KUALA LUMPUR: The Securities Commission (SC) has revealed that foreign investors turned net buyers of Malaysian equities in 2022, the first time since 2017, despite the uncertain global macroeconomic scenario that was prevalent throughout last year.
In its annual report released yesterday, the regulatory body reported that the strong return of foreign direct investment (FDI) in 2022 was a silver lining in what was largely a weak year for both the Malaysian equity and bond markets.
This was as it was hampered by global and domestic headwinds, including political instability, geopolitical tensions and tightening monetary policies by central banks worldwide.
According to the annual report, Malaysian equities saw a total non-resident inflow of approximately RM4.4bil in 2022.
On the other hand, the SC also noted that equity prices in general experienced a decline of 4.6% last year, with 10-year government bonds also seeing an increase in yield of 42.6 basis points as prices descended in tandem.
SC chairman Datuk Seri Awang Adek Hussin told a media conference after the launch of its annual report that despite there being a net inflow of FDI for equities in 2022, there was also an exit of RM9.8bil in FDI from the Malaysian bond market.
Of note, however, Awang Adek said bonds had reversed the fund exit for the first two months of 2023, posting a net gain of RM4.8bil.
Incidentally, the issuance of corporate bonds in 2022 surged by 34.1% as compared to the year before to RM153.3bil, with SC managing director Kamarudin Hashim attributing the jump to major refinancing and fundraising exercises undertaken by expressway company Projek Lebuhraya Usahasama Bhd that raised about RM25bil, contributing to 16.5% of total corporate bond issuance last year.
With Prime Minister Datuk Seri Anwar Ibrahim having announced during the retabling of Budget 2023 the government’s plan to allow the listing of dual-class shares on Bursa Malaysia to encourage listings of high-growth technology companies here, as well as the proposal to extend tax exemptions of up to RM1.5mil for listing expenses on the ACE and LEAP Markets until the assessment year of 2025, Awang Adek said the SC would be facilitating private market instruments in the secondary market to enhance liquidity.
“We fully encourage fully qualified companies to migrate to bigger and more liquid listing boards, such as from LEAP to ACE, or from ACE to the Main Board.
“This gives allowance for initial investors in such companies to monetise in more liquid markets, and the idea for us is to facilitate such growth,” he said.
On the issue of dual-class shares – which are issuances of two classes of shares with one class possessing superior voting power, usually to enable founders and top executives to retain control of their business – Awang Adek said the SC was typically looking at regulatory rules to ensure if the government’s plan to allow such issuances were to move ahead, investors would remain protected sufficiently.
He commented, “We understand the government’s rationale for mooting this idea, as it would attract the listing of technology companies here.
“I believe similar initiatives are done in other countries in the region and we do not want to be disadvantaged.”
Meanwhile, Awang Adek was hopeful for a better showing of the Malaysian market as a whole, especially from the latter half of 2023, while maintaining his guarded outlook on the myriad of factors affecting the global economy.
He said with the local political scenario looking more stable than it did last year, foreign investors could be seeing many more “plus factors” in the local equity market.
“On top of political stability, many companies in the Malaysian market are also fundamentally strong, and we are by and large still undervalued,” he added.
He also believes that the negative effects from the fallouts of Silicon Valley Bank and Credit Suisse would not directly impact the Malaysian capital market, as the exposure of the local market to these two institutions was not significant.