PETALING JAYA: The Finance Ministry (MoF), in collaboration with the Securities Commission (SC), is embarking on a three-pillar approach to enhance the capital markets, in the expectation of driving greater economic growth, inclusion and sustainability.
Prime Minister Datuk Seri Anwar Ibrahim, who is also Finance Minister, said the proposition would be anchored on creating market vibrancy with greater participation opportunities for Malaysians; attracting a larger pool of investors to support financing for small and medium enterprises (SMEs); as well as implementing market and structural reforms to enhance Malaysia’s competitiveness to strengthen market confidence.
The cooperation with the SC would also take into account feedback from Bursa Malaysia and the capital markets themselves, said Anwar, who was speaking at the SC’s new Capital Market Graduate Programme InvesTED yesterday.
In line with the goal to improve market vibrancy, the Prime Minister announced a reduction of the stamp duty rate – effective from July – for the trading of listed shares from 0.15% to 0.1%, with the stamp duty cap maintained at RM1,000 for each contract.
Concurrently, in the effort to widen the pool of investors, the MoF and SC are also looking into initiatives to facilitate the setting up of family offices in Malaysia; while promoting corporate venturing to drive greater domestic direct investment through more facilitative tax and incentive policies; as well as to widen the definition of sophisticated investors to include angel investors.
Simply put, a family office is the term used to describe a privately held company that manages investments and wealth for an affluent family, generally one with at least US$50mil (RM231mil) to US$100mil (RM463mil) in investable assets.
In addition to that, Anwar said: “The SC and Bursa Malaysia will implement reforms this year targeted to ease and speed up listings by expediting the initial public offering (IPO) process, reducing time-to-market to ensure the country’s competitiveness.”
SC chairman Datuk Seri Dr Awang Adek Hussin is optimistic that these efforts will create a more vibrant capital market to drive economic growth in the country,
“The capital market initiatives announced will boost greater trading participation and access to financing in the market, encouraging the growth of innovative companies and fostering greater diversity and inclusivity in the industry,” he said.
On a similar tone, Bursa Malaysia Bhd
chief executive Datuk Muhamad Umar Swift is confident that the proposed measures, along with the existing development initiatives, will stimulate market activity and create a more dynamic and liquid market environment.
“A liquid and strong performing capital market has tremendous benefits to numerous stakeholders, and the economy as a whole. More importantly, the measures will widen affordable investment choices for the rakyat, and deepen investor interest in our market, leading to Bursa Malaysia being a destination of choice for fundraising,” he commented.
Analysts and fund managers meanwhile welcomed the measures announced by Anwar and the two regulatory bodies.
Chief investment officer for Tradeview Capital Nixon Wong told StarBiz that these measures represent significant efforts to transform the local capital market into a more investment-friendly environment, potentially accompanied by more favorable tax policies and incentives, as well as focusing on promoting transparency and corporate governance.
“Given the decline in retail participation rates since 2021, initiatives such as the reduction in stamp duty could potentially stimulate trading demand from retail investors. Additionally, institutional and foreign investors may increase their participation, particularly from high-frequency proprietary traders, thereby enhancing the trading liquidity of the local market,” noted Wong.
He is particularly bullish in measures supporting easier IPO listings, as he believes that these would provide businesses with alternative funding options beyond traditional debt financing, adding that they not only diversify funding sources but would also improve the overall corporate governance of local businesses.
“The implementation of more facilitative tax and incentive policies, along with an expanded definition of sophisticated investors, encourages greater domestic direct investment. This, in turn, leads to a larger pool of investors participating in the stock market, resulting in increased vibrancy and improved trading liquidity.
“Furthermore, these measures indirectly promote better financial literacy among the local population, as more individuals become actively involved in investing and gain exposure to the workings of the financial markets. Overall, these initiatives contribute to a more dynamic and informed investment landscape within the country,” Wong pointed out.
While also of the opinion that the latest moves by the government would provide a much needed impetus to the market, Rakuten Trade head of equity sales Vincent Lau thinks the fact that Anwar has also touched on the launch of the New Industrial Master Plan in August underlines the Prime Minister’s confidence of a good result in the upcoming state elections.
“Basically, businesses would want political stability and continuity, and for the government to remain intact. It is best to get the elections sorted out early so that the second half of 2023 would improve from the current situation,” said Lau.
More notably, commenting on the lacklustre performance of the ringgit at present, he told StarBiz that more confirmed and structured reforms are necessary for Malaysia to improve its weightage in the MSCI - estimated to be around 1.5% at present - to encourage more fund inflows which would lend support to the local currency and capital markets.
Speaking further on the ringgit, Tradeview Capital’s Wong said the action plans announced by Anwar yesterday also serve to address the persistent risks from Malaysia’s political landscape and macro fund flows, on top of being essential for the structural improvement of the capital market
“As for the ringgit, its performance hinges on the overall performance of domestic economic activities, the direction of the Overnight Policy Rate (OPR), and fund flows. It is worth noting that these measures may not yield immediate effects on the value of the ringgit,” he highlighted.
Echoing Lau’s sentiments, UOB Kay-Hian head of Malaysian research Vincent Khoo opined that there is a need for clearer details on the market reform initiatives to evaluate their effectiveness, while adding that initial perception is that impact would be only modest if no major reforms are introduced.
Khoo is thus hoping for more detailed reforms as his best assumptions are premised on the Unity Government to retain its comfortable majority in the states which it currently controls.
Earlier in his speech, Anwar reported that Malaysia has experienced a robust resurgence in foreign direct investment (FDI) inflows, as in 2022 the country recorded a net FDI of RM74.6bil, which is a 48% year-on-year jump from 2021.
Of particular interest is that FDI for the first quarter of 2023 has witnessed approved (foreign) investments amounting to RM71.4bil, showcasing a significant 60% surge compared to the corresponding period of last year, said Anwar.
