TWENTY-TWENTY was an eventual year for the capital market regulator. The Securities Commission (SC) faced a myriad of issues ranging from the pandemic, to increased digitalisation of stock trades, the entry of new investors and the increase of unlicensed investment advisers as well as scammers using social media.
Below are excerpts from a StarBizWeek interview with SC chairman Datuk Syed Zaid Albar.
How would you categorise the state of the capital market? What are the priorities this year?
Our market has exhibited resilience and it has continued to play a central role in financing the domestic economy and mobilising savings despite unprecedented conditions. Last year, the size of the capital market expanded by 7% and grew to RM3.4 trillion or 2.5 times GDP (2019: RM3.2 trillion).
This is testament to the market’s resilience. In comparison, the capital markets sizes vs GDP for Indonesia is at 0.7 times, Philippines at 1.1 times and Thailand 1.9 times.
Both the local equity and bond markets recovered from the pandemic lows, outperforming regional peers. Total funds raised via the equity and corporate bond markets was at RM115bil, supported by a 76% increase in secondary issuances of equities.
Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) financing also recorded continued growth momentum, increasing by 43% from a year ago, raising RM631mil for the Micro, Small and Medium Enterprises (MSMEs).
ECF&P2P have proven to be a viable option to meet the financing needs of MSMEs, and within a span of six years, attracted healthy interest from MSMEs and retail investors. As at end 2020, close to 3,000 MSMEs have raised more than RM1.3 bil (accumulative since 2016) through ECF&P2P.
Over 80% of the investors in the crowdfunding markets are retail and about 60% of them are under the age of 35. The global economy is projected to be on a recovery path in 2021, while the Malaysian economy is expected to rebound too.
However, the pace of economic recovery is expected to be gradual and uneven across sectors. With that backdrop in mind, the SC will provide policy support to ensure the market remains resilient and orderly, and be a key funding source to revitalise the growth of Malaysian economy in 2021.
In 2021, our priorities will be centred on the developments we see within the industry, and the needs of our market participants.
Technology has been a big changer for a lot of industries. How is it changing capital markets, particularly in Malaysia?
The SC’s Digital Agenda for the capital market gained momentum as the necessity for reduced physical contact shifted many services and activities online.
Digital Investment Management (DIMs), digital asset exchanges (DAX), and other online service providers and platforms attracted new investors with a corresponding increase in new account openings and transactions.
More than 450,000 DAX accounts opened as of end 2020 across three SC-registered platforms. Total traded value in December 2020 was RM474mil, reaching RM1.3bil in January 2021.
The improved retail participation in the stock market was evident with local retail investors making up 32.4% of total value traded, significantly higher than the five-year average of 21.4%.
As at end 2020,78% of retail trades transacted online vs 22% offline through phone calls or via dealers and remisiers.
Moving forward the SC will leverage technology to collaborate with the industry to advance our digital agenda, strike the right balance between facilitating market innovation, while at the same time mitigate any emerging risks, particularly when we are still confronting significant uncertainties.
As more people adopt digital, we are also stepping up our investor awareness and education efforts against online scams, online sources of information and advice, as well as platforms operating illegally in our market.
The SC is also enhancing our own supervisory and surveillance capabilities using machine learning technology. We remain vigilant on any ongoing and emerging cyber risks and will continue taking proactive steps to enhance our industry’s cyber security standards and level of preparedness for any cyber incidents.
Will the SC loosen SPAC rules in light of its current prominence in markets today?
We constantly look at the latest development on the global front and will assess if these developments will benefit the Malaysian market. We observe the resurgence of interest in SPACs in other jurisdictions.
The heightened interest of using such fundraising vehicles could be due to the low interest environment, investors looking for new alternative avenue for higher returns. It is also due to the emergence of tech-base new business models triggered by the global pandemic.
We are definitely keeping a close watch on the trends, especially if there is any relevancy to our home market.
Why did the SC and Bursa extend the suspension of Intraday Short Selling (IDSS) and intraday short selling by Proprietary Day Traders (PDT Short Sale)?
