Malaysia’s diverse and open economy reported an overall capital market valuation of RM3.6 trillion as end-December 2022 (end-December 2021: RM3.5 trillion). In spite of highly volatile global markets and uneven post-pandemic recovery, the nation’s capital markets remained relatively resilient. Malaysia’s GDP expanded 8.7% in 2022 (2021: 3.1%) – the fastest clip in 22 years, propelled by growth in all sectors.
Based on the International Monetary Fund (IMF)’s index of financial development, Malaysia has been charting consistent progress, especially in terms of depth, access and efficiency. The IMF’s methodology indicates that Malaysia’s overall financial sector developed significantly between 1993 and 2016. According to data from the Securities Commission Malaysia (SC), Malaysia has been performing commendably on the whole, surpassing its peers in the emerging markets and, in some respects, even the advanced financial markets.
Recognising the shift towards raising funds and investment through the private market, the SC has been supporting the development of digital market access – by being the first jurisdiction to regulate equity crowdfunding (ECF). The SC has also been monitoring the development of the private equity (PE) and venture capital (VC) industry in Malaysia, by requiring registration in 2015 and the setting up of the Malaysian Venture Capital and Private Equity Development Council. In March 2023, Capital Markets Malaysia (CMM) launched the country’s pioneer corporate venture capital (CVC) programme, to spur the domestic PE and VC ecosystem by driving corporate investments on the part of more sizeable public listed firms.
The Malaysian capital markets have been financing the domestic economy and mobilising savings, despite the unprecedented conditions since 2020. High levels of domestic liquidity, coupled with the authorities’ proactive measures, have helped maintain an orderly market and ensure limited disruptions to the overall capital market.
The robust domestic corporate bond and equity markets posted a record RM179.4 billion of total fundraising value in 2022 (2021: RM130.9 billion), outshining the five-year (2018-2022) average of RM135.9 billion. The corporate bond market accounted for RM153.3 billion of these new issuances while the equity market contributed RM26.0 billion. Of the latter, RM3.5 billion was raised through 35 initial public offerings (IPOs) and RM22.6 billion via secondary fundraising. Persistent headwinds, however, moderated the overall market capitalisation of Bursa Malaysia to RM1.74 trillion in 2022 (2021: RM1.79 trillion).
Besides the traditional methods, alternative fundraising avenues have been gaining traction, especially in ECF and P2P financing, with total funds raised more than doubling to RM1.7 billion in 2022. Overall, the size of the entire capital market increased 2.2% to RM3.6 trillion. Given the challenging conditions, the fund management industry’s total assets under management (AUM) declined 4.7% to RM906.5 billion. The unit trust segment remained the chief source of funds for AUM, contributing RM487.9 billion of total net asset value (NAV).
Sustainable development is a global imperative that Malaysia has fully embraced. As companies seek to align themselves with the United Nations’ Sustainable Development Goals (SDGs), a welldeveloped financial sector is essential towards supporting their requirements. In this regards, the Malaysian capital markets are uniquely poised to answer the call for sustainable finance in promoting long-term economic growth. The SC has long been cognisant of the need to promulgate and develop sustainable finance because it aligns closely with the underlying principles of Malaysia’s Islamic capital market, having established a facilitative regulatory framework to support Sustainable and Responsible Investment (SRI) and green financing.
Malaysia has built up its reputation as the global leader in Islamic finance. Underscored by its mature Islamic finance ecosystem, advantageous market size and diverse demographics, Malaysia also stands among the world’s leading Islamic fintech hubs, housing various Islamic fintech start-ups. Against this backdrop, Islamic fintech – which focuses on the use of technology to deliver Shariahcompliant financial solutions, products, services and investments – has been flourishing in recent years.
In the meantime, Malaysia has also been able to diversify its market-based funding avenues by developing its Islamic capital market (ICM), particularly sukuk. The domestic ICM’s performance has been laudable, expanding from just RM294 billion as at end-December 2000 to RM2,322 billion (or 64.4% of the entire domestic capital market) as at end-December 2022.
According to the State of the Global Islamic Economy Report 2022, Malaysia retained its leadership on the Global Islamic Economy Indicator (GIEI) for the 9th consecutive year. The GIEI assesses the leading national ecosystems of 81 countries which can best support the development of Islamic economic and business activities relative to their sizes. The same report also states that Malaysia accounted for USD619.7 billion or 17.2% of an estimated USD3.6 trillion of global Islamic finance assets in 2020/2021 – placing it third behind Iran (23.3%) and Saudi Arabia (22.9%). All said, Islamic finance has been well leveraged in Malaysia to fund sustainable economic activities and the collaborative efforts of governments, businesses and civil society in building the ecosystem for sustainable finance.