Capital market grew to RM3.4 tril from RM2 tril from 2011 to 2020, says SC

KUALA LUMPUR (Sept 21): Malaysia’s domestic capital market expanded to RM3.4 trillion at the end of 2020 from RM2 trillion at the start of 2011, said the Securities Commission Malaysia (SC).

This was the result of various focused plans and strategies, the SC said in its Capital Market Masterplan 3 (CMP3) (2021-2025) report today.

“The introduction of various strategic initiatives helped to improve the depth, accessibility and efficiency of the capital market, which continued to improve since 2010,” said the regulator.

According to the SC, CMP1 (2001-2010) was launched to build the foundation and ecosystems of the capital market, while CMP2 (2011-2020) focused on strategies that would expand the capital market further, with robust governance in place to ensure market stability and integrity. 

“As a result of these focused plans and strategies, the domestic capital market remained relatively resilient and continued to chart strong growth, expanding from RM2.0 trillion at the start of 2011 to RM3.4 trillion at the end of 2020,” it added.

The CMP3 report noted that the Malaysian economy continued on a stable growth path in tandem with the wider Asian region prior to 2020, despite the challenging global environment.

The report said that when the global pandemic hit in the first quarter of 2020, it brought significant economic repercussions arising from the shutdown of businesses, job losses, as well as the reduction in consumer spending and consumer confidence. 

“Overall, the domestic economy grew at an average rate of 5.1% per annum from 2011 to 2019, underpinned by domestic demand and broad-based expansion across most economic sectors, before contracting by 5.6% in 2020 amid the global pandemic. 

“Headline inflation remained low and stable at an average rate of 1.9% per annum during the period, with inflation expectations being well-anchored,” it said.

According to the report, the capital formation and savings intermediation landscape has evolved to cater to the increasingly diverse economic landscape, while embracing emerging themes on technology, innovation and sustainability over the last decade.

“In response to the varied funding needs across the maturity lifecycle of businesses, as well as changing investment preferences and appetites, Malaysia has seen continued expansion in the role of its capital market,” the SC said. 

With greater innovation and use of technology, the CMP3 report observed the Malaysian capital market has enabled accessibility in recent years, allowing more Malaysian businesses, in particular small and emerging companies, to fundraise. 

As such, Malaysia was among the first few countries in the region to introduce new fundraising alternatives to cater to businesses at various stages of growth.  

This includes the introduction of equity crowdfunding and peer-to-peer financing for working capital needs of small businesses, and more recently, initial exchange offering for early-stage entrepreneurs. 

In addition, onshore venture capital fundraising for early stage companies has evolved, with more investments into growth-stage companies, it said.

“Similarly, onshore private equity (PE) fundraising for growth-stage companies has also increased. Today, Malaysia comes second in PE deal volume in ASEAN,” the CMP3 report said.

The SC noted that alternative fundraising also saw early success, spurred on by a broad range of development efforts such as the launch of a public-private co-investment structure — the Malaysia Co-Investment Fund (MyCIF) — and the facilitation of alternative intermediation platforms. 

“While still small in size, these alternative fundraising avenues have become a growing source of financing for MSMEs throughout the pandemic, increasing their reach to small and emergent companies by fourfold since inception,” it said.

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