KUALA LUMPUR: Fundraising through Malaysia’s capital market is expected to remain robust this year, although the number is unlikely to outpace the exceptionally strong performance of 2017.
Based on current estimates, total capital raising through primary and secondary markets could reach RM120bil in 2018, according to the Securities Commission (SC). Last year, fundraising totalled RM146.6bil, exceeding the regulator’s initial target of RM105bil. It was also a record high and above the five-year average of RM116bil.
According to SC chairman Tan Sri Ranjit Ajit Singh, despite this year’s estimation for fundraising being lower than last year’s actual achievement, the projected figure remains above the long-term average of around RM110bil.
“The important point to understand is that there is a consistent level of fundraising that is occurring through the Malaysian capital market. And that consistency is around the RM115bil figure, and we’re seeing the projection for this year to be higher than that,” Ranjit said.
Speaking to reporters at a briefing after the launch of the SC’s 2017 annual report, Ranjit pointed out that fundraising last year was an “exceptionally strong outlier” due to multiple effects, including anticipation of interest rate hikes and the execution of deferred capital-raising activities from 2015 and 2016.
He said the fundraising this year is expected to remain strong, sustained by robust private investments and infrastructure spending amid a growing domestic economy.
Of the estimated RM120bil to be raised from the capital market this year, the SC expects RM100bil to come from the corporate bond and sukuk market, with the remainder RM20bil from the equity market.
In equity financing, RM8bil would likely be raised via initial public offerings (IPOs) and the remaining RM12bil via the secondary market.
Ranjit said the overall outlook for the Malaysian capital market for 2018 remained positive, building upon the country’s strong economic fundamentals and regional growth trajectory.
“Capital markets (in general) are expected to remain vibrant amid the sustained growth in the global economy, and we think emerging markets will continue to outpace growth in the developed markets,” Ranjit said.
“The Malaysian economy is expected to maintain its firm growth, as domestic demand remains resilient, and the improvements in corporate earnings will provide further impetus to Malaysian equities,” he added.
Ranjit, however, said the SC remained vigilant amid the crystallisation of risks from the tightening of monetary policies and geopolitical development, including trade protectionism, which could result in some volatility in markets globally.
Meanwhile, Ranjit said the SC’s priorities for 2018 would remain focused on liberalising the market to promote vibrancy and efficiency.
“Among the highlights we could look at is the continued pursuit of measures to enhance vibrancy of the equity market, liberalising the regulatory requirements for retail participation in the bond market and sukuk market, and accelerating the development of the syariah-compliant sustainable and responsible investing ecosystem.
“We will also continue to facilitate innovation and implement digital markets strategy, whereby we will be looking to widen access to an alternative market-based investing avenue; open up applications for new peer-to-peer financing; license digital investment managers; and accelerate the industry digitisation effort for greater efficiencies and enhance investor experience,” Ranjit said.
In addition, he said, the SC would liberalise the regulatory requirements to facilitate growth of the maturing real estate investment trust (REIT) market. The issuance of Guidelines on Listed REITs yesterday was in line with the agenda to promote strong corporate governance practices and instil greater market confidence.
According to Ranjit, the SC would also focus on facilitating the offering of over-the-counter contracts for difference by licensed intermediaries for dealing in derivatives through the issuance of Guidelines on Contracts for Difference by early next month.
To promote greater efficiency in equity fundraising, Ranjit said the SC would introduce several enhancements within the IPO framework. These would be released in the middle of this year.
Among these initiatives will be to expand and strengthen the qualified senior personnel resource pool, empower the industry to develop standards on due diligence, provide enhanced guidance on IPO submissions, incorporate market perspective into making prospectus disclosures more effective and relevant, and increase transparency via publishing an IPO scorecard showing details of time to approval and reasons for an extended timeframe.
These, he said, would take effect from June 1 this year.
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