Capital market to remain robust

SC chairman Datuk Syed Zaid Albar said although the Covid-19 pandemic and its disruption to business activities have affected sentiment, the capital market continues to be a key source of financing for companies.

KUALA LUMPUR: Despite the economic uncertainties, the Malaysian capital market is expected to remain robust, with 30 new initial public offerings (IPOs) in the pipeline for the equity market this year, according to the Securities Commission (SC).

That is an increase from 19 IPOs in 2020.

In addition to the anticipated IPOs for 2021, the capital market regulator projects fundraising in the corporate bond and sukuk market to be in the range of RM100bil to RM110bil this year.

SC chairman Datuk Syed Zaid Albar said although the Covid-19 pandemic and its disruption to business activities have affected sentiment, the capital market continues to be a key source of financing for companies.

“An IPO is still seen as a good way for companies to raise funds for the expansion of their businesses as well as to improve their corporate standing.

“In 2020, despite a challenging period, the Main Market IPO saw a 20% growth, and in 2021, we expect a healthy pipeline of around 30 IPOs, ” Syed Zaid told a virtual media briefing on the SC Annual Report 2020 here yesterday.

On the corporate bond and sukuk market, SC executive director of market and corporate supervision Kamaruddin Hashim said based on the industry feedback, issuances for 2021 would likely be in the range of RM100bil and RM110bil.

“We see continued economic recovery, which will lead to increased private investment as business confidence increases, as well as the growth of quasi-government corporate bonds in 2021 amid the resumption of large infrastructure projects, ” Kamaruddin said.

“Certainly, the present conducive financing landscape may also persuade issuers to raise their issuance to secure a much lower financing cost, ” he added.

Overall, Syed Zaid said he was optimistic that the global economy and Malaysia would be on the recovery path this year, given the progress of vaccines, the SC’s continued policy support and the overall resumption of economic activities.

Nevertheless, he conceded that significant uncertainties still remain, and the overall recovery would likely be gradual and uneven across all sectors.

“The SC will provide policy support in ensuring that the market remains resilient and orderly, and be a key funding source to revitalise the growth of the Malaysian economy in 2021, ” Syed Zaid said.

According to the SC Annual Report, the capital market witnessed a lower level of fundraising in the corporate bond and equity market, totalling RM114.6bil, compared with RM139.4bil in 2019.

Corporate bond issuances fell significantly, with total new issuances down 21% year-on-year (y-o-y) to RM104.6bil, while the total funds raised in the equity market rose 52% y-o-y to RM10bil, of which RM2bil was raised via 19 IPOs and RM8bil through secondary fundraising.

In 2020, two companies were listed on the Main Market, 10 companies on the ACE Market, and the remaining on the LEAP Market.

Meanwhile, the SC said alternative fundraising avenues continued to gain traction, especially in equity crowdfunding (ECF) and peer-to-peer (P2P) financing, with total funds raised increasing to RM631mil in 2020, compared with RM441.6mil in 2019.

Overall, Malaysia’s total capital market managed to chalk up a growth of 7% y-o-y to RM3.4 trillion in 2020.

The SC noted the growth was driven largely by the Islamic capital market, which alone expanded 11% y-o-y.

Syed Zaid noted the growth despite higher volatility levels last year was testament to the resilience of the country’s capital market.

“Overall, our benchmark stock index and bond yield performed better than regional averages.

“And from a sectorial perspective, the divergence in investor preference was clear, with pandemic-related sectors such as healthcare (which includes glove manufacturers) and technology outperforming the rest of the equity market, ” he said.

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