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Market Highlights
Wed, 21 Jan 2026 07:30 am
Markets Slide on Global Jitters

Malaysia Market Review: Risk-off sentiment persisted on the FBM KLCI, which declined 0.77%, as foreign investors turned net sellers following a seven-day buying streak. Market breadth was broadly negative, with 782 decliners overwhelming 301 advancers, while lower liners also ended firmly in the red. Sectoral performance was uniformly weak, led by declines in Finance (-1.78%), Technology (-1.06%) and Healthcare (-0.89%), driven largely by weakness in heavyweight names such as Hong Leong Financial Group, Hong Leong Bank and Alliance Bank.

Global Markets. US equities suffered their sharpest decline since October on Tuesday, with the Nasdaq plunging 2.39%, the S&P 500 falling 2.06% and the Dow Jones retreating 1.76%. Risk sentiment deteriorated after President Trump reignited trade tensions with Europe, threatening to impose a 200% tariff on French wine and champagne following French President Emmanuel Macron’s rejection of Washington’s invitation to join Trump’s proposed “Board of Peace” over Greenland. Adding to the pressure, U.S. Treasury yields surged to four-month highs amid a global bond sell-off, partly driven by weakness in Japanese government bonds. The risk-off move spilled over into Europe, where the STOXX 600 declined 0.70%, as targeted countries weighed retaliatory measures under the EU’s “Anti-Coercion Instrument,” which could restrict US access to public tenders or limit services trade where the US runs a surplus. Asian markets also closed broadly lower, with the Nikkei 225 (-1.11%), Shenzhen Composite (-0.97%) and KOSPI (-0.39%) ending in negative territory.

 

Market Outlook. Profit-taking is expected to persist on the FBM KLCI today as market sentiment remains fragile amid elevated geopolitical and policy uncertainties. Nonetheless, downside may be cushioned by a positive surprise in Malaysia’s trade balance and a benign inflation backdrop. Investors will be closely watching ECB President Christine Lagarde’s speech and the UK inflation print today for clearer signals on Europe’s economic and policy direction amid an increasingly tense global environment. Any shift in tone or data surprise could influence global risk appetite and, in turn, near-term trading sentiment on the local bourse.

Economic Update
Wed, 21 Jan 2026 07:07 am
Malaysia Inflation Rate - Benign inflation anchors a steady OPR outlook  

Headline inflation rose to +1.6% YoY in December 2025 (Nov: +1.4%), slightly above consensus of +1.4%. For 2025, inflation averaged +1.4% (2024: +1.8%), pointing to a still-benign inflation backdrop amid muted policy pass-through.

Core inflation edged up to +2.3% YoY (Nov: +2.2%), its highest level since October 2023, reinforcing our view that domestic demand will remain the key growth anchor in 2026.

Heading into 2026, domestic demand will be underpinned by tourism under Visit Malaysia 2026, tight labour market conditions and ongoing income-related policy support, providing modest support to inflation.

That said, muted policy pass-through, the fixing of RON95 prices, subdued global commodity prices and a firmer ringgit should cap upside risks to inflation.

We maintain our 2026 inflation forecast at +1.8% YoY and expect BNM to keep the OPR at 2.75% in 2026.

Economic Update
Wed, 21 Jan 2026 07:03 am
Malaysia External Trade - Upside to growth on positive trade

Malaysia’s exports accelerated to +10.4% YoY in December 2025 (Nov: +7.0%), well above consensus of +2.5%, while imports maintained double-digit growth of +12.0% (Nov: +15.8%). The trade surplus widened sharply to RM19.3bn (Nov: RM6.1bn).

For full-year 2025, exports and imports expanded by +6.5% YoY and +6.2% respectively (2024: +5.8% and +13.1%).

Export strength was driven by manufactured goods (+13.6% YoY; Nov: +7.9%), led by robust E&E. In contrast, mining (-15.2%; Nov: +9.4%) and agriculture (-7.4%; Nov: -6.1%) weighed on overall export performance.

We view the decline in capital goods imports (-11.8% YoY; Nov: +56.6%) as a temporary breather. Investment momentum should remain intact in 2026, supported by ongoing infrastructure projects and continued data centre expansion.

Improving global growth and a steady global semiconductor outlook amid the AI-led upcycle should continue to support Malaysia’s external sector. That said, potential semiconductor tariffs, geopolitical tensions and a stronger ringgit remain key risks.

We maintain our 2026 export growth forecast at +4.8% YoY and GDP growth at +4.3% for now. A sustained improvement in early-2026 data could warrant an upward revision.

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