Despite a very challenging year in 2015, capital markets in Malaysia remained resilient, expanded in size and raised RM90 billion (US$22.5 billion) in fresh capital, according to Securities Commission (SC) chairman Ranjit Ajit Singh.
"2015 was a very challenging year for emerging markets globally. Markets were affected by many factors - the commodity price effects, the effects of the decline in growth in the major markets, as well as the consequential impact on the currencies and the uncertainty around the Fed tightening, dominated Malaysian markets," he told Malaysian business radio station, BFM, in an interview recently.
"The Malaysian market was resilient - despite a decline of 17% (across emerging markets), ours declined only 3.9%. RM90 billion worth of capital was raised. That's very important because ultimately it is about preserving the confidence for capital formation. Growth in asset management was 6% while the bond market grew as well."
"Overall, what was heartening to see was despite the volatility, the Malaysian market continued to grow and demonstrated resilience. The thrust of what we do is to create the architecture, the institutional structure and the market foundations to enable the capital markets to contribute to economic growth."
Ranjit explained that the SC's role is two-fold - first as regulator and second as developer of the capital markets. This includes protection of investors through ensuring market integrity and surveillance to control systemic risks.
The SC's independence is enshrined in the statute books and allows it to serve as mandated by the law. Ranjit said that the regulation of the markets has been tested by authorities such as the International Monetary Fund, or IMF.
"By and large, what we do is ensure better quality disclosure. Advisers must play their role as gatekeepers and do the right due diligence."
"We have to work together with the market operators - the stock exchange and broker dealers - to preserve integrity and trust, and confidence in the market. This is absolutely critical. This is a shared responsibility. We want a right price discovery process," he said.
While the SC has strengthened the surveillance system, markets have become very complex and demanding, he added. "Twenty years ago we typically dealt with one account (during investigations). Today there are 200 accounts cutting across jurisdictions. You have to make sure there is strong deterrent against market manipulation."
On derivatives, he said they have a role as long as they serve their purpose and are not abused. Capital markets have risks and the role of the SC is to ensure informed decision-making but yet not prevent people from taking risk based on their own risk appetite.
"Our role is to broaden and deepen the market but not (necessarily make it) more complex - give more choice and allow informed decision-making. Speculation is part and parcel of the market; the question is whether it is extreme or excessive. You want to focus on orderly markets. If there is an asymmetry of information, that has to be addressed."
"The best-protected investor is an informed investor. They key thing is there is a lot of information out there. Investors must take on responsibility (to use them)."
*extracted from SC Annual Report 2015