Malaysia’s exports rose in April, supported by strong electrical and electronics demand and record re-exports, which widened the trade surplus. Export growth year to date was 19.0% as of April.
UOB kept its 2026 export growth forecast at 2.5%, compared with Bank Negara Malaysia’s estimate of +8.6%, while 2025 is +6.4%. The outlook was linked to geopolitical risks, Middle East supply disruptions, and possible US tariff measures, including the July expiry of the temporary 10% global tariff and developments tied to Section 122.
The goods trade surplus, alongside an expected services surplus, may lift the current account balance this year. UOB estimated a current account surplus of +MYR38.0bn, compared with Bank Negara Malaysia’s +MYR45.6bn, and the 1Q26 actual was +MYR15.2bn.
In May, the Malaysian government warned manufacturers could face production stoppages as early as June due to disrupted supplies and shrinking inventories. Firms are seeking alternative inputs, but replacements may arrive late or not meet required specifications.
US President Trump said on 19 May that further action could occur if Iran does not agree to US terms within days, following a truce agreed on 8 April.
Given the current date, we are seeing a clear split between recent strong performance and significant future risks. Malaysia’s April export numbers were exceptional, but this appears to be a short-term reaction to Middle East supply issues rather than a sustainable trend. This creates a complex environment, where the strong trade surplus would typically support the Malaysian Ringgit (MYR).
Derivative traders should consider the rising potential for currency volatility in the coming weeks. The tension between a strong current account surplus and escalating geopolitical risks suggests that options strategies on the USD/MYR, such as buying a straddle, could be prudent. We saw similar currency swings during the US-China trade disputes from 2018-2019, where initial tariff threats caused sharp moves in emerging market currencies.
On the equities front, caution is advised, particularly in the electrical and electronics (E&E) sector that drove the recent export surge. With the government warning of potential production stoppages as soon as June and US tariff risks returning in July, hedging strategies are key. Given that the E&E sector consistently accounts for over 40% of Malaysia’s total exports, any disruption will heavily impact the FTSE Bursa Malaysia KLCI, making protective puts on the index a logical consideration.
The period leading up to July will likely see implied volatility increase across asset classes. The expiry of the temporary 10% global tariff and other US trade provisions creates a clear event risk on the horizon. Traders should prepare for sharp market movements by positioning for higher volatility, much like positioning ahead of a major central bank announcement.
Looking further ahead, we must watch for any change in tone from Bank Negara Malaysia (BNM). There is a wide gap between our conservative 2.5% export growth forecast for 2026 and BNM’s much more optimistic 8.6% estimate. If global headwinds slow the economy as we expect, the market may begin to price in interest rate cuts for late 2026, a shift from the stable outlook we observed through most of 2025.
