Fitch Ratings expects Malaysia’s debt capital market (DCM) to reach USD640 billion outstanding by end-2026, due to modest growth on increased non-sovereign borrowing, a deep domestic market, a stronger ringgit, continued innovation and digital integration. The first tokenised sukuk out of Malaysia was issued in 1H26, and new regulations governing private debt should create a more enabling environment. The Iran war has had limited direct impact on the DCM as most issuers and investors are domestic.
“Foreign investor demand for Malaysian debt has remained resilient despite global volatility. This reflects the ringgit’s appreciation, stable yields, and the relative depth and development of the local DCM,” said Bashar Al Natoor, Fitch’s Global Head of Islamic Finance. “Malaysia is also likely to remain one of the world’s largest sukuk markets, as well as one of the largest DCMs in ASEAN. In addition, all Fitch-rated Malaysian sukuk are investment-grade.”
Malaysia’s DCM exceeded USD610 billion outstanding at end-5M26, up by 6.5% yoy. About 60% of this was sukuk. Government debt made up about 58% of the DCM outstanding. However, the government aims to reduce federal government debt to 60% of GDP or below by 2030, which could temper sovereign debt issuance. While sovereign issuance declined by about 25% in 5M26, non-sovereign issuance increased by 17% yoy, to 68% of total DCM issuance (5M25: 58%). ESG DCM rose by 44% yoy to USD20 billion outstanding, supported by tax incentives.
The yields of Malaysian government debt in 2026 have so far been stable despite global volatility. Most rated Malaysian sukuk had much higher liquidity than sukuk from most other countries.
Lower sovereign borrowing, risk-off sentiment, ringgit and interest-rate volatility, commodity price swings, inflationary pressure, and the effects of US tariffs could all weight on DCM growth.
