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Malaysia’s capital market, fundraising activities shrink in 2018

14 Mar 2019 / 13:56 H.

KUALA LUMPUR: The Securities Commission Malaysia (SC) expects the Malaysian capital market to remain resilient and orderly this year despite seeing a decline in the size of the capital market to RM3.1 trillion as at end 2018 from RM3.2 trillion in 2017, with lower fundraising activities last year.

The capital market saw a moderate level of fundraising activities in 2018, with total funds raised decreasing 21.8% to RM114.6 billion from a record high of RM146.6 billion in 2017. Of this, RM105.4 billion was raised via the corporate bond and sukuk market; while RM9.2 billion was raised via the equity market.

The SC is projecting fundraising to hit RM110 billion to RM120 billion in 2019 on better performance from initial public offerings.

Though occasionally tempered by uncertainties stemming from rising trade tensions and tightening global financial conditions, the regulator said all segments of the Malaysian capital market remained resilient.

“We’ve been growing steadily over the years. Our macroeconomic fundamentals are still strong, our domestic liquidity and robust capital market infrastructure is still there,“ SC chairman Datuk Syed Zaid Albar told a media briefing in conjunction with the release of its 2018 Annual Report today.

The capital market size of RM3.1 trillion is equivalent to 2.2 times the size of the domestic economy. The bond market grew 8.8% to RM1.4 trillion last year, while equity market capitalisation contracted 10.8% to RM1.7 trillion.

Alternative fundraising channels, namely venture capital (VC), private equity (PE), equity crowdfunding (ECF) and peer-to-peer financing (P2P) raised RM808.4 million in funding. VC/PE raised RM613.3 million, while the remaining were raised by 693 issuers via ECF and P2P. About 54% ECF and P2P investors are below the age of 35.

The fund management industry saw assets under management fall 4.2% to RM743.6 billion in 2018, from RM776.2 billion in 2017, while the unit trust industry recorded net asset value of RM426.18 billion in 2018 compared with RM427 billion a year ago.

Malaysia remained a global leader in the Islamic capital market with RM1.9 trillion unchanged in syariah-compliant equities and sukuk outstanding. Malaysia also continued to be the world’s largest sukuk market.

In 2019, the SC will focus on strengthening the alternative financing avenues, facilitating digital investment models, expanding and harnessing synergies between Islamic capital market and sustainable finance, reviewing the entire primary market framework, improving investor experience, reviewing the licensing framework, strengthening the corporate governance ecosystem and strengthening supervision and surveillance in areas of risk.

Meanwhile, Syed Zaid said the SC has issued a show-cause letter to Goldman Sachs over its involvement in the 1Malaysia Development Bhd scandal. However, he declined to comment further as an inquiry is ongoing.

“We’re still in the process of investigation. Once we’ve completed our investigation, we will make the necessary recommendations.”

The US Federal Reserve has fined ex-Goldman Sachs bankers for money laundering. The firm is also being investigated for its role as underwriter and arranger of three bond sales that raised US$6.5 billion (RM26.6 billion) for 1MDB.

On Deloitte PLT, he said the audit firm is going through an appeal after it was fined RM2.2 million by the SC for 1MDB-related breaches.

“The fine has been imposed but they have the right to appeal under the Act,” said Syed Zaid without elaborating.

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