KUALA LUMPUR: Entitled “Growth with Governance”, the new Capital Market Masterplan 2 (CMP2) has outlined capital formation as a key strategy to transform Malaysia's capital market over the next ten years.
“CMP2 outlines the strategies to unleash the competitive dynamics that will enable our markets to more effectively utilise domestic savings for capital formation and to foster entrepreneurial and innovative zeal,” said Securities Commission (SC) chairman Tan Sri Zarinah Anwar.
Key growth strategies encompassed in the CMP2 include enhancing the capacity and efficiency of the local capital market in financing investment requirements for economic growth. It also seeks to “deepen the secondary market liquidity” and to “identify new growth opportunities”.
The SC estimates the size of Malaysia's capital market (comprising stockmarket capitalisation and debt securities) to more than double from RM2 trillion in 2010 to RM4.5 trillion by 2020.
The baseline forecast is predicted on annual real GDP growth of 6.5% and historical market benchmarks, and is subject to prevailing ecoomic and market conditions.
Several segments are expected to achieve critical mass, such as the Islamic capital market which is projected to increase from RM1.1 trillion in 2010 to RM2.9 trillion in 2020 and the investment management industry where assets under management is projected to rise from RM377.4bil in 2010 to RM1.6 trillion in 2020 and the penetration rate for unit trusts to almost double from 18% in 2010 to 34% in 2020.
There is also substantial upside from further expansion of the derivatives product range which will deepen liquidity due to higher levels of inter-market trading, hedging and arbitrage.
On the issue of governance, Zarinah said: “It is equally important to learn from lessons of past financial crises that growth is only sustainable if it is underpinned by a proper system of accountabilities and governance. Therefore, the hallmark of the market that we aspire to build is one that will be distinguished by the quality of its governance.”
The SC said experience from past financial crises also indicated that innovation and complexity would create risks that would continuously test the resilience of the Malaysian capital market, making the management of these risks the key challenge in future deepening and broadening of the capital market.
It said intermediaries would be required to operate on higher standards and capabilities and there would be greater focus on managing risks.
“Corporate governance standards will also be further strengthened and stakeholder participation in governance will be broadened. There will also be an enhanced focus on systemic stability,” the SC said.
The SC said it would implement CMP2 through its annual business planning process and that deliverables for 2011 included the introduction of a regulatory framework for private retirement schemes, a five-year corporate governance blueprint and the recently-issued guidelines on the registration of credit rating agencies.
“The regulatory framework for fund raising and product approval and for licensing renewal is also being reviewed to enhance process efficiency,” the SC said.
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