THE Securities Commission (SC) will soon'' allow investors to invest in exchange-traded funds to help broaden the nation's capital markets.
The plan will add variety to the current class of investment funds listed on the stock exchange,'' the SC said in a statement yesterday.
Such funds would be a catalyst in building greater liquidity within the equity market,'' it said.
Malaysia is seeking ways of expanding the capital markets as it opens the financial services industry to overseas companies to make markets more competitive and boost liquidity, or the ability of an asset to be traded or converted into cash.
Exchange-traded funds are index-based products that enable investors to buy or sell shares of an entire benchmark portfolio.
The exchange-traded funds would be listed on Bursa Malaysia, the SC said.
It is a passively managed fund and depending on the benchmark index, provides exposure to a certain market or sector,'' the regulator said. Its unique structure and mechanism allows investors to arbitrage any discounts and premiums that may arise between the price of the exchange-traded fund and its net asset value, it said.
Other types of funds currently listed and offered to investors on the stock exchange were closed-end funds and real estate investment trusts, it said.
Malaysia had last September announced tax breaks for investors of real estate investment trusts, including a tax exemption for income distributed to unitholders starting this year.
Last week, Bursa Malaysia Bhd, which manages the country's stock exchange, said it signed a preliminary agreement with FTSE group to study a plan to create new indices to attract overseas investors. Bloomberg
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