[ D O M E S T I C
S U R V E Y
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M A L AY S I A ]
Growth and innovation
hand in hand
Operational reforms will help local providers meet
the service needs of a growing investor base.
T
he previous 12 months represent something of a bounce
back in Malaysian capital markets following a relative
slowdown in 2015. Figures from the Securities Commis-
sion Malaysia (SC) revealed capital markets in the country grew
to RM 2.84 trillion in 2016 with total capital raised amounting to
RM 98.5 billion.
Such growth has been attributed to increased optimism in the
market along with renewed interest in emerging markets and
sustained domestic GDP growth expectations.
The SC also predicts further levels of fundraising in 2017 with
current estimates of between RM 102 to RM 105 billion. Accord-
ing to some estimates, the size of the capital markets for 2017
may also increase to the tune of RM 2.97 trillion. In addition,
the bond market grew to RM 1.17 trillion, while equity market
capitalisation ended the year at RM 1.67 trillion.
The fund management industry continued its upward trajec-
tory, with assets under management (AUM) growing 4.3% from
RM 667.9 billion in 2015 to RM 696.3 billion last year.
Unit trust funds maintained overall net sales over redemption
of RM 26.0 billion, registering an increase of 3.4% to reach RM
358.5 billion in net asset value (NAV).
Operational changes
From a service providers’ point of view, such success comes
against a backdrop of numerous developments with an impact
on operating conditions in the market.
The introduction of a new real-time gross settlement and debt
securities depository (RENTAS) system on 19 September 2016
was the culmination of a multi-year effort to internationalise and
modernise Malaysia’s financial market infrastructure to support
the settlement of wholesale payments and securities denominat-
ed in international currencies.
In addition, on the home front, providers have noted support
from the SC for a Peer2Peer (P2P) lending market in a move par-
tially designed to nurture and facilitate market based innovation
in the FinTech space within the country.
This support was put into practice in 2016 when the SC intro-
duced the P2P financing framework to further broaden financ-
ing avenues for micro, small and medium enterprises. Six P2P
operators were registered and are expected to be fully opera-
tional by the end of the year.
“Growth has been attributed to increased
optimism in the market along with renewed
interest in emerging markets.”
Islamic finance
More broadly, the preceding 12 months have seen the further devel-
opment of Malaysia as a centre of Islamic capital market expertise.
An Islamic banking and Sharia awareness workshop in August
helped reinforce the view that Islamic capital markets are a promis-
ing growth area for Malaysia’s financial markets as a whole.
According to figures from the SC, the market capitalisation of
Sharia-compliant securities in 2016 reached RM 1.69 trillion,
representing 60% of the domestic capital market. Islamic fund
management grew 13% to RM 149.6 billion in AUM, primarily
driven by expansion of Islamic unit trust funds and representing
just over 21% of total AUM in the Malaysian market.
IOSCO hub
Malaysia’s role as a financial centre received a boost earlier this
year when it was announced that the International Organisation
of Securities Commissions (IOSCO), the world’s leading body of
capital market regulators was launching its first-ever Asia Pacific
Hub in Malaysia. The Hub is intended to further develop capital
markets and strengthen regulatory capabilities in the region. Lo-
cated at the SC building in Kuala Lumpur, this will be IOSCO’s
first presence outside of its headquarters in Madrid, Spain.
SC Chairman Tan Sri Ranjit Ajit Singh noted that, “The
selection of Malaysia as the host of the first ever regional Hub
reinforces the country’s efforts in building a high quality and
well-regulated capital market. The Hub in Malaysia will foster
greater connectivity and inclusiveness within the Asia Pacific
region, and is a reflection of the SC’s commitment in facilitating
greater cross-border collaboration.”
Custody
As was the case 12 months ago, domestic custody provision,
as evidenced by responses to this year’s survey, is dominated
by four banks – CIMB, Maybank Deutsche Bank and Standard
Chartered – though HSBC and Citi each received ratings from
over 5% of total respondents to this year’s survey.
Summer 2017
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