KUALA LUMPUR (Sept 28): Malaysia's financial markets adjusted in an orderly manner despite external pressures, and conditions remain conducive for corporates to raise funds, Bank Negara Malaysia's Financial Markets Committee (FMC) said.
In a statement on Monday following the FMC's meeting on Sept 21, the committee cited sound economic fundamentals and strong foreign direct investment (FDI) inflows for the resilience of the domestic market.
It said United States Federal Reserve rate hikes that led to a stronger US dollar and higher US Treasury yields were main drivers of recent market movements.
“Nevertheless, the domestic financial markets continued to adjust in an orderly manner, supported by balanced two-way flows that ensured effective price intermediation among market participants,” said the FMC.
The committee observed strong interest in corporate bond issuance and increased hedging as the ringgit moderated in September after being relatively stable in July and August, and increased Malaysian Government Security yields after remaining flat for a prolonged period.
It also noted that “higher bond yields may present an attractive entry point for foreign investors” as external factors such as geopolitical uncertainties surrounding the prolonged Iran war, oil price volatility and evolving global interest rates remain near-term headwinds,
It said Malaysia’s strong economic fundamentals continued to bolster market sentiment, anchored by second-quarter gross domestic product (GDP) growth of 6% year-on-year — beating market projections of 5.8% — alongside strong inflows into the services sector, including the artificial intelligence (AI) and data centre boom.
The FMC noted that foreign exchange and bond markets will remain supported by current initiatives. These include the Qualified Resident Investor (QRI) programme and state-linked companies and corporations bringing back and converting foreign earnings.
Meanwhile, the committee endorsed progress on the transition from the Kuala Lumpur Interbank Offered Rate to alternative reference rates, namely the Malaysia Overnight Rate (MYOR) and Malaysia Islamic Overnight Rate (MYOR-i), ahead of the national readiness milestone on Oct 1.
Significant steps have been taken across derivatives and cash products, including the release of standardised market conventions on the Financial Markets Investor Portal (FMIP), Bloomberg’s launch of Overnight Index Swap (OIS) curves, and finalised conventions for interbank money market products developed with the Financial Markets Association Malaysia (FMAM).
Additionally, a feasibility study on market-making for Islamic profit rate swaps (IPRS) was completed to enhance liquidity in Islamic derivatives and will be submitted to the bank's Shariah Advisory Council (SAC).
The FMC also noted the release of the Malaysia Bond Market Report 2025 by its Bond Market Subcommittee, which evaluated establishing an inter-Principal Dealer electronic trading platform.
The Islamic Financial Market Subcommittee plans to convene an industry roundtable in October to accelerate MYOR-i adoption.