Key Points
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We expect USDMYR to continue trending lower toward 3.7000 by end‑2026, supported by a more durable ringgit appreciation cycle driven by structural fundamentals.
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Malaysia’s economy remains in an ICT‑led investment upcycle, with total investment approvals across the manufacturing and services sectors rising 14.7%yoy in 9M25. Notably, ICT has emerged as the largest contributor to approved investments, underpinned by strong foreign participation, with ICT investment approvals growing by around 32%yoy over the same period.
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Macroeconomic stability also compresses risk premiums. Inflation remains well‑contained despite RON95 fuel subsidy rationalisation and adjustments to sales and services tax, allowing BNM to maintain policy stability. Fiscal discipline keeps sovereign risks in check, supporting investor confidence in local financial markets.
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We expect BNM to maintain a neutral policy stance, keeping the policy rate at 2.75% through 2026, while further Fed easing should continue to narrow rate differentials. This will enhance Malaysia’s relative yield appeal and has already helped drive a steady pickup in net foreign bond inflows since 2024.
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With reasonable equity valuations, a solid macro backdrop, and an ongoing tech upcycle, Malaysia is well positioned for renewed foreign equity interest, providing an additional upside catalyst for the ringgit.
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External tailwinds are turning more favourable. Firmer commodity prices support terms of trade, while the electronics sector benefits from rising US capex in computers and peripherals. Continued CNY resilience also further underpins MYR, given the strong CNY‑MYR correlation.
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Downside risks to our ringgit outlook include a sharp global growth slowdown, a significant decline in commodity prices, or a downturn in the global electronics cycle.
