Investors are increasingly moving away from holding a homogeneous view on emerging markets towards greater differentiation, Securities Commission chairman Ranjit Ajit Singh said in his message in the recently released SC's annual report for 2015.
He said they were assessing individual markets on the basis of fundamentals, including long-term economic prospects, the quality of capital market regulation and corporate governance, as well as the credibility of institutions.
Notwithstanding headwinds in the emerging markets, the Malaysian capital market continued to expand in 2015 to reach RM2.82 trillion in size compared to RM2.76 trillion in 2014.
The growth was driven by the equity market, which grew by RM44 billion from RM1,651 billion in 2014 to RM1,695 billion by end-2015, and the bond market which also grew by RM15 billion to reach RM1,125 billion in 2015, compared to RM1,110 billion in the previous year.
"Such expansion attests to the sustained ability for issuers to obtain long-term financing from the Malaysian capital market, as fundraising activity remained robust throughout the year with RM86 billion raised through the issuance of private debt securities - higher than the corresponding amount in 2014 - and RM4 billion raised via initial public offerings, bringing the total funds raised through the primary market to RM90 billion in 2015, compared to RM92 billion in 2014."
Assets under management by fund management companies rose 6% to RM668 billion in 2015 compared to RM630 billion in 2014. Unit trust funds continued to be the largest source of clients' assets under management, with net asset value of RM347 billion by end-2015 compared to RM343 billion in 2014.
The unit trust industry, which is an important proxy for retail investor confidence in the capital market, also recorded a surplus of sales over redemptions with the number of units in circulation growing from 425 billion in 2014 to 458 billion in 2015.
"Moreover, while the capital market recorded net portfolio outflows in 2015 in line with global emerging market trends, the value of foreign ownership in the corporate bond market increased slightly from RM13.9 billion in 2014 to RM14.0 billion by end-2015. Liquidation of foreign portfolio positions in the equity market also took place at a measured pace, with the FBMKLCI recording a decline of 3.9% compared to the MSCI Emerging Markets index which fell by 17.0% over the same period," Ranjit said.
Islamic Capital Market
On the Islamic Capital Market, he said Malaysia has firmly established its reputation as a global leader in Islamic finance and the world’s largest issuer of sukuk. With Islamic finance rapidly gaining traction in Muslim-majority nations and international financial centres alike, he saw it as crucial for the SC to continue to identify new growth areas to consolidate Malaysia's leadership in an increasingly competitive market, with fund and wealth management identified as a high-potential segment.
"Extensive work is therefore underway in formulating a roadmap which articulates the SC’s strategy to establish Malaysia as a global Islamic fund and wealth management hub, the release of which is slated for 2016."
He said that Malaysia's well-established Islamic capital market infrastructure lends itself to natural synergies for the SC's efforts to capitalise on growing interest in sustainable and responsible investments (SRI) - an interest driven by pressing global concerns over socioeconomic issues including inequality, climate change and the financing of humanitarian aid.
Ranjit said that the SC was casting the net wide to pursue criminal and administrative actions against various disclosure-related offences such as non-compliance with approved accounting standards and the furnishing of false and misleading statements. This included charging a licensed audit partner for abetting a public-listed company in
making a misleading statement to the stock exchange.
Insider trading continues to be a focus area, with 16 individuals charged for such offences. A total of 41 administrative actions were also taken against various parties that have failed to act in accordance with the standards of conduct and integrity required by the SC, including licensed persons, public-listed companies as
well as their directors.
Ranjit said that as Chair of the ASEAN Capital Markets Forum (ACMF), which represents securities regulators from all 10 member states, the SC remains committed
towards the ASEAN regionalisation agenda and has led the formulation of the ACMF Action Plan 2016-2020, which articulates regulatory and developmental priorities
that will be pursued over the next five years to achieve greater connectivity and harmonisation across the region’s capital markets.