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Malaysian Ringgit Drops To 6-day Low Against U.S. Dollar





The Malaysian ringgit weakened against the U.S. dollar in the Asian session on Monday. Data from the Department of Statistics showed that Malaysia's domestic producer price index dropped 2.6 percent year-over-year in October, following a 5.1 percent decrease in September. In August, prices had fallen 5.4 percent. On a monthly basis, producer prices rose 1.7 percent in October, much faster than the 0.1 percent slight increase in the preceding month. It was the second successive monthly climb. Against the greenback, the ringgit fell to a 6-day low of 4.2800 from an early high of 4.2640. At Friday's close, the ringgit was trading at 4.2600 against the greenback. If the ringgit extends its downtrend, it is likely to find support around the 4.40 area.


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Malaysia Manufacturing Sector Weakens Further In November - Nikkei





The manufacturing sector in Malaysia continued to contract in November and at an accelerated pace, the latest survey from Nikkei revealed on Tuesday with a PMI score of 47.0. That's down from 48.1 in October, and it slides further beneath the boom-or-bust line of 50 that separates expansion from contraction. Among the individual components, production contracted at the sharpest rate in more than three years. New orders declined at a record pace, as did buying activity.


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Copper Drops With Metals After Chinese Factory Activity Slows





Copper fell with other markets after activity in Chinese factory slowed, underscoring a weak outlook for demand in the country. The official manufacturing purchasing managers index fell to 49.6 last month. The official PMI figure has been in contraction territory for four months. Copper for 3-month delivery on the London Metal Exchange slipped 0.5% to $4,561.50 a ton by 9:29 a.m. in Shanghai.


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Australia GDP Expands 2.5% On Year In Q3





Australia's gross domestic product gained 2.5 percent on year in the third quarter of 2015, the Australian Bureau of Statistics said on Wednesday. That beat forecasts for an increase of 2.4 percent and accelerated from the 2.0 percent gain in the second quarter. On an annualized quarterly basis, GDP gained 0.9 percent - also topping expectations for an increase of 0.8 percent and up from the 0.2 percent gain in the three months prior. The terms of trade slipped a seasonally adjusted 2.4 percent on quarter in Q3. The major contributions to economic growth this quarter came from exports, with net exports contributing 1.5 percentage points to GDP growth. The growth in exports is reflected by strong growth in mining activity (5.2 percent), bouncing back after the decline in the June quarter. Strength in the broader economy was also seen in household final consumption expenditure (up 0.7 percent) and new and used dwelling construction (up 2.0 percent). These positive contributions were offset by a fall in total gross fixed capital formation of 4.0 percent, driven by falls in private (-2.9 percent) and public (-9.2 percent) investment. The September quarter continues to see the decline in mining related construction, with engineering construction decreasing 7.1 percent.


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reasury yields dive as weak US data renewed woes on Fed liftoff





Treasury yields plunged as soft manufacturing data revived questions about the possible timing of Federal Reserve's interest rate hike over the following year. According to the Institute for Supply Management, manufacturing activity slumped to 48.6 in November, from 50.1 in October. The likelihood of a Fed rate increase this month has lowered. Futures markets pointed to 75% probability of a rate hike in December. The yield premium investors get for purchasing longer-term debt slimmed at 1.25 percentage points, its narrowest in nine months. The yield on the benchmark 10-year US government note slipped to its one-month low of 2.155%, while the two-year yield fell to 0.907%, its weakest in nearly two weeks.


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Fitch: Strong Capitalisation Backs Malaysian Insurers' Profile Amid Changes


Malaysia's insurance and takaful sector will remain stable in 2016, underpinned by the industry's solid capitalisation, Fitch Ratings says in a new report. The sound capitalisation will also support the sector's premium growth and potential underwriting volatility as economic growth decelerates. The sector's solid capitalisation is built on the robust regulatory framework and capital practices required by the Malaysian regulator. The series of regulatory reforms implemented in recent years aimed to raise the sector's competitiveness ahead of full liberalisation and economic integration with other south-east Asian economies. The industry's consolidated risk-based capital ratio was strong at 239% in 1H15, well beyond the regulatory minimum of 130%. Fitch believes stable domestic demand and low insurance penetration will continue to support the general insurance and takaful sector. This is despite the slower premium growth in 1H15 associated with lower automobile sales and private consumption, as consumers adjust to the Goods and Services Tax implemented in April 2015. The growth in investment-linked policies is likely to stay strong given the low interest rates, but we expect life insurers to increasingly tap on health-related and retirement products as the population ages and medical costs rise. High claims from the compulsory motor class will continue to pressure general insurers' profitability but this will be partly offset by healthy underwriting margins from fire and non-motor classes. We believe the deregulation of tariff rates in 2016 to have a mixed impact: motor insurers are likely to benefit from greater flexibility in pricing their risks adequately, but it could trigger competitive pricing among fire insurers and erode bottom-line profitability. Fitch expects M&A activity in the sector to pick up following a quiet 2015. This will be driven by the regulatory requirement for composites to split their life and non-life operations within five years from 2013. There are currently eight takaful and four insurance composites that have yet to split their operations. The report, "2016 Outlook: Malaysian Insurance Sector", is available on www.fitchratings.com or by clicking on the link in this media release.