This move is a continuation of the regulators’ proactive measures to mitigate potential risks arising from heightened volatility and global uncertainties.
The additional six-month suspension of IDSS and PDT Short Sale, which are used mainly as a day trading strategy, will enable Bursa Malaysia to enhance the control measures for intraday short selling activities in order to promote market stability and strengthen the integrity of the capital market.
What do you expect to achieve from the revised IPO framework announced last year? How is the SC working with Bursa to bring in more quality IPOs?
In 2020, the SC announced the revised IPO framework and introduced a mandatory pre-submission consultation to ensure applicants and advisers can come together and look into issues holistically.
This will enable material issues to be surfaced upfront, before applications are submitted, and in turn, improve the efficiency of the approving process. This is part of our ongoing work to ensure the market remains relevant and competitive.
From time to time, the SC works closely with Bursa, and constantly engages industry and various stakeholder groups to gather market perspectives to enhance the IPO process.
Many factors affect the choice of listing destination; companies do take into consideration a wide range of factors including profiling for their business needs.
Nevertheless, we do want companies to tap into the capital market, including through equity listings, debt financing and alternative market-based financing (ECF, P2P). We are working with Bursa to ensure the vibrancy of the market and to attract more companies to list.
When did the SC start investigating AmBank in relation to its involvement in 1MDB?
The SC initiated an investigation in May 2018 and was in touch with AmBank on the matter since June 2018.
When did the settlement negotiation with AmBank start?
The SC and AmBank started negotiations on the settlement relating to outstanding regulatory matters on Terengganu Investment Authority Berhad and Bandar Malaysia in June 2020.
Can you share more details on the recent AmBank settlement.
The Finance Ministry has issued a statement on the settlement and since the settlement is still in progress, we are not able to comment further.
Is the SC looking into the transactions by AmBank senior officials in December 2020? Is this considered insider trading?
We are aware of this and the SC is currently reviewing the evidence and all the circumstances relating to the matter.
What are some of the main challenges the SC faces going forward?
Business models and investor behaviour are evolving at a very fast pace, arising from rapid innovation and technological advancement. This in turn will impact market intermediation services and distribution channels.
To remain competitive, the ecosystem and industry players will need to keep up with the ever-increasing pace of innovation and evolution while managing and balancing emerging risks. The main challenges are:
> Ensuring the capital market continues to remain relevant in supporting Malaysia’s economic transformation and growth of new sectors, which will involve providing sufficient funding for our growth stage and mid-tier companies as the entrepreneurial drive embedded within these companies will be crucial to elevate Malaysia to the next stage of economic development.
> Ensuring greater efficiency in terms of intermediating and mobilising savings especially for more productive and sustainable businesses; we will also need to hasten our digitisation effort to support the capital market to achieve greater efficiencies and agility in terms of intermediation services.
> Ensuring greater depth, liquidity and diversity to continue to provide added value to investors and issuers; there is also a need to ensure better product diversity in our market, including sustainable and responsible investment and financial instruments that prioritise social outcomes or contribute to the greater good of society.
We will address these challenges in our Capital Market Masterplan 3, which is targeted to be launched in the second half of this year.
This is the flagship policy document from the SC and it will highlight:
> Capital market solutions to some structural challenges of the Malaysian economy
> Longer term capital market strategies that will be needed in tandem with our economic transition towards a high-income, high value-added and inclusive nation.
It has been highlighted that some companies choose to ignore questions posed by shareholders during their virtual AGMs. How will the SC address this issue?
Irrespective of whether the AGM is held through a physical or virtual meeting, the SC expects engagement with shareholders and stakeholders to be meaningful and good corporate governance practice dictates that all questions posed by stakeholders be responded to by the board and/or senior management.
The SC has also reiterated this in its guidance note on the conduct of general meeting.
Based on the SC’s survey on conduct of fully virtual general meetings during the first MCO and CMCO – we found that despite a preference for physical participation, a significant number of shareholders would still like to continue having the option of participating in a general meeting remotely or online.