Malaysian Assets Face Near-Term Pressure from Fed and BoJ Rate Hikes

The US Federal Reserve and Bank of Japan's potential policy rate hikes this week could put pressure on Malaysian assets. Market observers warn that a simultaneous tightening by both central banks would create a less favorable liquidity environment, leading to an outflow of hot money in the short term.

Imran Yassin, head of research at MBSB Research, believes that investors will reduce leverage and exposure to Asian risk assets, including Malaysian equities, if the Fed raises its policy rate by 25 basis points. The expected hike would also prompt a sharper rise in US Treasury yields and result in a stronger yen appreciation.

Malaysia's strong domestic growth, institutional support, defensive sectors, and artificial intelligence-driven export demand could provide some cushion against these risks. Imran expects an orderly regional pullback rather than a major market correction.