Summary

• Malaysia’s economy grew by 5.3% in 3Q2024, with manufacturing growth accelerating to 5.6% (1H2024: 3.3%). The positive investment cycle remains supported by a surge in capital imports. Exports rebounded in October after a minor decline in September. While external uncertainties have increased, particularly following the Republican sweep in the recent US election, Malaysia is expected to benefit from potential trade rerouting.
• Following the tapering of foreign inflows in September, October saw significant foreign outflows across local capital markets as investors adopted a cautious stance prior to the election outcome.
• In November, US bond yields rose despite a rate cut, reflecting a robust economy and shifting rate cut expectations. As a result, the dollar strengthened, while the ringgit experienced a more moderate depreciation. The 10-year US yield retreated after peaking near 4.50%, driven by buying activity as yields became increasingly attractive, and diminished fears of US policy risks.
• Malaysian government bonds rallied in November despite the US bond market sell-off, although the decline in yields did not fully offset the rise in October. The movement was primarily driven by domestic factors, following a muted market response in the previous month due to rising US Treasury (UST) yields.
• Bond yields declined across several regions, with German bund yields falling, signalling easing inflation in the eurozone, and Chinese government bond yields decreasing as part of efforts to stimulate growth. The divergence in inflation trajectories between the US and the eurozone suggests that both central banks are likely to follow different policy paths.