"At 2-2 we had some momentum and it was disappointing we allowed them to come back into the game with too many rushed and emotional decisions in defence. We need to improve greatly around overcoming those situations."
The world No 8 Black Sticks began slowly and were behind, to a Razie Rahim penalty corner in the second minute.
Hugo Inglis equalised with a penalty stroke after 21 minutes but Malaysia, ranked No 13, regained the initiative in the third quarter through Joel van Huizen.
Eight minutes from fulltime defender Cory Bennett created some magic to equalise again, pouncing on his own penalty corner deflection to put the ball into the roof of the net on his reverse stick.
But Malaysia silenced the crowd five minutes from the end when Rahim nailed his second goal of the game with another penalty corner flick.
The third match is at the same venue on Wednesday night.