Summary

• August 2025 imports contracted due to a 5.9% decline, while exports grew modestly by 1.9% to RM131.6 billion (July: +6.5%, RM140.1 billion), led by electrical and electronics (E&E), machinery and equipment, optical and scientific instruments, and palm-based agricultural products. Manufacturing activity showed tentative improvement, with Malaysia’s seasonally adjusted Purchasing Managers’ Index (PMI) rising to 49.9 in August from 49.7 in July, the highest since June 2024. July industrial production picked up to 4.2% (6M2025: 2.9%), supported by mining (+4.3%) and manufacturing (+4.4%).
• The ringgit stabilised following the Federal Reserve’s (Fed) recent rate cut. As of 25 September, the ringgit traded at 4.22 USDMYR, after strengthening to 4.19 upon the Fed’s quarter-point rate cut on 17 September — the first since December 2024. The move, primarily driven by a softening US labour market, was largely priced in by markets, contributing to the ringgit’s stability. The currency’s movement closely mirrored the US Dollar Index (DXY) over the month. Markets are pricing in one Fed rate cut over the next 12 months.
• Malaysia’s capital market saw softer net foreign outflows of RM354 million in August, as RM3.0 billion bond inflows were offset by RM3.4 billion equity outflows. Bond demand was supported by dovish Fed signals, contained inflation, and a steadier ringgit, while equities tracked regional outflows. Secondary trading eased, but issuances surged 46.5% m-o-m to RM44.1 billion, with non–Malaysian Government Securities/ Government Investment Issues (non-MGS/GII) bond supply typically accelerating towards year-end.
• MGS yields edged 2–6 bps higher in September, mirroring the bearish flattening in US Treasuries and German Bunds, though benign domestic inflation and a steady Overnight Policy Rate (OPR) kept the curve anchored. The DXY rebounded to 98.6 as stronger US economic data tempered prospects for deeper rate cuts, even as markets still expect the index to ease towards 96.3 by end-2025. In China, front-loaded issuance and weaker duration demand pushed long-end yields higher, though 4Q supply relief should ease some pressure. Overall, global spillovers remain the key driver for MGS, with domestic stability limiting sharper repricing risks.