Why Capital Markets Malaysia

Capital Markets Malaysia (CMM) is the only platform that provides comprehensive information on the various segments of the Malaysia capital market. This website provides overview information, what you should do to invest or participate in the Malaysian capital market and who you should contact.

It explains the key features of the capital market in Malaysia and how it is underpinned by a vibrant economy located in the heart of ASEAN, one of the highest growth regions in the world. We outline here what may be attractive to international portfolio investors considering Malaysia and how these could differ from the offerings of other countries and regions.

If you require further information not available on this website, please e-mail Preetha Subramaniam at [email protected] or call +603 2091 0667.

The Four Pillars

CMM was established by the Securities Commission Malaysia (SC) to further develop and position Malaysia’s capital market – classified as an advanced emerging market in the FTSE Global Equity Index Series in 2013 – on the international front. CMM focuses its efforts on the four primary pillars of the capital market:

  1. Equities
  2. Fixed Income
  3. Asset Management
  4. Alternative Assets

CMM also highlights the importance of the Islamic Capital Market and the Sustainable and Responsible Investment (SRI) framework, which cut across all four market segments to expand the spectrum of product offerings to issuers and investors in the Malaysian capital market.

Equities - Largest in ASEAN

Malaysia has the second largest equity market in ASEAN in terms of market capitalisation, with the largest number of listed companies providing diversified exposure.

It has a strong domestic presence in its equity market, which provides investors with stability against global volatility – this is reflected clearly in the MSCI Asia Pacific Risk Weighted Index, in which Malaysia represents 9% of the index.

In terms of primary fundraising, Malaysia has reached a more advanced stage compared to most of the rest of the ASEAN markets. A large number of Malaysian listed companies have become regional and global players through both organic growth and acquisitions, which provides investors with great exposure to opportunities within ASEAN and beyond by investing in Malaysian equities. This development has also benefited our secondary equity market – in 2015, we raised the highest volume of funds in the secondary market within ASEAN.

Fixed Income - Largest in ASEAN, Third Largest in Asia

Malaysia has the third largest fixed income market relative to GDP in Asia after Japan and South Korea, and the largest in ASEAN, predominantly due to the rapid expansion of the Malaysian sukuk (Islamic bonds) market.

The Malaysian fixed income market has grown by 10.4% annually on a compounded basis in the last 10 years. In the sukuk market, we have consistently maintained our position as the global leader with over 50% share of the world’s sukuk market.

Malaysia has developed deep experience in structuring and raising funds in both the conventional and Islamic fixed income markets, and is widely recognised as being the leading international marketplace for sukuk issuances.

Foreign companies, including well-known corporate names, have also demonstrated their confidence in the Malaysian fixed income market by choosing Malaysia as their preferred base for bond issuances. Examples are: Bank of Tokyo-Mitsubishi UFJ (which issued the first Japanese sukuk in Malaysia in 2014); and Turkiye Finans (which was the first Turkish lender to issue a sukuk in Malaysia in 2014).

Fund Management - Largest Islamic Funds Under Management in the World

Malaysia benefits from having international fund management expertise due to key international players having chosen the country as a global Islamic hub for their asset management operations.

Total assets under management (AUM) in Malaysia have seen a phenomenal compounded growth rate of 12.1% annually over the last 5 years, and our diversity in fund management is demonstrated by our ranking as the largest country for Islamic AUM globally.

The fund management industry in Malaysia is backed by a strong domestic institutional base, which provides support for the Malaysian capital market and reduces volatility resulting from inflows and outflows of funds from foreign investors.

Alternative Assets - New and Different Ways of Raising Money

The market regulator, the Securities Commission Malaysia (SC), is also looking at alternative ways of providing financing in addition to the conventional equity and fixed income markets. Among these is equity crowdfunding (ECF). ECF represents a growing market segment which democratises the financing process by using technology to provide small participants and entrepreneurs cheap access to seed capital which would otherwise not be available to them.

As a growing market still in its infancy, it provides an important alternative fundraising avenue to small businesses who cannot as yet afford to tap the conventional marketplace.

In 2015, Malaysia became the first ASEAN country to introduce ECF and is among the first in the Asia Pacific region. Six platform operators have been approved to vet the applications for crowdfunding, take the ventures to market and eventually provide a window for trading from time to time.

Other activities contemplated include the promotion of a wider range of exchange traded funds (ETFs) from the existing eight funds (as at June 2016) to reflect the diversity of the country and the region, derivatives, private equity and venture capital, and peer-to-peer financing, for which measures are already in the pipeline.

The Islamic Capital Market – Global Leader in Sukuk Issuance

Malaysia is a global leader in sukuk issuance, and is widely recognised as being the leading international marketplace for sukuk issuances.

It has depth of expertise in Islamic equities, fixed income and asset management, and has pioneered the setting up of guidelines and frameworks within the global Islamic capital market.

Examples include: the establishment of the Malaysia International Islamic Financial Centre (MIFC) in 2006 as a one-stop contact point to facilitate the issuance of sukuk; the development of the SRI Sukuk Framework in Malaysia in 2014; and the upcoming establishment of the world’s first Islamic venture capital fund.

We have built the framework for identifying and developing new Islamic products in the capital market. Recent interest in SRI provides further potential for expansion of the Islamic capital market due to sustainability being a key common factor between Islamic finance and SRI.

Sustainable and Responsible Investment

Recent interest in SRI – the concept of making investment decisions that take into account not only financial returns, but also the social and environmental impacts brought about by the investment – has also cast the net wider for fixed income issuances, and in particular, Islamic fixed income financing in Malaysia.

In Malaysia, Shariah-compliant investing represents the largest part of the country’s SRI strategy (99.33% of total sustainable investment assets in Malaysia in 2013), due to sustainability being a key common factor between Islamic finance and SRI. There are thus ample growth opportunities for fixed income fundraising within the SRI framework.