This article first appeared in Forum, The Edge Malaysia Weekly on October 4, 2021 - October 10, 2021

As a young boy, I would sometimes accompany my mother on trips to the pasar, or wet market, in my hometown. Like any other adolescent, I would roam around on my own while she went about her weekly shopping, taking advantage of the opportunity to explore every nook and cranny and the hidden lanes in the area.

I observed traders operating exactly within the confines of their peculiarities — the fishmongers and vegetable sellers with a ready supply of ice and water to keep their produce fresh, while just a few rows away, the meat or poultry sellers would prefer their area to be dry.

Over time, new stalls would appear within the perimeter, selling flowers, toys and pre-loved items, often in areas that were accessible but away from the chaos. Traders would frequently shout out their offers to buyers who had an open view of all the offerings, hoping to find a sweet deal.

Today, I often reflect on the many parallels between these wet markets and the Malaysian capital market ecosystem. Wet markets, with their organised chaos, vibrance and plethora of choices, frequently play an important role in supporting livelihoods, including those of small producers and farmers. Many communities rely on wet markets for food and nutrition.

The trusting relationships developed over the years between sellers and their customers help contribute to market integrity, which is a cornerstone of fair and efficient markets that ensures participants have equal access, that price discovery and trading practices are fair, and that product standards are met. Moving from pasars to capital markets, we have a robust ecosystem that supports economic growth and financial stability.

At its core, the capital market facilitates capital formation for the real economy, allowing businesses to raise funds to fuel their growth while simultaneously enabling investors to participate and build their wealth. In Malaysia, micro, small and medium enterprises (MSMEs) and mid-tier companies (MTCs) account for roughly 60% of the economy. The capital market is a powerful feed line that delivers capital to these companies, as well as the entire economy and nation as a whole. Whether you are a business owner or an investor, we must see it as a virtuous cycle.

As a result, capital market policymakers and regulators play a central role in creating the enabling environment necessary for companies, investors and others to act for our collective future — the capital market, the economy and the nation.

Following the 1997/98 Asian financial crisis, it became clear that a broad and deep domestic capital market was required to diversify risks and ensure a more resilient economy. Over-reliance on bank financing had made the economy vulnerable and the Capital Market Masterplans were developed to create a Malaysian capital market that would support the nation’s growth and development priorities.

A myriad of proactive initiatives implemented over the years have increased the capital market’s depth, accessibility and efficiency and strengthened its resilience to weather the storms of the last decade.

Alternative fundraising avenues such as equity crowdfunding, peer-to-peer financing and initial exchange offerings, for example, have helped to democratise fundraising, assisting MSMEs and even early-stage innovative businesses that require risk capital. While still in their infancy, these platforms have aided businesses throughout the pandemic, raising RM1.25 billion in much-needed financing since March 2020.

Prior to 2020, the world was already changing at a rapid pace. Climate disasters exacerbated social issues such as rising inequalities. The world’s ageing population has been putting a strain on pension systems and living standards. The arrival of the Covid-19 pandemic has accelerated some of these trends, reversing decades of progress in reducing poverty, unemployment and technological divide in a short period.

When attempting to anticipate future challenges, we must take a strategic approach. Challenges will always come and go. What remains is for us to prepare and equip ourselves to face the challenges coming our way. How do we cultivate the right mindset, tools and vision for the future — a future we want to create, rather than one that we are forced to react to?

While market development can take many different paths, not all can be measured solely by size and growth. Given that the goal is to revitalise the market, it is less about how many companies we list but 

nurturing them to be future drivers of the nation’s economy. Ultimately, the aim is to encourage corporate innovation and ideation that can create champions in every sector. This will aid in the development of new, high-value-added sectors that can help grow the ecosystem and provide multiplier effects for the broader economy.

Investor protection must also develop in tandem with the market’s growth and maturity. Greater availability of risk capital and alternative investments necessitates protecting vulnerable segments that face the risk of missing out on opportunities, such as the silver community or those living in rural or remote locations.

As we look at the next chapter of development with the Capital Market Masterplan 3 (CMP3), the capital market must become more relevant in meeting the funding needs of all Malaysian businesses across all life cycles, as well as changing investor preferences and appetites. The capital market must also become more relevant in facilitating the country’s transition towards a greener and more sustainable economy.

The capital market must be efficient, particularly in light of rapid innovation and technological changes. We need more healthy competition in our market to provide value and increased opportunities to issuers and investors, as well as to accelerate market development that fosters innovation.

More investors are expected to shift towards online investing, which necessitates developing new intermediation propositions enabled by existing or new entrants to meet these new digital needs. There are also opportunities to modernise the bond and equity market’s entire value chain, from issuance to pricing and trading for greater efficiency and transparency.

Finally, CMP3 intends to focus on market diversity and empower Malaysians to invest in their future. The capital market must be able to provide more diversity in product offerings, allowing investors to accumulate and sustain their wealth well into retirement.

Looking ahead, I am optimistic about the future of our capital market and the significant opportunities it offers. While many industries have suffered due to the economic ramifications of Covid-19, there has never been a greater need for efficient and relevant capital markets.

My faith in CMP3’s approach stems from the belief that it allows the market to create value throughout the economy. These opportunities that drive economic value must be aligned with the nation’s needs. Revitalising our economy is a shared journey. By identifying the trends and putting forward these recommendations, we hope all parties will come on board to drive inclusive and sustainable growth that can greatly benefit the nation.

Datuk Syed Zaid Albar is executive chairman of the Securities Commission Malaysia. The views expressed here are his own.

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