Building a relevant and diversified capital market

Guided by the newly-launched Capital Market Masterplan 3 (CMP3), the SC seeks to build a capital market that grows in relevance with the upgrade of the Malaysian economy and its stakeholders.

PETALING JAYA: The Securities Commission (SC) aspires to create a more relevant, efficient and diversified capital market in Malaysia over the next five years.

Guided by the newly-launched Capital Market Masterplan 3 (CMP3), the SC seeks to build a capital market that grows in relevance with the upgrade of the Malaysian economy and its stakeholders.

The capital market would also be more efficient in mobilising capital into productivity sectors of the economy, accompanied by evolved regulations.

In addition, the CMP3 aims to encourage greater diversity in the market, supported by a competitive and technology-enabled intermediation landscape, creating greater value for both investors and issuers.

These objectives will be underpinned by three key development thrusts, namely, catalysing competitive growth, empowering investors for a better future as well as shaping a stakeholder economy with sustainable and responsible investment (SRI) and Islamic capital market.

In tandem, three key regulatory thrusts have also been set out under the CMP3 to enable an improved regulatory approach.

“(The regulatory thrusts) embed shared accountability in the capital market to promote responsible businesses, industry self-regulation and investor advocacy, underpinned by principles-based regulations.

“They prioritise efficiency and outcomes in protecting investor vulnerabilities, with a fit-for-purpose regulatory architecture as well as effective supervisory and enforcement approach.

“They embrace the digital age with the industry, as they navigate through regulatory technology (RegTech) and emerging technology risks, while enhancing the SC’s digital capabilities,” according to the SC.

Looking ahead, the SC said there were several priority areas that the country needed to focus on in order to evolve with global megatrends, achieve its growth potential and transcend its status as a middle-income country.

Of these, there were two critical ones which the capital market could enable.

These included the structural upgrade of the economy and the augmentation of the retirement savings landscape.

The SC pointed out that Malaysia’s dominant economic contributors were largely domestic-centric.

This resulted in its growth potential being constrained by its comparatively small market.

For Malaysia to transform and grow, it was essential for the economy to cultivate and build internationally competitive and home-grown enterprises that were strongly embedded within global value chains, aided by high value-added technological developments to drive structural transformation.

This would require more effective resource allocation towards the internationalisation, digitisation and technological upgrading of Malaysian firms, especially unlisted mid-tier companies (MTCs).

The SC said the core intermediation of the savings-investment channel, dominated primarily by the banking system and government-linked investment companies, had not been able to serve these segments of companies meaningfully.

“The conventional equity and bond markets mainly cater to listed companies, which contribute to only an estimated 15% of gross domestic product, resulting in a shortage of access to capital within the wider economy.

“To cater to the broader needs of enterprises in the economy, including MTCs and micro, small and medium enterprises, Malaysia would require a more inclusive capital market – one that provides a more comprehensive financing ecosystem across the spectrum of funding needs.

“To that end, the SC could strengthen the scale and maturity of the alternative markets ecosystem to cater for higher-risk capital and to see greater deployment of patient capital through market-based financing for national development,” it said.

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