Fitch sees Malaysia's DCM hitting $640bn by end-2026

June 19, 2026 (MLN): Malaysia's debt capital market (DCM) is on track to reach $640 billion outstanding by end-2026, driven by modest growth on the back of rising non-sovereign borrowing, a deep domestic market, ringgit appreciation, and continued innovation including digital integration, according to Fitch Ratings.

The rating agency noted that Malaysia's DCM surpassed $610 billion outstanding at end-May 2026, reflecting a 6.5% year-on-year increase, with sukuk accounting for around 60% of the total.

Government debt constituted approximately 58% of DCM outstanding, though sovereign issuance fell by around 25% in the first five months of 2026 as Kuala Lumpur works toward reducing federal debt to 60% of GDP or below by 2030.

Non-sovereign issuance, meanwhile, climbed 17% year-on-year to represent 68% of total DCM issuance, against 58% in the same period last year.

ESG-linked DCM surged 44% year-on-year to $20 billion outstanding, aided by tax incentives.

Malaysia's first tokenised sukuk was issued in the first half of 2026, while new private debt regulations are expected to further improve the issuance environment.

The Iran conflict has had limited direct bearing on the DCM, given that most issuers and investors are domestic.

Bashar Al Natoor, Fitch's Global Head of Islamic Finance, said foreign investor demand for Malaysian debt had remained resilient despite global volatility, reflecting the ringgit's appreciation, stable yields, and the relative depth and development of the local DCM.

He added that Malaysia was likely to remain one of the world's largest sukuk markets and among the largest DCMs in ASEAN, with all Fitch-rated Malaysian sukuk carrying investment-grade ratings.

Fitch flagged that lower sovereign borrowing, risk-off sentiment, currency and interest rate volatility, commodity price swings, inflationary pressures, and the effects of US tariffs could weigh on DCM growth going forward.

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