Masterplan to boost Malaysia

THE Capital Market Masterplan 2026 to 2030 (CMP) released recently by the Securities Commission (SC) is seen as a blueprint, not only for the Malaysian capital market, but also as a roadmap for institutional investors over the next five years.

Institutional Investors Council Malaysia (IIC) members are seen as key enablers who are expected to take a leading role in meeting the CMP objectives, especially in areas that the SC has placed strong emphasis on.

For institutional investors, the sustainability journey outlined in CMP remains a key objective, positioning the Malaysian capital market to be in tune with the national sustainability agenda and towards the net-zero target by 2050.

The key incentive is to build a robust and sustainable financial ecosystem.

To do this, the SC says there will be a greater focus on clear and robust measurement standards and transparent disclosures.

The SC is also expected to develop impact investment guidance, beginning with social impact indicators, which are aligned with an international framework for standardised impact measurements and disclosure requirements.

The focus here is to be able to provide financing on a large scale for environmental and social projects, which will enable Malaysia to stand out when it comes to the adoption of best practices.

The SC is looking at between RM90bil and RM100bil to be cumulatively channelled via the Malaysian capital market to finance the nation’s goal in meeting its transition, mitigation, adaptation, resilience, and social commitments over the next five years.

According to SC, blending commercial capital from banks and institutional investors with concessional capital from government and philanthropic sources will help better match risk-return preferences across a broader investor base.

Surely, this will be an exciting challenge and opportunity for institutional investors to participate actively in making sustainable investment choices.

This will help institutional investors allocate more capital for sustainable and impact investing over the next five years.

As institutional investors are focused on sustainability issues and continue to grow the asset size in the field, the introduction of these indicators – as well as guidelines related to impact investment – will help them take a more proactive and measured approach when investing.

This is as good an incentive as any for institutional investors, to grow the assets under management that are sustainability-focused, driven by key measurables.

International competitiveness

The CMP has also outlined an ambitious plan that will raise Malaysia’s international competitiveness.

The SC wants to position Malaysia as a regional fundraising hub for companies seeking new capital that focuses on growth and innovation, with a target of at least RM100bil raised within the next five years.

Asean is the fastest-growing economic region in the world, and it is only natural that Malaysia establishes its presence as a competitive marketplace.

Malaysia must capitalise on its strength when it comes to raising capital the Islamic way, as it is a leader in Islamic finance and, in particular, issuance of sukuk papers.

For IIC, with Malaysia being a launchpad for Islamic Capital Market products, the opportunity that could potentially be tapped is huge, as more regional champions choose Malaysia for their capital needs, especially with respect to the issuance of sukuk papers.

Even for the equity market, Malaysia has established itself as one of the largest public offering issuers in the region.

This has enabled the country to position itself as a strong market for regional companies to be listed, which will enable local institutional investors to be key stakeholders in regional champions.

Towards this end, the SC should also explore having dual listings for some of the current largest listed companies in the region, and have them listed on Bursa Malaysia.

MY Value Up

For all intents and purposes, institutional investors’ main objective in investing in the capital market is to generate income for their stakeholders as well as to be part of nation-building, especially among government-linked investment companies.

By being a provider of capital to mostly large market capitalised listed companies, institutional investors also expect returns that are reflective of capital deployed.

The Value Up programme carried out in other jurisdictions, including those in Singapore, South Korea, and in Japan has shown positive results as regulators took measures to enhance the attractiveness of the listed companies there.

The end results are sparkling as these markets hit fresh record highs mainly due to efforts to unlock the under-performance of the markets there.

The SC also recognised the local bourse’s performance where statistics show Malaysian companies’ performances remained muted despite taking part in the Public Listed Companies Transformation Programme. The SC now recommends a more direct approach by recognising that the board and management of public companies as primary stewards that can raise their respective companies’ performance.

Towards this end, the SC, via the Malaysian Code of Corporate Governance (MCCG) will be looking at reviewing some of the best practices into mandatory requirements through regulatory or policy instruments.

This is a welcome move as we do see some listed companies taking an easy way out when it comes to some of the demands under the MCCG due to the availability of the “apply or explain an alternative” option that is currently available.

Key governance issues that the IIC would like to see are those related to the appointment of independent non-executive directors (INED), which should be managed by an independent body like the Institute of Corporate Directors Malaysia.

Other regulatory focus should cover the remuneration packages for executive directors, which should be subject to shareholders approval at a general meeting.

There should also be a closer look at the issuance of share options to INEDs, both at the company’s initial public offering stage as well as under any share option scheme.

In conclusion, like past CMPs, we see the newly launched CMP as a welcome blueprint for institutional investors that will embrace sustainability in a greater way, promote inclusiveness, improve market velocity.

It will also contribute to making Malaysia the fastest growing capital market in Asean, especially in relation to Islamic capital markets.