KUALA LUMPUR (April 16): The Securities Commission Malaysia (SC) said today key global developments will continue to influence the outlook for the domestic capital market in 2020 with volatility driven primarily by the direction and pace of world economic growth and monetary policy stance besides trade and geopolitical tension uncertainty.

The SC said in its 2019 annual report that greater clarity in ongoing domestic policy reforms will also influence the performance of the local capital market, which expanded to RM3.2 trillion in 2019.

"Nevertheless, the Malaysian capital market will continue to support economic growth through the financing of business expansion and infrastructure.

"Activities in the global capital market will continue to be shaped by developments in the global economy and the relatively easy global financial conditions, aided by the prospect of continued accommodative global monetary policies.

"Volatility, however, will likely persist, given heightened downside risks to growth. The prospect of global equities is expected to remain generally positive, underpinned by continued commitment from global policymakers to support growth.

"Nevertheless, a prolonged period of a low-interest rate environment will likely intensify yield-seeking trends, further contributing to already stretched valuations in some equity markets.

"In the global bond market, performance will continue to be reflective of the overall trends in global risk aversion, with the shape of the yield curve anticipated to remain relatively flat,” the SC said.

Looking back, the SC said that in 2019, the domestic capital market continued to play an important role in financing the Malaysian economy. According to the SC, the size of Malaysia’s capital market expanded to RM3.2 trillion in 2019 from RM3.1 trillion a year earlier.

For 2019, the SC said debt securities outstanding and equity market capitalisation stood at RM1.5 trillion and RM1.7 trillion respectively. During 2018, debt securities outstanding and equity market capitalisation stood at RM1.4 trillion and RM1.7 trillion respectively, according to the SC.

"Notwithstanding the challenging global backdrop and ongoing domestic policy reforms, the Malaysian capital market witnessed a higher level of fundraising activities during the year, with total funds raised in the bond and equity market amounting to RM139.4 billion in 2019 compared with RM114.6 billion in 2018.

"Alternative fundraising avenues have also continued to gain traction, especially in ECF (equity crowdfunding) and P2P (peer-to-peer) financing, with total funds raised more than doubled to RM443.8 million (2018: RM195.9 million)

"A total of RM132.8 billion was raised in the corporate bond and sukuk market compared with RM105.4 billion in 2018, with issuances mainly in utilities and financial services.

"Sukuk made up 77.1% of total bond issuances in 2019. Meanwhile, RM6.6 billion was raised via the equity market (2018: RM9.2 billion), of which RM2.0 billion was through new equity listings with a total of 30 IPOs (initial public offerings) ) and RM4.6 billion raised via secondary fundraising.

"In 2019, four companies were listed on the Main Market, 11 companies on the ACE Market, and the remaining on the LEAP Market.

"Notably, the size of issuances via the LEAP Market grew by 60.6% y-o-y to RM92.2 million in 2019 (2018: RM57.4 million).

"In the fund management industry, total AUM (assets under management) rose to RM823.2 billion (2018: RM743.6 billion) amidst an increase in market value, driven by robust performance of small and mid-cap equities and higher net injection from dividend reinvestment.

"Total net sales for the unit trust segment amounted to RM30.5 billion in 2019, a decrease of 19.5% y-o-y (2018: RM37.9 billion)."

In terms of portfolio flow, the SC said total non-resident inflow amounted to RM8.7 billion in 2019 compared to 2018’s outflow of RM33.6 billion.

The SC said the bond market recorded inflow of RM19.9 billion in 2019 versus 2018’s outflow of RM21.9 billion. The equity market recorded outflow of RM11.1 billion in 2019 compared with 2018’s outflow of RM11.7 billion, according to the SC.

"In the bond market, non-residents accounted for 13.7% of total outstanding ringgit bonds as at end December (2019) (end-2018: 13.1%) – most of which were Malaysian Government Securities (MGS) at 80.1% of total foreign holdings (end-2018: 79.1%).

"In the equity market, foreign holdings remained stable at 22.4% of total market capitalisation in 2019, in line with its five-year average . The high level of domestic liquidity in the capital market continued to allow for orderly market adjustments of fund flows between non-residents and local investors,” the SC said.