Malaysia’s exports rose 19.6% year on year in January. This beat the Bloomberg consensus of 14.6% and improved from 10.2% in December. It was the strongest result since September 2022. Growth came mainly from high-value manufactured goods, including electronics and optical equipment.
Authorities expect export growth to slow in the coming months, but to stay positive in 2026. The Malaysia External Trade Development Corporation linked the strong results to exporters’ resilience and competitiveness.
Political tensions have increased inside the governing coalition. The Democratic Action Party, the largest party in the ruling bloc, is considering moving its cabinet ministers to the backbenches. This comes as support for Prime Minister Anwar Ibrahim has weakened and reforms have progressed slowly.
In foreign exchange markets, USD/MYR fell 0.2% to 3.90 last Friday and declined 0.1% over the week. Year to date, the Malaysian ringgit is up 4.0% against the US dollar.
Foreign portfolio flows have turned positive on a net basis. Net foreign portfolio inflows totalled USD355mn this year, compared with a USD885mn outflow over the same period last year.
We are seeing a strong start to 2026. January export growth of 19.6% was the best since late 2022. This strength is supported by the global technology upswing that began in 2025, which is still lifting demand for Malaysian electronics. The ringgit has gained 4% against the dollar this year, helped by USD355 million in net foreign inflows.
However, political uncertainty in the governing coalition is rising. Any sign of instability could quickly reverse the portfolio inflows seen so far. The market volatility around the 2018 general election shows how quickly foreign capital can leave on political headlines.
Over the next few weeks, this mix of strong data and higher political risk suggests that buying volatility may be sensible. With economic data strong, it may be risky to outright short the ringgit. But ignoring political risk also looks unwise. Options could help hedge long-MYR exposure or position for a sharp move in USD/MYR, possibly above 4.00.
Bank Negara Malaysia’s steady stance on the Overnight Policy Rate helps for now. It has held the rate at 3.00% since mid-2023. The 10-year Malaysian Government Securities yield, near 3.85%, also looks attractive versus the US 10-year Treasury. This yield gap can support some foreign investment, but it may not be enough to stop outflows if political risks rise further.
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