SC to allow more diversified ETFs in 2019

In a statement, the SC said that it has not authorised any ICOs pending the finalisation of its guidelines.

KUALA LUMPUR: The Securities Commission Malaysia (SC) will allow the issuance of more diversified range of Exchange Traded Funds (ETFs) in the market with effect for Jan 2, 2019.

The regulator said in a statement on Monday the diversified ETFs include futures-based ETFs, synthetic ETFs, physical commodity ETFs and smart beta ETFs. 

It said the diversification was under the revision of its guidelines on ETFs.

“The introduction of an array of ETFs aims to promote competitive growth and facilitate product innovation in the market, providing new investment opportunities and exposure for investors with varying risk appetites,” it said.
 
According to the SC, these enhancements are in tandem with global trends, with the Asian ETF market expected to see an annual growth rate in assets of 18% by 2021. 

Currently, Malaysia has 10 listed ETFs with a combined market capitalisation of about RM2.03bil, as at October 2018.
 
“Futures-based ETFs, such as leveraged and inverse (L&I) ETFs, will pave the way for a more cost-effective and transparent channel for investors to access the traditionally sophisticated futures market. 

“Leveraged ETFs use futures contracts to provide a multiple of the underlying index’s daily return (positive or negative) while Inverse ETFs allow investors to gain from downward market,” it said.

However, the SC pointed out that due to the complexity of the L&I ETFs, prospective retail investors must meet certain pre-qualification criteria before they can invest in these products.

First time retail investors must undergo an e-learning module developed by Bursa Malaysia as well as a performance simulator provided by management companies of L&I ETFs before they can invest in L&I ETFs.