Summary

• The ringgit remained stable in March, supported by the Federal Reserve’s (Fed) dovish stance and expectations of narrowing interest rate differentials. The ringgit has traded within the 4.42–4.48 range since January, bolstered by Malaysia’s resilient economic fundamentals and investor confidence.
• Exports surged to 6.2% in February (Jan: 0.3%), driven by manufacturing growth of 8.8% and strong performance in the electrical and electronic (E&E) sector at 18.1%. The rebound aligns with an improved Purchasing Managers’ Index (PMI) of 49.7 in February (Jan: 48.7), reflecting stronger demand, with additional support from regional trade shifts linked to US tariff policies.
• Headline inflation eased to 1.5% while core inflation rose slightly to 1.9% in February. Despite global headwinds, Bank Negara Malaysia (BNM) held the Overnight Policy Rate (OPR) at 3%, projecting gross domestic product (GDP) growth between 4.5% and 5.5% for 2025, supported by healthy domestic demand, stable employment, and wage growth.
• Net foreign outflows in February reached RM1.7 billion in bonds and RM2.2 billion in equities, as investors turned cautious amid rising geopolitical tensions and trade-related uncertainties. The continued negative MGS–UST spread reinforces the appeal of US Treasuries (UST) over Malaysian bonds, although this may decline over time as US economic growth expectations moderate due to the trade war.
• Secondary market trading remained active but eased from earlier highs. Cagamas bond trading increased by 19% to RM1.0 billion, while quasi-government bond trading fell sharply by 68% to RM2.8 billion due to lower issuance. In the corporate bond segment, financial institutions (FI) bond trading declined 25% to RM1.1 billion, whereas that for non-FI corporate bonds edged up 2% to RM5.7 billion, supported by consistent issuance.