The Personal Consumption Expenditures (PCE) index for August 2024 signalled a reduction in inflationary pressures, increasing by 2.2% year-on-year, down from 2.5% in July. This has led to heightened expectations of significant rate cuts by the Federal Reserve (Fed) at its upcoming November meeting. The CME FedWatch Tool indicates a 100% likelihood of a rate cut, with a 52.8% probability of a 50 basis points (bps) cut and a 47.2% probability of a 25bps reduction.
US Business Activity Slows Amid Mixed Economic Data
The US economy showed signs of softening, with the S&P Global composite output index dipping slightly to 54.4 in early September. Manufacturing activity contracted for the third consecutive month, while services growth decelerated. Consumer confidence also plummeted, recording its steepest drop in three years, largely due to growing concerns over the labour market.
China and Taiwan Lead Global Market Gains as PBOC Cuts Rates
Among major global indices, China’s CSI 300 surged by 15.7%, driven by the People’s Bank of China’s (PBOC) record interest rate cut. Taiwan’s market also saw substantial foreign inflows, with a rise in export orders linked to strong demand for AI chips. Meanwhile, the Hang Seng Index climbed 13%.
Foreign Fund Inflows Surge Across Asia
Foreign investment in Asia reached a nine-month high of USD5.13 billion last week, led by inflows into Taiwan (USD3.03 billion) and India (USD2.83 billion). Taiwan benefited from robust demand for AI-related exports, while India recorded its highest foreign inflows in 28 weeks. In contrast, South Korea and Indonesia experienced net outflows, with expectations of rate cuts to support domestic growth.
Local Retailers and Institutions Support Malaysian Market
In Malaysia, foreign investors took profits after six weeks of net buying, resulting in a net outflow of RM527 million. However, local institutions and retailers provided support, with net purchases of RM240.3 million and RM286.7 million, respectively. Utilities, industrial products, and healthcare sectors saw the highest foreign inflows.
