PETALING JAYA: Although volatility in Malaysia’s capital market is expected to be driven by events like global monetary policy tightening and geopolitical developments, macroeconomic fundamentals and supportive capital market infrastructure are expected to keep it orderly, says the Securities Commission (SC).
In its 2022 annual report, the SC stated the domestic economy’s growth is projected to see a more modest pace, given the increasingly challenging global environment and normalisation in domestic demand.
“Global economic growth is expected to slow further in 2023.
“Aside from ongoing concerns related to the pandemic, especially in China, the interplay between geopolitical fragmentation, elevated inflationary pressure and the pace of monetary policy normalisation in major economies will be key determinants of the pace of global economic activities,” it stated in its annual report yesterday.
The development in the global capital market is expected to be in tandem with this economic outlook.
External uncertainties will also result in an uneven pace of economic recovery across sectors, the SC added.
In 2022, the total funds raised in the local capital market was up by 37% year-on-year (y-o-y) to RM179.4bil.
Of this amount, RM26bil was raised via the equity market, while RM153.3bil was issued through the corporate bond market.
Equity crowdfunding and peer-to-peer financing also rose in 2022.
The year also saw softer market valuation and net redemptions for the fund management industry.
Assets under management decreased by 4.7% y-o-y to RM906.5bil, with the unit trust segment being the largest source of funds.
On the whole, the size of the capital market increased by 2.9% y-o-y to RM3.6 trillion, with the drop in equity market capitalisation offset by higher bonds and sukuk outstanding.
“Despite the challenging environment, the domestic capital market remained orderly and continued to facilitate fundraising and savings intermediation effectively.
“The Malaysian equity market performance was weaker in 2022, but non-residents returned as net buyers in the equity market, the first since 2017.
“Malaysian Government Securities bond yields experienced upward pressure across tenures, while corporate spreads widened, trailing global bond markets,” the SC said.
Overall, the market capitalisation of Bursa Malaysia and the FBM KLCI eased to RM1.7 trillion and RM1 trillion, respectively, in 2022.
Local institutions remained net sellers to a total of RM6.5bil worth of equities last year.
Non-residents turned net buyers after four consecutive years of net-sell, with total net buy of RM4.4bil in 2022.
In the Malaysian bond market, total bonds and sukuk outstanding grew by 11.8% y-o-y to RM1.9 trillion in 2022, reflecting higher levels of bond and sukuk fundraising in the market.
On a global scale, the SC noted monetary tightening, the Russia-Ukraine war and rising recessionary fears have weakened the performance of global financial markets in 2022.
“In the global equity market, both the MSCI World Index and the MSCI Emerging Markets Index recorded double-digit declines of 19.5% and 22.4%, respectively, in 2022. “Meanwhile, in the global bond market, bond yields were significantly higher in 2022, led by the US Treasury 10-year note.
“This is given multi-decades high inflation across advanced economies and continued expectations of steeper interest rate hikes by major central banks, leading to weak performance of the major bond indices,” the capital market regulator said.
