Malaysian capital funds to reach RM105b, more aid for SMEs

By NG MIN SHEN

The Malaysian capital market is expected to raise up to RM105 billion this year, with a focus on easing access to capital financing for the small and medium enterprises (SMEs) segment.

Securities Commission Malaysia (SC) deputy CEO Datuk Ahmad Fairuz Zainol Abidin said the domestic capital market has more than doubled over the past decade to twice the country’s gross domestic product, demonstrating long-term resilience in its growth despite the global operating environment.

“This growth trajectory has allowed the capital market to remain a significant source of financing for the real economy, with RM105 billion projected to be raised this year,” he said in his keynote address at the Capital Market Conference organised by the Malaysian Institute of Accountants in Kuala Lumpur yesterday.

Amid global concerns of longer-term prospects being dampened by weak levels of productivity and investment, policymakers and regulators have been gradually shifting from responding to the aftermath of the worldwide financial crisis to enabling stronger and more resilient economic growth ahead.

This policy objective, also seen within the global capital market landscape, has led to a focus on invigorating business activity and facilitating innovation to boost productivity, while ensuring the benefits of such economic progress are inclusively distributed.

“There is a renewed emphasis on ensuring that the capital market continues to provide solutions to real business needs especially for the lesser-served SMEs, which typically lack the maturity and credit history required for availing themselves to traditional means of financing,” Ahmad Fairuz said.

To that end, Bursa Malaysia Bhd will be launching the Leading Entrepreneur Accelerator Platform (LEAP) on July 25, a market designed to aid SMEs in gaining fundraising access and visibility.

Bursa Malaysia COO Datin Azalina Adham observed that a study by consulting firm Oliver Wyman had noted the potential for the capital market to provide up to 20% of SMEs’ financing needs.

“Presently, about 96% of SME funding comes from financial institutions. The LEAP market could address the over-dependency by being an avenue for SMEs to access capital funding,” she said.

LEAP will be the third market on the local bourse after the Main Market and ACE Market, with trading limited to sophisticated investors — either high net worth individuals whose total assets or annual income exceed RM3 million or RM300,000 respectively, or corporates with net assets exceeding RM10 million.

Governed by a listing framework issued by Bursa Malaysia and approved by SC, the market is intended to make listing easier and simpler for SMEs.

Companies looking to list on LEAP are not required to issue a prospectus, only an information memorandum, while Bursa Malaysia will serve as the sole approving authority. Post-listing, companies need only produce semi-annual financial reports and annual audited accounts — no quarterly financial reports or annual reports are mandatory.

There is also no requirement for an independent director, audit committee and nomination and remuneration committee, although Azalina said Bursa Malaysia’s governance team will evaluate the processes to ensure sufficient internal controls of the market.

“There may not be a formal audit committee or independent directors, but there is already the need for proper controls and processes within. We are of the view that these companies are too young and it’s too early for them to be burdened with formal committee requirements, but that doesn’t mean they don’t need to worry about governance,” she said.

Meanwhile, SC is in the process of reviewing the due diligence guidelines to enhance the effectiveness of the due diligence process carried out on corporate proposals.

The revised guidelines will provide due clarity on standards and expectations as well as accountability of each party involved.

“The review process will involve a collaboration with industry, as well as legal and accounting professionals,” Ahmad Fairuz said.

He said the regulator realises the need for a proactive approach in order to fully optimise opportunities and appropriately manage the challenges that have emerged from the changing economic and market landscape.

“A key item of our agenda is to ease access to the capital market by reducing time-to-market for product issuances and increasing operational efficiencies.

“For example, we have over the years pursued the incremental liberalisation of our regulatory frame- work for select market segments which have attained a certain level of maturity and readiness,” he said.