 10-year MGS declined 10 bps to 3.38%, and the 30-year MGS led the rally, dropping 16 bps to 3.91%.
Post-OPR cut, yields continued to edge lower into early August, reflecting a more dovish market stance and expectations of another potential easing over the next 12 months. The steepness in yield curve offers better relative value for the 7-year and 15-year tenures. Short-end yields have compressed considerably, leaving the long end more attractive on a relative basis.
The recently announced 13th Malaysia Plan (13MP) has implications for fiscal and debt management, with a target to reduce the debt-to-GDP ratio to 60% by 2030. Based on our estimates (assuming 4.5% GDP growth, at the low end of consensus), the ratio is more likely to settle around 62.5% by 2030, implying official forecasts assume at least 5% annual growth to achieve its 60% debt-to-GDP target.
On the fiscal front, the government aims to lower the fiscal deficit to 3% of GDP by 2030 while maintaining development expenditure of at least 3% of GDP, implying official projection that the surplus (from fiscal revenue minus operating expenditure) will continue to grow. Achieving this will require continued focus on revenue growth, subsidy rationalisation, and operational efficiency. Structurally, a dovish Bank Negara Malaysia, benign domestic inflation, and a globally easing monetary environment support a favourable backdrop for bond issuance, although supply absorption will be critical.
Gross government bond issuance is projected at RM165 billion in 2025, rising to RM180–190 billion annually over the next five years, partly reflecting the 2026 maturity wall (RM108 billion maturing, ~40% of 2026 issuance earmarked for refinancing) and increased in development expenditure. In the near term, short-end rates are expected to remain anchored by monetary policy, while long-end yields may steepen as issuance supply exerts pressure.
Corporate bond issuance momentum is expected to pick up, particularly from GLCs involved in large-scale infrastructure projects such as MRT3, ECRL, and Prasarana. Other notable issuers include Petronas, Tenaga Nasional, Gamuda, YTL, Sime Darby, as well as players in the independent power producer (IPP), renewable energy, ports, and utilities sectors. We favor fixed income investments into infrastructure, focusing on growth sectors such as healthcare, construction, and utilities.
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