KUALA LUMPUR (Sept 21): Malaysia, as with most global jurisdictions, saw an overall decline in initial public offerings (IPOs) over the last decade, as more companies chose to stay private for longer, said the Securities Commission Malaysia (SC).

This is the result of greater liquidity in private markets, thus affording the companies greater control and flexibility, the SC said in its Capital Market Masterplan 3 (CMP3) (2021-2025) report today.

Notwithstanding these trends, the mid- and small cap (MidS) segment of the equity market has seen a higher number of IPO listings and increased trading activity, the report noted.

“The increase in IPO listings by MidS companies was enabled by initiatives such as the establishment of the LEAP market and an enhanced listing transfer framework from the ACE market to the Main Market. 

“Improved trading activity had in part been enabled by better research coverage through the MidS Research Scheme, lower trading costs with the MidS-specific stamp duty waiver and greater liquidity arising from the various MidS-related indices, as well as index futures,” said the SC.

Meanwhile, the CMP3 report said the corporate bonds and sukuk market continued to be a strong fundraising avenue over the last decade, with the outstanding amount growing by 8.9% compound annual growth rate (CAGR) to RM732.4 billion in 2020. 

The share of corporate bonds and sukuk over total issuances increased to 28.5%, from 13.0% in 2010, the report said.

This growth, it said, was built on facilitative policies, which strengthened local credit rating capabilities, as well as enhanced fundraising flexibilities with liberalised limits and credit rating requirements. 

The report also noted that the evolution of the investment needs of Malaysian investors generated significant growth in the industry asset under management (AUM), and brought changes to the Malaysian investment landscape, including greater diversity in product range and better intermediation capacity.

As a result, AUM grew at a compounded pace of 9.1% per annum to RM905.5 billion in 2020, from RM377.5 billion in 2010.

In addition, the SC noted that the introduction of the private retirement scheme (PRS) provided individuals with a private option to complement the public mandatory retirement scheme and longer-term savings flexibility.

Since the inception of PRS in 2012, its AUM grew by a CAGR of 71.5%, from RM62.7 million in 2012 to RM4.7 billion in 2020.

On Islamic capital market (ICM), the CMP3 report said Malaysia continued to be a prominent global ICM hub and a leader in global sukuk outstanding and issuances in 2020, with shariah-compliant assets amounting to RM2.3 trillion as at end 2020, having grown from RM1.1 trillion in 2010. 

“Malaysian sukuk outstanding more than tripled in size on the back of facilitative development policies. Islamic AUM meanwhile grew 2.7 times, underpinned by initiatives outlined in the Securities Commission’s Islamic Fund and Wealth Management Blueprint, which was launched in 2017,” the SC said. 

The report also observed that the introduction of the Sustainable and Responsible Investment Sukuk Framework (SRI Sukuk Framework) and the Guidelines on Sustainable and Responsible Investment Funds (Guidelines on SRI Funds) capitalised on similarities between the underlying principles of Islamic finance and SRI. 

“This has thus far produced 13 SRI sukuk issuers, with a combined total issuance amounting to RM5.5 billion as at December 2020 and catalysed a series of innovative ICM-SRI product structures. 

“In fact, Malaysia has one of the largest SRI AUM in the Asian region (ex-Japan) due to the strength and scale of its Islamic funds, which are recognised as part of the overall SRI universe,” it added.

Read more stories about the Securities Commission's Capital Market Masterplan 3 (CMP3) here.