Malaysia’s January exports rose 19.6% year on year, above the Bloomberg consensus of 14.6% and up from 10.2% in December, the strongest reading since September 2022. Growth was led by high-value manufactured goods, including electronics and optical equipment.
Authorities expect export growth to slow in coming months, while remaining positive in 2026. The Malaysia External Trade Development Corporation reported strong export results linked to exporters’ resilience and competitiveness.
Political tensions have increased within the governing coalition. The Democratic Action Party, the largest party in the ruling bloc, is considering moving its cabinet ministers to the backbenches, amid weaker support for Prime Minister Anwar Ibrahim and slow reform progress.
In foreign exchange markets, USD/MYR fell 0.2% to 3.90 last Friday and declined 0.1% over the week. Year to date, the Malaysian ringgit is up 4.0% against the US dollar.
Foreign portfolio flows have turned positive on a net basis. Net foreign portfolio inflows totalled USD355mn this year, compared with a USD885mn outflow over the same period last year.
We are seeing a very strong start to 2026, with January’s export growth of 19.6% being the best since late 2022. This performance is anchored in the global technology upswing that began in 2025, which continues to boost demand for our electronics. As a result, the Ringgit has appreciated 4% against the dollar this year, supported by USD355 million in net foreign inflows.
However, we must price in the growing political uncertainty within the governing coalition. Any sign of instability could quickly reverse the positive portfolio flows we have enjoyed. We only have to look back to the market volatility surrounding the 2018 general election to see how fast foreign capital can exit on political headlines.
For the coming weeks, this creates an environment where buying volatility may be prudent. Given the strong economic data, outright shorting the Ringgit seems risky, but ignoring the political risk is unwise. Using options to hedge long-MYR exposure or to position for a potential sharp move in USD/MYR, perhaps beyond the 4.00 level, could be a sensible strategy.
Bank Negara Malaysia’s steady hand on the Overnight Policy Rate, holding it at 3.00% since mid-2023, provides a baseline of stability for now. Furthermore, the yield on 10-year Malaysian Government Securities, currently around 3.85%, remains attractive compared to the US 10-year Treasury note. This yield spread helps anchor some foreign investment, but it may not be enough to prevent an outflow if political risks escalate.
