Kuala Lumpur, September 3, 2025 — Market sentiment in Malaysia is showing signs of renewed strength, as rising expectations of a U.S. Federal Reserve interest rate cut are boosting the ringgit and injecting fresh optimism into the equities market. According to CGS International Securities Sdn Bhd, narrowing gaps between the U.S. Federal Funds Rate (FFR) and Malaysia’s Overnight Policy Rate (OPR) could prove a significant tailwind for both local currency and stocks.
CGS International points to the notable recovery in late 2024 when the ringgit surged 11.3% in the third quarter, riding on the back of the Fed’s first post-pandemic rate cut in September. Malaysia’s key benchmark index, the FBM KLCI, mirrored this outperformance, rising approximately 7.3% from its low during that period .
The firm highlighted a –41% inverse correlation between the FBM KLCI and the FFR‑OPR spread, meaning that as the interest rate differential narrows, stock market conditions tend to improve.
Revising its outlook, CGS International raised its target for the year-end FBM KLCI from 1,670 to 1,690 points, after extending its valuation timeframe to mid‑2026 and incorporating five-year average earnings multiples. Its updated earnings forecasts now see growth of 4.0% in 2025 and 7.2% in 2026, compared to previous estimates of 5.4% and 7.3%, respectively.
