April 2026 Market Outlook

Geopolitical Shock and External Vulnerability

March 2026 market were driven by a higher geopolitical risk premium stemming from escalating tensions involving Iran and the threat of disruption around the Strait of Hormuz. This led to higher energy prices, lifted inflation expectations, constrained the Federal Reserve’s room to ease, and increased downside risks to global economic growth by tightening financial conditions and raising input costs across global freight.

As a result, global asset markets moved into a more defensive posture, with investors rotating toward safer assets and becoming more selective on risk exposure. Higher global energy and freight costs could feed into imported inflation and weigh on external demand, placing Malaysia’s economy in a more challenging and externally vulnerable operating environment.

Global equity markets carried February’s downward momentum into March. The S&P 500 fell 4.2% while the Nasdaq declined 4.1%, reflecting heightened sensitivity to valuations and a geopolitical risk shock on the Middle East. In the U.S., the unemployment rate held at 4.4% in February, while core CPI rose 2.5% year-on-year, pointing to a softer labour backdrop alongside sticky underlying inflation.

Against this backdrop, Federal Reserve’s March communication maintained a cautious and relatively hawkish tone, keeping the federal funds target range unchanged at 3.50%–3.75% and signalling that policy would remain restrictive.

Malaysia’s macro fundamentals remained intact in March. Bank Negara Malaysia kept the Overnight Policy Rate unchanged at 2.75%, signalling that the current policy stance remains appropriate to support growth while preserving price stability. At the same time, foreign portfolio flows rebounded sharply, with Malaysia recording net inflows of RM6.1 billion, driven by demand for government and private debt securities. This indicates that Malaysia continued to be viewed as a relatively defensive and lower-risk market within the region, even amid rising geopolitical risk and firmer global yields.

A stable policy settings, resilient domestic demand, and continued investor interest in fixed income remain supportive of overall asset confidence, particularly for rate-sensitive sectors such as real estate.

Malaysia’s construction sector maintained positive momentum, supported by stronger domestic construction activity and rising progress billings from ongoing projects.

Summary

March 2026 global markets come under pressure from rising geopolitical tensions, firm inflation, and a restrictive U.S. policy backdrop, resulting in weaker risk appetite and tighter financial conditions. Against this environment, Malaysia remained relatively resilient, supported by stable monetary policy, strong foreign inflows into debt securities, and continued confidence in domestic assets. REITs sustained positive momentum, particularly in retail-focused portfolios, while construction benefited from stronger domestic execution and healthy order book visibility. Overall, these trends suggest that Malaysia’s real asset sectors continue to be supported by domestic resilience and a stable monetary policy environment.