PETALING JAYA: Companies in Malaysia have been battered by the coronavirus disease (Covid-19) pandemic and this has led to the Securities Commission (SC) introducing further relief for public-listed companies in its commitment to ensure continued access to fundraising.
The capital markets regulator announced that there would be temporary relief by Bursa Malaysia from the Practice Note 17 (PN17) and Guidance Note 3 (GN3) classifications for companies listed on the Main Market and Ace Market.
This is only for criteria listed under paragraph 2.1(a), 2.1(e) and 2.1(f) of the PN17 criteria and obligations where the shareholder’s equity is 25% or less than the share capital and lower than RM40mil, where auditors have highlighted material uncertainty or a company’s going concern and a default in payment as announced by a listed issuer.
The relaxation period begins today until June 30 next year.
SC chairman Datuk Syed Zaid Albar said this would allow companies more time to regularise their financial positions.
Observing heightened interests by micro, small and medium enterprises (MSMEs) to tap into alternative fundraising channels, the SC has also liberalised the fundraising limits on equity crowdfunding (ECF) platforms to RM10mil and allowed both ECF and peer-to-peer financing (P2P) platforms to operationalise secondary trading with immediate effect.
“Based on operator feedback, there is still demand from issuers to raise funds but on the other hand, investors are taking a wait-and-see approach
“To address the unavailability of investors, the Malaysia Co-Investment Fund (MyCIF) in an immediate step, has changed its co-investment criteria to a 1:2 ratio (from 1:4) to ensure issuers continue to be funded, ” he told reporters at a virtual press conference in conjunction with the release of its 2019 annual report, adding that this would run until Sept 30.
Syed Zaid stressed that SC’s four key priority areas in 2020 are to ensure stable market operations, enable immediate opportunities, facilitate regulatory reliefs and maintain market integrity and conduct.
The SC was also conducting a feasibility study to facilitate small and mid-cap companies greater access to funding, including issuance of debt instruments.
Chief regulatory officer Foo Lee Mei said the SC was greatly encouraged by the positive developments in the ECF and P2P platforms which have raised over RM700mil for 1,943 MSMEs over the last three years and believed that further expansion would greatly benefit them.
Another key focus area would be to broaden the suites of investment solutions to include Islamic offerings, alternative investments and financial planning services.
Covid-19 is an unprecedented pandemic which has led to significant decline in global markets since March.
While there has been some recovery, conditions remain volatile.
“The capital market was similarly affected, mirroring trends seen in both developed and in emerging markets, but to a lesser degree.
“More importantly, despite the volatility, domestic market conditions have remained orderly and supported by local participation amid non-resident outflows, ” Syed Zaid said, adding that foreign selling in Malaysia hit the highest in March.
Foreign shareholding in the equity market as at end March stood at 22.46%, cushioned by increased participation of local institutions and retail investors.
The average foreign shareholding between 1998 and 2019 was about 22.3%, which the lowest level was 18% in 2002.
Syed Zaid also pointed out to a rise in redemptions of unit trusts in March and assured that licensed fund managers were poised to manage redemptions in an orderly manner.
“There have been no major redemption risks which have been observed so far. In fact, we have seen some new investments flowing into unit trusts.
“Despite the market volatility, our brokers and investment banks remain strong and continue to intermediate during this movement control order (MCO) period.
“They are significantly stronger today than they were 20 years ago as a result of our prudential requirement on investment banks in which we work closely with Bank Negara and also our supervision on intermediaries, ” he said.
The net asset value (NAV) of unit trust funds has fallen between 4% and 5% since the end of February, mainly due to market movements from lower share prices.
Redemption activities moderated following a high level of net redemptions for the first half of March leading to a net sales position in the first week of April.
While there has also been some volatility in the domestic bond market, Syed said it has continued to perform relatively better than other emerging peers, supported by deep domestic liquidity funds of the management industry.
Meanwhile deputy chief executive Datuk Zainal Izlan Zainal Abidin said the SC expected issuance of corporate bonds and sukuk this year to be in the region of RM90bil to RM100bil.
“This is a hugely unprecedented time as we’re facing humanitarian, economic and financial challenges, all at the same time, brought along by a globally redefining event.
“It is no longer business as usual and uncertainties will remain even after this pandemic subsides.
“But based on our learning and experience from past events of extreme market volatility and the buffers we have built over the years, the Malaysian capital market will, God willing, be able weather this crisis, ” Syed Zaid said.