Summary

• Malaysia’s full-year gross domestic product (GDP) growth is likely to reach the upper range of Bank Negara Malaysia’s (BNM) forecast (4.0%–4.8%), with the 3Q2025 GDP expanding by 5.2% (1H2025: 4.4%). The growth was supported by resilient private consumption and strong external demand. Exports sustained a double-digit growth in October at 15.7% (Sep: 12.2%), driven by acceleration in multiple key sub-sectors such as manufacturing (Oct: 15.7%; Sep: 12.5%), agriculture (Oct: 20.3%; Sep: 6.5%), and mining (Oct: 8.0%; Sep: 4.3%). Looking ahead, the strong growth momentum is expected to persist into 2026, supported by easing trade and geopolitical tensions, which offer near-term reassurance and bolster market optimism. MARC Ratings forecasts GDP growth at 4.5% for 2025, and 4.3% for 2026.
• Malaysia’s inflation eased to 1.3% in October (Sep: 1.5%), reflecting slower inflation in key sub-sectors such as food and beverages (Oct: 1.5%; Sep: 2.1%), and housing and utilities (Oct: 1.1%; Sep: 1.5%). The transportation sub-sector recorded the sharpest decline of -0.1% (Sep: 0.7%), driven by lower global oil prices amid oversupply concerns. Prospects of a Russia–Ukraine peace deal could further increase global oil supply, amplifying existing oversupply concerns and keeping Brent crude prices subdued despite ongoing US sanctions on Russian oil. While energy-related pressure moderated, core inflation edged up to 2.2% (Sep: 2.1%), supported by higher prices in personal care and miscellaneous goods of 6.0% (Sep: 4.8%). Year-to-date (YTD) inflation as of October averaged 1.4%, in line with MARC Ratings’ forecast of 1.4% for 2025.
• In October, foreign portfolio flows turned positive with net inflows of RM1.7 billion (Sep: -RM6.8 billion). Bond inflows recovered to RM4.4 billion (Sep: -RM6.8 billion), while equities registered a -RM2.7 billion outflow (Sep: RM0.0 billion). Foreign holdings of Malaysian Government Securities/ Government Investment Issues (MGS/GII) rose to 21.3% (Sep: 20.9%), supported by favourable prospects on the MGS–UST yield spread and improved sentiment post-ASEAN Summit in October. Going forward, a firmer external backdrop, improving yield differentials, moderating inflation, and rising GDP growth are expected to sustain foreign demand for ringgit bonds.
• As of month-to-date (MTD) 20 November, MGS yields declined by 4–8 bps, led by the front end, with the 3-year yield easing to 3.04% from 3.12%. The downward shift was supported by subdued inflation expectations, a favourable MGS–UST yield differential, and a more constructive external trade environment. Looking ahead, MARC Ratings projects firmer MGS yields, with a fair value of 3.35%-3.40% as markets head into 2026 (Oct 2025: 3.50%), underpinned by sustained risk appetite, contained inflation expectations, favourable prospects on the MGS–UST yield spread, and a stronger ringgit, forecast at 3.93 USDMYR by mid-2026. Of note, as of YTD 20 November, the ringgit remains the best-performing currency in Asia, appreciating by 7.7% against its regional peers.