The Four Forces in Malaysia’s Capital Market that Drives Growth

Kuala Lumpur, May 07, 2018 (GLOBE NEWSWIRE) — Capital markets are akin to networks – where institutions, investors and those raising funds are connected through various mechanisms. Every network has its goals, be it effectiveness, efficiency or size.

According to Bursa Malaysia’s CEO, Tajuddin Atan, Malaysia’s exchange holding company has a greater guiding goal, “Bursa Malaysia’s goal is to serve the nation’s economic growth potential in an integrated, collaborative manner – building upon the government’s economic policies while creating a balance between macro-economic conditions, the needs of Malaysian businesses of all sizes and positioning the Malaysian capital market in the eyes of global investing community.”

This balance comes from four forces at play: 1) Helping Malaysian companies (some of which are ASEAN household names) go global; 2) Building a solid core of Malaysian SMEs, the next drivers of growth (especially those operating within the new economy); 3) Growing participation of investors of all sizes and developing international credentials; 4) And by doing this through innovations in Islamic capital market leadership, Crude palm oil futures (FCPO) and the Sustainability Agenda.

“These four forces fuel the economy, while ensuring broad participation that creates sustainable, wide-spread and equitable growth,” said Tajuddin.

Globalisation of Malaysian Companies

Bursa Malaysia has a strong base. Its market capitalisation grew 185.6% from January 2009 till end March 2018. In the same period, in terms of funds raised across the primary and secondary markets, Malaysia leads with USD61.96 billion as compared to the other emerging ASEAN markets.

In 2017, foreign fund net inflows into the equity market stood at USD2.46 billion, well ahead of the region (Vietnam +USD1.01 Billion, Philippines +USD1.1 Billion, while Indonesia and Thailand recorded net outflows).

Malaysia’s equity market also has the highest number of listed companies at 906 – ahead of Singapore (745), Vietnam (737), Thailand (691), Indonesia (569) and Philippines (267) as at end March 2018.

Tajuddin believes that this recognition by funds, both local and foreign have supported the creation of regional champions and global players –  household names such as AirAsia, CIMB, Maybank, Sime Darby, IHH Healthcare, Petronas Chemicals, Maxis, Axiata and Public Bank amongst others. The market throws its full support behind the growing number of companies whose ambitions lie in a regional or global role.

“Other than sheer size, revenues and profits, they contribute by building the image of the Malaysian market – we are now increasingly being seen as a gateway to ASEAN investment by many investors the world over,” Tajuddin surmised.

Boosting SMEs

This recognition also helps support SMEs – a big part of the Malaysian economic miracle, and undoubtedly, from where the next generation of Malaysian global champions will emerge from.

Tajuddin went on to explain that Bursa Malaysia had developed various platforms to serve the SME segment – the ACE market, the Mid and Small Cap Research Scheme to drive visibility and discovery, and the first of its kind platform for sophisticated investors and SMEs in ASEAN, the LEAP Market which helps address the SME financing gap. The Government has also provided listing incentives (LIVE) to create more opportunities for underserved SMEs.

Growing the Investor Base

“The third force is the active participation of a broad range of investors. Bursa Malaysia constantly invests in education programmes in this area. Just last year alone, we reached 35,000 investors at over 170 investor seminars and workshops, said Tajuddin. As far back as 2014, Bursa Marketplace – a virtual, online marketplace and education portal began to provide access to market knowledge, insights and trading ideas while helping develop financial literacy. Retail participation grew by 41% in 2017.

Innovations

The fourth force comes from market innovations – in the Islamic Capital Market, Derivatives Market and by driving the Sustainability Agenda.

Innovative products and solutions can be seen in the Bursa Suq Al-Sila’ international commodity trading, Bursa Malaysia-i, the world’s first end-to-end Shariah investing platform and the Islamic Securities Selling and Buying Negotiated Transaction (iSSBNT) framework, the world’s first Shariah-compliant alternative to Securities Borrowing and Lending.

Tajuddin went on to say that Bursa Malaysia’s pivotal role in developing the Islamic Capital Market and having the foresight to provide innovative market-based financing solutions has won the company numerous global recognitions. This includes Best Islamic Exchange Asia in 2016 and 2017, Most Innovative Global End-to-End Shariah-compliant Investing Platform Asia 2017, First End-to-End Shariah-compliant Investment Platform and Best Commodity Trading Platform Asia 2017.

“We are also noted for Malaysian crude palm oil futures (FCPO) contracts – now a global benchmark. And in the field of driving the Sustainability Agenda, Bursa Malaysia was the first emerging market to launch the globally-benchmarked FTSE4Good Bursa Malaysia Index,” Tajuddin stated.

These are the four forces at play, and the resulting impacts. These forces exist within the strong vision and framework of the nation’s economic policies that have helped sustain growth, build an environment where businesses can thrive and encourage new economy innovation.

Continuity and Stability

It is a market that continues to display positive momentum, underpinned by solid fundamentals – growth is resilient, domestic demand continues to expand and Malaysia is seen as one of the stronger markets within ASEAN and an attractive investment destination. These attributes have been built-in to the Malaysian economy over the past decade, and are foundations upon which the positive trajectory of sustainable growth can continue.

“As investors, businesses and even economic policy-makers chart their future growth plans, they all depend on a sense of continuity of effective policies, credibility of governance and stability. For Bursa Malaysia, these are the critical factors as we continue to further liberalise the capital market – to build a developed exchange that can meet the demands of a developed nation,” Tajuddin concluded.

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Dominic Tan
Be Strategic Sdn Bhd
+6012-336-9168
dominic.t@bestrategic.my