Malaysia is a stable high-growth, advanced emerging market with a diversified and strong economic base. It has a highly developed capital market with an equity market valued at RM1.7 trillion and a fixed income market of RM1.12 trillion at the end of 2015, giving a total capital market size of RM2.82 trillion (US$705 billion). Islamic compliant instruments accounted for RM1.7 trillion or 60% of these.
Malaysia is a significant advanced emerging market in terms of equity value and is typically among the top five markets in Asia represented on the MSCI Asia Pacific Index, and the top market in ASEAN for fundraising in the secondary market. Malaysia also has the third largest bond market relative to GDP in Asia after Japan and South Korea.
Malaysia has a long history of economic and political stability, enjoying high growth rates and investment grade debt ratings among international rating agencies. The government is committed to free market policies and sees international linkages as an important part of overall economic and social development. The economy has diversified from the traditional dependence on commodities and is now strongly rooted in services, driven increasingly by domestic demand.
It has always honoured its debt obligations, has strong financials, high domestic liquidity of funds, relatively low foreign borrowings and has never had to resort to financial aid from international organisations such as the International Monetary Fund (IMF), successfully pulling out of repeated major financial crises on its own steam.
There has been an open policy towards both foreign direct and portfolio investors from the time of independence in 1957. Money can be brought in and taken out freely without any capital controls.
On top of that, the tax regime is liberal with no capital gains tax on portfolio investments and exemption of withholding tax on some categories of earnings.
A strong system of governance is in place for capital markets with specific legislation aimed at providing investor protection and assuring continuity of policies, rules and regulations. The main regulatory body, the Securities Commission Malaysia (SC), is considered to be among the best and has ensured that regulation is in line with global best practices, both in terms of regulation and promoting the development of an orderly and investor-friendly capital market.
Malaysia lies within the high-growth ASEAN market with many of its companies diversifying into key markets in other ASEAN countries. If ASEAN were a country, it would be the seventh largest in the world in terms of GDP. As ASEAN economic integration increases, there will be increasingly more opportunities for Malaysian companies and the capital market from the links with ASEAN.
The combination of stability within Malaysia and high growth within ASEAN offers unique opportunities for investors in the Malaysian capital markets. There is a diversity of financial intermediaries that are able to provide access to these opportunities, both in terms of issuance and investments.