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Australia Retail Sales Jump 0.5% In October





The total value of retail sales in Australia climbed a seasonally adjusted 0.5 percent on month in October, the Australian Bureau of Statistics said on Friday - standing at A$24.655 billion. The headline figure beat expectations for an increase of 0.4 percent, which would have been unchanged from both the September and August readings. There were rises in food retailing (0.6 percent), department stores (3.5 percent) and household goods retailing (1.1 percent). There were falls in cafes, restaurants and takeaway food services (-0.6 percent) and clothing, footwear and personal accessory retailing (-0.1 percent). Other retailing (0.0 percent) was relatively unchanged. By region, there were rises in New South Wales (0.8 percent), Victoria (0.5 percent), Queensland (0.5 percent), South Australia (0.3 percent), Tasmania (0.8 percent), the Australian Capital Territory (0.6 percent) and the Northern Territory (0.2 percent). Western Australia (0.0 percent) was relatively unchanged. Online retail turnover contributed 3.0 percent to total retail turnover in original terms.


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Treasuries Regain Ground Following Upbeat Jobs Data





Following the sell-off seen in the previous session, treasuries regained some ground over the course of the trading day on Friday. Bond prices moved to the upside in morning trading before moving roughly sideways in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.5 basis points to 2.275 percent. The ten-year yield partly offset the 15.2 basis point jump seen on Thursday but remains well above the one-month closing low it set on Tuesday. The rebound by treasuries came as traders went bargain hunting even amid the release of a Labor Department report showing stronger than expected job growth in the month of November. The report said non-farm payroll employment jumped by 211,000 jobs in November compared to economist estimates for an increase of about 190,000 jobs. Job growth in September and October was also upwardly revised to 145,000 jobs and 298,000 jobs, respectively, reflecting 35,000 more jobs than previously reported. The Labor Department also said the unemployment rate held at the more than seven-year low of 5.0 percent set in the previous month, matching expectations. The stronger than expected job growth further cemented expectations the Federal Reserve will raise interest rates later this month, although the pace of monetary policy normalization is expected to be gradual. Joel L. Naroff, President and Chief Economist at Naroff Economic Advisors, said, "There really is nothing except a major crisis that will stop the Fed from its appointed first round of rate hikes." "All it would have taken is a mediocre employment report to provide the necessary cover to raise rates and the November data were more than that," he added. A separate report from the Commerce Department showed that the U.S. trade deficit unexpectedly widened in October, as exports fell at a faster rate than imports. The Commerce Department said the trade deficit climbed to $43.9 billion in October from a revised $42.5 billion in September. Economists had expected the trade deficit to narrow to $40.6 billion in October from the $40.8 billion originally reported for the previous month. The economic calendar for next week starts off relatively quiet, although reports on producer prices and retail sales are likely to attract attention later in the week. Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds. The Treasury is due to sell $24 billion worth of three-year notes next Tuesday, $21 billion worth of ten-year notes next Wednesday, and $13 billion worth of thirty-year bonds next Thursday.


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NZ Dollar Falls Against Majors





The New Zealand dollar weakened against the other major currencies in the Asian session on Monday. The NZ dollar fell to 0.6699 against the U.S. dollar and 82.57 against the yen, from Friday's closing quotes of 0.6743 and 83.01, respectively. Against the euro and the Australian dollar, the kiwi dropped to 1.6208 and 1.0939 from last week's closing quotes of 1.6101 and 1.0865, respectively. If the kiwi extends its downtrend, it is likely to find support around 0.65 against the greenback, 80.00 against the yen, 1.66 against the euro and 1.11 against the aussie.


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Fitch: Japanese Life Insurers Seek Overseas Growth Opportunities





Japanese life insurers are likely to strengthen their insurance business outside Japan in 2016 while accumulating foreign bond holdings to improve their investment yield, Fitch Ratings says in a new report. The Rating Outlook for Japanese life insurers has been revised to Stable from Negative, to be consistent with the Outlook for the Japan sovereign (Long-Term Local-Currency Issuer Default Rating at A). This reflects the insurers' high concentration of Japanese government bonds (JGBs) in their investment portfolios. The Sector Outlook remains Stable due to the overall improvement in earnings and sufficient capitalisation. Several Japanese major life insurers have started to acquire sizable life insurance companies (for around JPY1.4trn in total) in developed markets such as the United States and Australia, following the overseas expansion plans of The Dai-ichi Life Insurance Company, Limited (Insurance Financial Strength (IFS) Rating A/Stable). Fitch believes this trend will continue, given the ageing and contracting population in Japan, and will monitor any integration and governance risks from international M&A. Japan's life insurers are likely to continue moderately accumulating foreign bonds to seek higher yield, if the very low bond yields in Japan (at around 1% for 20-year JGBs) persist. Fitch expects currency risks (especially versus US dollar) may increase further, if insurers raise unhedged portions. Although the increasing allocation to foreign bonds will provide broader diversification from the concentration on JGB, currency risks need to be managed effectively given the majority of the life insurance liabilities are still yen-denominated. Fitch expects the life insurers to maintain their strong earnings level and solid capital adequacy in 2016. The nine major traditional life insurers' core profit was JPY1,194bn in the first half of the financial year ending March 2016, up from JPY1,117bn a year earlier. The nine insurers' average statutory solvency margin ratio was 923.5% at end-September 2015, compared with 897.7% a year earlier. The view is supported by an improving investment spread owing to accumulated foreign bond investments and the moderately expanding profitable "third sector" (health) insurance product businesses. The report titled "2016 Outlook: Japanese Life Insurance" is available at www.fitchratings.com or by clicking on the link in this media release.


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