Kuala lumpur: Malaysia's equity market soared to its highest point since 2018, driven by renewed investor confidence, a firmer ringgit, and shifting global capital dynamics. The benchmark FTSE Bursa Malaysia KLCI rose by 1.4 percent, reaching 1,760.50 at midday, marking its highest level since mid-October 2018. Meanwhile, the ringgit strengthened to 3.9515 against the US dollar, breaking below the 4.00 psychological level for the first time in over seven years.
According to BERNAMA News Agency, economists noted that the rally unfolded amid a weak US dollar and rising Japan-related market tensions. The US Dollar Index hit its lowest level since September, sparking speculation about potential yen intervention and higher Japanese bond yields, which could lead to a gradual unwinding of yen-funded carry trades and global portfolio reallocation.
Sunway University economics professor Dr. Yeah Kim Leng highlighted that the ringgit's appreciation was not solely due to the weaker dollar, as Malaysia's currency gain outpaced the dollar's decline. He attributed the remaining currency gains to improving domestic fundamentals, such as better-than-expected economic growth, lower-than-average inflation, rising forex reserves, a strong current account surplus, and fiscal performance aligning with expectations. This suggests a gradual re-rating of Malaysia's currency rather than a cyclical move, even amid volatile global forex markets.
Dr. Yeah also pointed out that rising Japanese bond yields and potential currency intervention could significantly impact portfolio allocation in major developed markets more than in emerging economies with strong growth and macro stability. He noted that global investors might seek diversification in higher-yielding and fast-growing emerging markets like Malaysia, reducing speculative risks to the ringgit.
AmBank Group chief economist Firdaos Rosli stated that the ringgit's close below the 4.00 psychological level resulted from both internal and external factors, including Malaysia's stable monetary policy, solid growth in 2025, and positive investor sentiment. External factors, such as broad US dollar weakness and a favorable real interest rate environment for Malaysia, also supported the ringgit. Firdaos added that the recent movement was slightly dollar-driven, with strong bond inflows seen over the past week, supported by Malaysia's favorable fourth-quarter 2025 GDP data.
Firdaos acknowledged that confidence in the domestic economy has been bolstered by solid incoming data, though exports may remain volatile. He highlighted the country's resilient growth, supported by a solid labor market, anchored inflation, a positive current account surplus, and fiscal discipline. However, he warned of reversal risks if US Federal Reserve rate cuts are delayed or if global risk sentiment shifts due to geopolitical factors or dependence on electrical and electronics trade with the US.
The stabilizing ringgit has also supported a strong re-rating in domestic equities. IPPFA Sdn Bhd director of investment strategy, Mohd Sedek Jantan, noted that the current equity rally reflects a compression of risk premia driven by improving macro confidence. Banking and financial stocks have been the primary beneficiaries, as a stabilizing ringgit reduces macro and funding uncertainty, improves asset-quality visibility, and supports sustainable credit growth. Mohd Sedek added that selective domestic consumption-related stocks are gaining traction, and yield-oriented sectors like utilities and real estate investment trusts benefit from macro stability, though their upside remains limited to valuation normalization.
Overall, the current sectoral leadership suggests that Bursa Malaysia's gains are being driven by a reassessment of medium-term fundamentals rather than a defensive response to global uncertainty.