Capital market activity could return to pre-pandemic levels


MALAYSIA’S capital market activity is on track to improve this year with fundraising interest across several sectors showing a return to pre-pandemic levels.

Maybank Investment Bank Bhd CEO Fad’l Mohamed said there has been a significant increase of interest from first-time issuers on equity capital markets among those that have benefitted from the pandemic, those that showed resilience and companies that were impacted but recovered at a stronger than expected pace.

“The trend from 2020 in terms of primary and secondary placements, as well as block trades will continue, as issuers look to fund their recovery momentum and inorganic growth opportunities in the case of primary placements and large shareholders look to recycle capital via secondary placements or block trades,” he said in a statement yesterday.

Fad’l expects activity in the debt capital markets will match those prior to the onset of the pandemic although corporate fundraising is currently focused on refinancing and infrastructure rather than new capacity building. The local bond and sukuk markets have been widely tapped for infrastructure projects in recent years and the trend is poised to continue into 2021, he said.

There is also an increased demand and interest in green infrastructure with the global movement towards clean energy and net-zero emissions. “Malayan Banking Bhd (Maybank) is the market leader in capital market large-scale solar (LSS) photovoltaic projects, having arranged 54% of all solar sukuk issues from 2017 to 2019. We have also provided approximately RM2.7 billion of financing to green energy projects.

“The recent awards for the fourth LSS programme paves the way for more green financing and investment opportunities,” he said. Fundraisings by the financial industry sector are also active in the debt market which includes capital raising by banking groups amid a challenging credit environment.

Mergers and acquisitions (M&A) activities are also expected to rise as confidence returns to the market and companies continue their quest for in-country consolidation, Fad’l said.

He said greater activity will derive from companies whose valuations have been impacted by challenges in 2020, but underlying business remains sound, mainly in the retail sector.

“M&A are is also likely to be driven by ongoing trends of private equity investors looking to monetise their investments and multinational corporations reviewing their scale of operations,” he added.

He said the pandemic in the past year demonstrated the resilience of Malaysia’s capital markets which is expected to remain broad and deep enough to support capital raising activity.

The successful completion of the RM1.5 billion IPO by MR DIY Group (M) Bhd and strong bonds and sukuk volume of RM104 billion seen in 2020 showed there was ample liquidity in the market, he noted.

Fad’l said the low-interest-rate environment also continues to support domestic liquidity. Although bond yields have risen sharply in the past three months, he said it is still lower than the average yield in the past decade.

“Barring any unforeseen events such as another wave of infections, vaccine hiccups or political uncertainty, we expect capital market activity to return to healthy levels as all sectors of the economy forge ahead to rebuild and recover,” he said.