KUALA LUMPUR: A timely question facing Malaysia today is whether a stronger ringgit can meaningfully improve the wellbeing of the rakyat, attract higher-quality foreign direct investment and, ultimately, help the country escape the constraints of a long-standing real income and productivity trap.
CGS International Securities Malaysia Sdn Bhd country head Alan Inn said beyond the macroeconomic implications, currency strength has tangible consequences for households, businesses and capital markets alike.
“For investors and fund managers, a firmer ringgit would warrant a thoughtful recalibration of portfolios, particularly towards sectors that stand to benefit from stronger domestic purchasing power – such as retail, travel and other consumption-driven industries rooted in Malaysia.
“This shift is especially relevant given that the vast majority of companies under research coverage – estimated at nearly 85% – are fundamentally domestic-centric, positioning them to potentially enjoy meaningful earnings tailwinds in an environment of sustained currency strength,” he said during a panel discussion titled “The Ringgit Boost – Implications for 2026” at the CGS International 18th Annual Malaysia Corporate Day 2026 held recently.
During the panel discussion, AEON360 managing director Low Ngai Yuen said consumer spending in the most recent quarter rose about 7% year-on-year, with volumes increasing by around 6%, signalling a meaningful improvement in domestic demand.
“This marks a clear inflexion from the third quarter, when sentiment was exceptionally soft, and market confidence was visibly lacking across industry forums.”
That period of weakness, however, prompted a strategic reset, she said.
“The softness in Q3 forced a reassessment of inventory planning and competitive positioning,” Low said, adding that fourth-quarter results reflected “a combination of improved execution and a gradual recovery in consumer confidence”.
Rather than expressing confidence verbally, consumers are revealing it through behaviour.
“What we are seeing in our data is basket upgrading. Customers are increasingly willing to trade up – whether to higher-priced personal care products or items with added functionality – suggesting improved discretionary confidence,” Low said.
This shift has been further supported by policy measures.
“The capital subsidy introduced in Q4 played a meaningful role in driving footfall, particularly in our hypermarket segment, which remains commodity-driven,” Low said.
AEON Group currently operates 22 hypermarkets alongside more than 25 department stores and supermarkets, with diverging consumer behaviours observed across formats.
Low said spending patterns are also evolving beyond essentials.
“In urban and higher disposable income segments, consumers are planning travel, including overseas destinations such as Japan,” she noted, adding that demand for imported food and international offerings gained traction in Q4 compared with the prior quarter.
Taken together, these trends point to a gradual restoration of confidence. “We are seeing early but tangible signs of consumers becoming more comfortable with how they spend,” Low said.
A key question often asked, she said, is how much of current consumption is driven by Sumbangan Asas Rahmah (Sara) assistance versus factors such as ringgit appreciation and a stronger-than-expected macroeconomic backdrop.
With the government confirming the continuation of Sara this year, Low said, “the interplay between policy support, currency strength and underlying economic resilience will remain critical in shaping consumer behaviour going forward.”
Moving on, Merchantrade Asia Sdn Bhd’s chief commercial officer, Ivan Alias, said the dynamics of foreign labour and cross-border remittances are becoming increasingly important parts of Malaysia’s broader economy.
He said in the first three quarters of last year alone, foreign workers remitted an estimated RM39 billion out of Malaysia, underscoring both the scale of migrant labour participation and the capital flowing offshore.
At the same time, policy signals indicate a longer-term intention to reduce reliance on foreign workers, raising questions about how labour patterns and remittance behaviour may evolve.
Ivan said Merchantrade’s remittance data points to a notable shift rather than a simple outflow narrative.
“When we compare December with the same period a year earlier, total remittance outflows from Malaysia actually declined, and the number of transactions fell by about 29%. However, when we looked deeper into the data, we observed two important developments driving this change.”
The first was a migration back to formal channels.
“We saw new customers entering our ecosystem, many of whom had previously used informal networks,” Ivan explained. “They have now returned to licensed, formal remittance channels, which reflects both trust and regulatory alignment.”
The second trend was a change in remittance behaviour among existing users. “In December, many customers sent money multiple times, but in smaller tranches,” Ivan said.
“This was largely driven by currency volatility, where both the ringgit and recipients’ home currencies were moving rapidly.”
According to Ivan, this pattern was especially pronounced in digital remittance channels.
“Digital remittance allows customers to send smaller amounts more frequently because the cost structure is flat,” he noted. “We do not see the same behaviour over the counter, where indirect costs – such as transport and time – are much higher for migrant workers.”
Taken together, the data suggest that while overall remittance volumes may be moderating, foreign workers remain economically active in Malaysia, with behaviour increasingly shaped by currency movements, cost efficiency, and access to digital financial services.
“What we are observing is not an exit, but an adaptation,” Ivan said, pointing to a more nuanced evolution in how migrant workers manage earnings and cross-border financial obligations.
The emerging trends point to a domestic economy that is gradually regaining confidence, supported by improving consumer behaviour, targeted policy interventions and shifting financial flows.
On the consumer front, spending patterns are evolving beyond essentials, with evidence of basket upgrading, higher discretionary activity and renewed appetite for travel and imported goods – signals that confidence is returning, even if cautiously.
This recovery has been reinforced by government support measures and a more resilient macroeconomic backdrop than initially expected.
At the same time, remittance data highlights a more nuanced picture of Malaysia’s foreign labour dynamics.
While overall remittance volumes have moderated, behavioural shifts – particularly the move from informal to formal channels and the increased use of digital platforms – suggest adaptation rather than withdrawal.
Collectively, these developments underscore a broader structural transition within the economy – one where domestic demand, financial formalisation and digital adoption play an increasingly central role.
As currency strength, policy continuity and economic performance intersect, the key question ahead is not whether behaviour is changing, but whether these shifts can be sustained to support longer-term income growth, investment quality, and economic resilience.
