Summary

• Malaysia’s external sector remains on a strong growth trajectory with exports growing at 7.0% in November (Oct: 15.7%). Growth was underpinned by resilient demand for electrical and electronic products (E&E) at 15.0% (Oct: 26.5%) as well as recovering petroleum exports. Performance with trading partners also remained robust, with shipments to China accelerating to 9.3% (Oct: 7.5%), while the rest stayed broadly supportive. Looking forward, we anticipate the momentum to persist into 2026, driven by sustained demand for E&E, amid the ongoing artificial intelligence (AI) upswing and rising data centre investments.
• Malaysia’s inflation edged up marginally to 1.4% in November (Oct: 1.3%).The rise was mainly driven by alcohol and tobacco (Nov: 2.4%; Oct: 0.3%), transportation (Nov: 0.2%; Oct: -0.1%), and education (Nov: 2.6%; Oct: 2.4%), but offset by stable food and beverage prices (Nov: 1.5%; Oct: 1.5%) and slower housing and utilities prices (Nov: 0.7%; Oct: 1.1%). Looking ahead, inflation is expected to remain contained through 2026, with fading spillover effects from earlier implemented policy reforms in 2025.
• The ringgit rallied 9.7% year-to-date (YTD) as of 22 December, consolidating its position as Asia’s top performing currency, underpinned by contained inflation levels, sustained foreign bond inflows and improving prospects on the Malaysian Government Securities – US Treasuries (MGS–UST) yield differentials. Looking forward, the ringgit is projected to appreciate towards 3.93 USDMYR by mid-2026, supported by deeper interest rate easing by the Federal Reserve (Fed), with markets currently pricing in at least two more Fed rate cuts and a 33%-45% probability of a third cut. The ringgit is also expected to benefit from trade developments following the 47th ASEAN Summit, which will bolster the current account surplus through stronger exports, reinforcing ringgit strength.
• In November, foreign portfolio inflows accelerated to RM4.9 billion (Oct: RM1.7 billion), led by bond inflows of RM6.1 billion (Oct: RM4.4 billion), while equities posted net outflows of RM1.2 billion (Oct: -RM2.7 billion). Foreign holdings of MGS/ Government Investment Issues (MGS/GII) edged higher to 21.4% (Oct: 21.3%). Looking ahead, inflows should remain resilient, anchored by a stronger ringgit, contained inflation and a fiscal deficit narrowing further to 3.5% of GDP in 2026 (2025: 3.8%). Structural tailwinds from the global AI capex cycle will boost corporate earnings and sustain foreign portfolio inflows into Malaysia. Month-to-date (MTD) 22 December, MGS yields at the belly and long end rose 2–10 bps, reflecting softer auction demand and a mild inflation uptick in November.