SC announces new measures as capital market evolves

ECF and P2P financing platforms are allowed to operationalise in secondary trading


THE Securities Commission Malaysia (SC) said the domestic capital market’s performance in 2020 will be influenced by key global developments, with volatility driven by the direction and pace of global economic growth, global monetary policy stance and uncertainty in relation to the ongoing trade and geopolitical tensions.

Additionally, greater clarity in ongoing domestic policy reforms will help support economic activity through the financing of business expansion and infrastructure.

SC chairman Datuk Syed Zaid Albar via a video conference yesterday said the Malaysian capital market has been impacted by the Covid-19 pandemic, but remains orderly given ample liquidity and robust infrastructure.

“The equity market is mirroring global trends but to a lesser degree. Foreign sell-offs are cushioned by increased participation of local institutions and retail investors.

“We have seen some volatility in our domestic bond market, but it continues to perform relatively better than our emerging peers, supported by deep domestic liquidity funds of our management industry,” he said.

The regulator also announced regulatory relief for public listed companies facing a Practice Note 17 classification due to the pandemic and lifted the fundraising limits placed on equity crowdfunding (ECF) platforms.

The SC had allowed ECF and peer-to-peer (P2P) financing platforms to operationalise in secondary trading and encouraged for the offering of more financial products to the growing online trading community in the country.

The SC noted that the total size of the capital market expanded to RM3.2 trillion in 2019 from RM3.1 trillion the year before, with debt securities outstanding and equity market capitalisation of RM1.5 trillion and RM1.7 trillion respectively.

The local capital market witnessed a higher level of fundraising activities during the year, with total funds raised in the bond and equity market amounting to RM139.4 billion compared to RM114.6 billion raised in 2018.

Alternative fundraising avenues like ECF and P2P financing continued to gain traction with total funds raised more than doubled to RM443.8 million, the SC 2019 annual report stated.
A total of RM132.8 billion was raised in the corporate bond and sukuk market compared to RM105.4 billion in 2018, with issuances mainly undertaken by utilities and financial services, while sukuk made up 77.1% of total bond issuances in 2019.

Some RM6.6 billion was raised via the equity market, of which RM2 billion was by 30 IPOs and RM4.6 billion raised via secondary fundraising.

In 2019, four companies were listed on the Main Market, 11 companies on the ACE Market, and the remaining on the Leading Entrepreneur Accelerator Platform (LEAP) Market. The size of issuances via the LEAP Market grew by 60.6% year-on-year (YoY) to RM92.2 million in 2019, the SC noted.

Overall market capitalisation on Bursa Malaysia ended marginally higher by 0.7% to RM1.71 trillion in 2019 from RM1.70 trillion in 2018.

The SC said this was despite the challenging external environment with heightened headwinds mainly from the ongoing US-China trade tensions and weaker global growth.

“Overall, while the FTSE Bursa Malaysia KLCI moderated in 2019, some segments in the broader domestic equity market gained significant traction, partly reflecting a shift in investors’ preference.

“This occurred as sentiments swayed in favour of constituents with better valuation and corporate earnings prospects, particularly in the small and mid-cap segment,” it said.

The SC added that the significant growth in small and mid-cap indices was mainly driven by the energy, construction and technology sectors.

The energy sector specifically recorded the largest increase, rising by 50.7% YoY, while the construction sector increased by 47.9% YoY, owing partly to the revival of public projects by the government.

“The technology sector, in turn, rose by 37.5% YoY, benefitting from the 5G network rollout, higher global smartphone shipments, and potential trade diversion stemming from the ongoing US-China trade war,” it said.