The electronics manufacturing services (EMS) sector in Malaysia has seen mixed performance in 2024 despite being part of the broader tech upcycle, with rising costs, inflation, and supply chain disruptions offsetting growth from increased global demand and outsourcing trends. Key EMS Performances Winners : SKP Resources Bhd (+76% YTD) V.S. Industry Bhd (+47% YTD) NationGate Holdings Bhd (+51% YTD) P.I.E. Industrial Bhd (+29% YTD) Strugglers : ATA IMS Bhd (-8% YTD) JHM Consolidation Bhd (-36% YTD) Growth Drivers and Challenges Diversification Opportunities : The China+1 and Taiwan+1 strategies have positioned Malaysian EMS players to gain market share. However, reliance on major customers, such as Dyson, continues to be a concern. Cost Pressures : High inflation and production costs have affected profit margins. Company Highlights SKP Resources : Recorded a 27% y-o-y net profit increase , benefiting from a recovery in consumer demand. V.S. Indust...
The bond market's reaction to the Federal Reserve’s rate cuts has been anything but conventional. Yields on 10-year US Treasuries have risen sharply, defying expectations of easing-induced price gains. The result is a uniquely difficult landscape for bond traders heading into 2025.
Key Highlights
- Rising Yields: 10-year Treasury yields have increased by over three-quarters of a percentage point since September, marking the steepest rise in the early stages of a Fed rate-cut cycle since 1989.
- Fed’s Caution: Policymakers project just two 0.25% rate cuts in 2025, with inflation concerns driving a slower pace of easing.
- Economic Resilience: Despite high borrowing costs, the US economy remains robust, keeping inflation above the Fed's 2% target.
Market Implications
- Steepener Trade: Traders are capitalizing on the spread between short-term and long-term yields, with 10-year yields trading above 2-year yields for the first time since 2022.
- Short-Term Bonds in Favor: 2-year notes, offering yields close to cash equivalents, are attracting buyers as they provide a cushion against economic uncertainty and potential Fed rate cuts.
- Long-Term Bonds Under Pressure: Persistent inflation, coupled with President-elect Donald Trump's anticipated fiscal policies, is deterring interest in longer-dated securities.
Trump Administration’s Impact
- Fiscal Expansion: Increased spending under Trump’s economic agenda is expected to push long-term yields higher, exacerbating fiscal pressures.
- Inflation Risk: Policies targeting growth may intensify inflation, challenging the Fed’s ability to pivot further on rates.
Looking Ahead
Bond investors are navigating an environment of mixed signals: cautious Fed policy, resilient economic performance, and potential volatility stemming from fiscal and geopolitical developments. While short-term Treasuries offer relative safety and appeal, long-term bonds remain a riskier proposition amid uncertainties over inflation and fiscal policy.
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