A challenging task ahead
Capital Market has to position the country as a globally-recognised financial centre
APITAL Market Malaysia (CMM), the new body set up under the Securities Commission to promote the Malaysian capital market, has a tough job ahead.
Its scope of responsibilities range from increasing foreign participation in the Malaysian capital market to educating and raising awareness among Malaysian retail traders about new platforms like peer-to-peer lending and equity crowdfunding.
Its chief executive officer Azhar Mohd Zabidi, who was an investment banker for over 20 years before taking up the role in September last year, said the body was set up following recommendations from an industry-led task force to look into the shortfalls of the capital markets in 2014.
“It was decided that a promotional unit be formed with the main priority of positioning Malaysia as a globally recognised marketplace for investors and for capital-raising,” he tells StarBizWeek.
He says like any business organisation, the country’s capital market needed to reinvent itself to move forward.
“Aside from making Malaysia one of several globally recognised centres for investment and raising capital, we will also look at strategies and steps that can be taken to develop specific segments of the market like fund management, or private equity, because these are all strong feeders for the capital market,” he says. Asked if the body had specific key performance indicators (KPIs), Azhar says it has been tasked with improving the country’s ranking as an international finance centre by 2020.
“In terms of KPI, there has to be significant improvements to the volume of our market and rankings, foreign participation and the number of issuances, among others.
“This body has been given specific objectives to fulfil between three and five years, but of course, we cannot dictate market conditions during this period,” he says.
Azhar says the body focused on four key pillars in the capital market – the equity market, fixed income or bond market, asset management and alternative assets.
As the country’s equity market is going through a tough time at the moment, CMM’s current focus is on the bond market.
He says Malaysia’s fixed income market had remained resilient despite weaknesses in other parts of the economy.
“Through our continuous engagement with fixed market investors, we have been able to promote further investment into the Malaysian market over the last few months.
“We have seen an increase of almost 7% in foreign shareholding in the domestic bond market between December 2015 and May this year,” he says.
He adds that the Malaysian bond market had seen a lot of success, citing examples such as Aeon Credit Service (M) Bhd, Bank of Tokyo-Mitsubishi and China Construction Bank which raised capital through Malaysia.
He says they are beginning to see foreign companies that have small or no operations here using the Malaysian market to raise funds for expansion. Another area of focus is asset management.
CMM is identifying pockets of wealth abroad, which can be tapped to invest with the Malaysian asset management industry.
“The low-hanging fruit would be South-East Asia, so we are looking at the pockets of wealth in Indonesia and Thailand, for example, but we are also looking at other areas such as Europe and the Middle East,” he says.
Azhar says Malaysia’s competitive edge was in its economic fundamentals.
“If you look within the region, Malaysia is home to many regionally-diversified companies such as AirAsia Bhd in aviation, Axiata Group Bhd in telecommunications and Genting Bhd in gaming, for example.
“The fact is, Malaysia is home to a lot of regional champions, and some are diversified way beyond South-East Asia.
“So, if you intend to put money in SouthEast Asia, Malaysia would be a clear gateway to gain that exposure without going specifically into some of our neighbouring countries, and taking on specific country risks,” he says.
Asset management, according to Azhar, is the fastest-growing segment of the capital market in Malaysia. It has been growing at 12% over the last five years, boosted mostly by domestic investors.
He reckoned that the industry was also diversified, in terms of conventional as well as Islamic offerings. Malaysia has the second-largest asset under management in the world for Islamic funds, accounting for 31% of the global share as at December 2015.
“What has kept the Malaysian market strong is that domestic asset under management alone is about RM668bil.
“This doesn’t include funds by the Employees Provident Fund, which are about RM680bil, so we have in excess of RM1.3 trillion supporting our domestic market,” he says.