Malaysia set for stronger fund inflows, ringgit after US rate cut

KUALA LUMPUR: Malaysia is set to gain from stronger foreign fund inflows, a firmer ringgit and improved demand for its exports after the United States Federal Reserve cut interest rates for the first time this year, experts said.

The Fed's first rate cut since December 2024 came as unemployment in the US edged up to 4.3 per cent, with chair Jerome Powell signalling more easing ahead to cushion labour market risks and offset tariff-related price pressures.

SPI Asset Management managing director Stephen Innes said the move is being viewed as a global liquidity signal that could set the stage for stronger foreign inflows into Malaysia's markets.

He said while the 25 basis point cut does not alter Malaysia's fundamentals directly, it provides a more supportive backdrop for risk assets across emerging markets.

"Bursa Malaysia could benefit from stronger foreign inflows as global investors rotate into emerging markets with improving carry and valuation appeal, particularly in export and commodity-linked sectors," he told the Business Times.

Innes also noted that the broader economy would feel the impact mainly through capital flows.

"A Fed easing cycle can encourage more inflows chasing a stronger ringgit, which in turn improves market confidence and provides some insulation against external volatility," he said.

For Bank Negara Malaysia, however, the policy stance remains delicate.

Innes said the central bank cut its overnight policy rate (OPR) in July and held steady in September, signalling caution not to appear as simply shadowing the Fed.

"If Powell's easing path accelerates, the pressure will build for Bank Negara to keep regional alignment in order to support competitiveness and capital flow stability.

"Domestic inflation is contained and growth remains reasonably resilient, which argues against urgency.

"November's decision will depend heavily on export performance and labour data — another cut is possible if external risks worsen, but the bias is still toward gradual, measured adjustments rather than aggressive easing," he said.

Meanwhile, IPP Wealth Managers investment strategist and country economist Mohd Sedek Jantan said the move reinforced a constructive outlook for the ringgit, which could trade in the 4.10 to 4.15 range by year-end.

"Narrowing rate differentials, resilient domestic growth and fiscal consolidation anchor investor confidence.

"Looking ahead, investors should position for a lower US rate environment, a softer dollar, and selective opportunities across emerging markets, with Malaysia among the relative beneficiaries," he said.

On the same view, Principal Asset Management Asean fixed income chief investment officer Jesse Liew said the Fed's gradual easing path would be supportive for regional currencies and bonds.

Liew noted that across Asean this gathers into one clear story for ringgit, rupiah and bath local currency bonds and foreign exchange, where an easier Fed lowers outflow pressure and steadies' currencies.

"In Malaysia and Indonesia, the central banks can remain patient while keeping room to act, with any local easing guided by domestic growth and currency stability.

"In Thailand, softness in macro indicators is now partly balanced by clearer policy direction, with expectations of swift government formation and a possible stimulus package supporting growth. The mood, however, remains subdued and hence the path of easier policy hence stays intact," he said.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the ringgit's appreciation would boost importers' purchasing power, but cautioned the rate cut also underscored rising downside risks to global growth.

"We have seen tariff policies are negatively affecting the US economy. The immigration policies seem to have a significant impact on US gross domestic product.

"The populist policies are taking a serious toll on the US govt finances which saw the US sovereign rating is no longer a AAA rated country.

"I suppose the rate cut should raise alert on the extent of global growth momentum going forward," added Afzanizam.

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