KUALA LUMPUR (July 3): Malaysian shares rose on Friday as investors across Asia walk back expectations for higher US interest rates. The ringgit also strengthened.

The FBM KLCI rose 17.22 points or over 1% to 1,679.05 with 22 of 30 constituents in the positive territory. Petronas Chemicals Group Bhd (KL:PCHEM) advanced 5% to RM4.36, leading gainers on the index.

Soft US economic data “rewrites the near-term policy calculus, draining urgency from the rate-hike trade and giving emerging-market currencies room to breathe,” said Apex Securities.

US jobs market cooled as non-farm payrolls came in weaker than expected in June and prior months data were also revised lower. Combined with moderating crude oil prices, the news has curbed market expectations that the Fed needs to raise interest rates soon.

“We expect an extended period of policy pause through 2026 before the Fed resumes easing in 2027,” said Alvin Liew, senior economist at United Overseas Bank. “This represents a materially long pause, even as we keep our view of an easing stance for Fed policy.”

Brent, the global benchmark for crude oil, hovered near US$72 per barrel.

Nearly all sectors closed higher. Industrials are leading gains at the broader market with Press Metal Aluminium Holdings Bhd (KL:PMETAL) up 19 sen or nearly 3% to RM7.72. Kuala Lumpur Kepong Bhd (KL:KLK) rose 3.5% to RM21.70 in the plantation sector. 

The ringgit appreciated to 4.0695 against the US dollar, tracking gains of emerging market currencies in Asia.

Signs of weakening US economy and easing inflation with retreating oil prices may give the ringgit a fillip, Nazmi Idrus, chief economist at CGS International Securities Malaysia, told The Edge.

However, he cautioned that near-term risks remain. Uncertainty surrounding the timing of state elections has kept some investors on the sidelines, with concerns that committing capital now could leave them exposed if sentiment shifts on political developments.

Public Investment Bank also struck a cautious tone on the broader market outlook and cut its 2026 year-end FBM KLCI target to 1,680 points from 1,730 previously.

The research house flagged deteriorating asset quality as a key concern, warning that weakening consumer and business confidence amid escalating cost pressures could weigh on bank’s loan books in the second half of this year.