KUALA LUMPUR, March 20 ― Domestic financial markets remained orderly in the second half of 2023 (2H 2023) despite global volatility, said Bank Negara Malaysia (BNM).

BNM said domestic market stress, measured by the Financial Market Stress Index (FMSI), increased in October and November.

"This was driven mainly by the higher volatility observed in the equity and foreign exchange (FX) markets.

"Market stress subsequently decreased in December amid growing expectations of a reduction in the Federal Funds Rate (FFR) following the release of the Federal Open Market Committee’s (FOMC) projected policy rate path and the anticipation for the US economy to achieve a ‘soft landing’,” it said in its Financial Stability Review Second Half 2023 released today.

The central bank said that in the second half of 2023, central banks of major economies paused or slowed the pace of policy rate increases, signalling that a turning point in their monetary policy path could be approaching.

"While this development provided some support to global financial markets, volatility continued to remain high due to shifting expectations on the timing and magnitude of policy rate cuts.

"Increased concerns over the escalation of geopolitical tensions since October 2023 led to a higher demand for safe-haven currencies, such as the US dollar,” it said.

In addition, BNM said that the data released related to China’s slower-than-expected economic growth has dampened investor sentiment towards the region. ― Bernama