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Growth and innovation hand in hand
Operational reforms will help local providers meet the service needs of a growing investor base .
The previous 12 months represent something of a bounce back in Malaysian capital markets following a relative slowdown in 2015 . Figures from the Securities Commission 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 . According 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 trajectory , 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 denominated 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 partially 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 introduced the P2P financing framework to further broaden financing avenues for micro , small and medium enterprises . Six P2P operators were registered and are expected to be fully operational 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 development 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 promising 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 . Located 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 globalcustodian . com 65