Malaysia’s GDP grew 6.3% year on year in 4Q25, the fastest pace since 4Q22. For 2025, full-year growth was 5.2%. Real GDP growth is projected at 4.5% in 2026. The Ministry of Finance estimates 2025 growth at 4.0%–4.5%. Domestic demand is expected to support growth in 2026, helped by government measures and national master plan initiatives. Other drivers include the rollout of approved investments, stronger tourism from Visit Malaysia Year 2026, and increased activity linked to AI. Malaysia’s current account surplus rose to MYR31.8bn (1.6% of GDP) in 2025, up from MYR27.7bn (1.4%) in 2024. The surplus is projected at MYR38.0bn (1.8% of GDP) in 2026, compared with the Ministry of Finance estimate of MYR23.2bn (1.1%). External risks have increased due to renewed geopolitical tensions and new US tariff announcements in mid-January. These measures included: – A 25% tariff tied to countries doing business with Iran (12 Jan) – A 25% levy on certain advanced computing chips (14 Jan) A one-year pause in US–China tariff escalation is in place until Nov 2026. Related US Supreme Court proceedings were also delayed. We expect a mixed outlook for Malaysian markets in the coming weeks, even after last year’s strong data. Headline GDP growth is likely to slow to 4.5% this year from 5.2% in 2025. Still, strong domestic demand should provide a meaningful cushion. This could lead to a split between the broader FBMKLCI index and domestically focused sectors. The main risk is external. President Trump’s new tariffs on advanced chips and on countries trading with Iran were announced last month. This uncertainty has already weighed on the Bursa Malaysia Technology Index, which fell 3% in early February as markets priced in the new risks. We think protective put options on the FBMKLCI, or on technology-focused ETFs, are a sensible hedge against further negative surprises from US trade policy. The local story remains supportive. Government spending and firm consumer activity are helping, and January 2026 retail sales rose 5.8%. For derivatives traders, this backdrop may support selling put options on fundamentally strong banks or consumer staples names to collect premium, based on their relative stability. This approach leans on domestic strength that is less exposed to global trade shocks. The Ringgit outlook is more complicated. The projected rise in the current account surplus to 1.8% of GDP is supportive. However, risk-off sentiment could still pressure the currency, as shown by the VIX rising above 20 last month. USD/MYR has been volatile but mostly range-bound around 4.70 since January. That setup can suit options strategies such as straddles for traders expecting a breakout but uncertain about the direction. Visit Malaysia Year 2026 is a clear positive. Tourism-related stocks have already gained in early February. Call options on airlines and major hotel operators may offer a focused way to express this theme. This can also provide a long exposure to balance hedges on more vulnerable export-oriented sectors. This setup echoes 2018–2019, when US–China trade tensions drove sharp swings in Malaysian equities despite a stable local economy. Traders who hedged export exposure while staying long domestic themes tended to outperform. We expect a similar pattern in the next few months, rewarding investors who can manage a strong local economy alongside volatile external risks.

here to set up a live account on VT Markets now