KUALA LUMPUR (March 18): The Securities Commission Malaysia (SC) is optimistic on the outlook of the capital market in 2021, saying that the global economy and Malaysia will be on the recovery path this year.

“This is given the progress of the vaccines, our continued policy support and the overall resumption of economic activities. Nevertheless, significant uncertainties still remain, and overall recovery is expected to be gradual and uneven across all sectors,” said its chairman Datuk Syed Zaid Albar in a virtual conference today.

He noted that the SC will be providing policy support in ensuring that the market remains resilient and orderly, adding that the capital market will be a key funding source to revitalise the growth of the Malaysian economy in 2021.

“As the Malaysian economy and companies continue with their recovery momentum, the SC will focus on ensuring that more businesses, including the micro, small and medium enterprises (MSMEs) and mid-tier companies, can fundraise through the capital market, in tandem with the government’s focus on developing high growth companies in the green and digital economy,” said Syed Zaid, noting that this is “crucial for the economic recovery” of the country.

Syed Zaid also said the SC would continue its efforts to raise awareness and efficiency of the equity crowdfunding and peer-to-peer fundraising options among these target groups, facilitating the growth of sustainable and responsible investment (SRI), and leveraging the Islamic capital market to further drive its SRI agenda.

He added that the SC would also develop a SRI taxonomy for the capital market to complete Malaysia's national agenda and transition to a low carbon economy.

While the fundraising size of venture capital (VC)/private equity (PE) firms has declined in 2020, Syed Zaid said the outlook is encouraging for them as businesses are showing signs of recovery, adding that the private market represents an important source of capital for expansion.

In 2020, the fundraising size of VC/PE recorded a 41% decline to RM300 million, according to the SC’s annual report.

He noted that most VC/PE firms focus their attention on ensuring business continuity of their portfolio companies due to the pandemic. Thus, in terms of new deals, it is understood that these firms have taken a wait-and-see approach, especially in the early stages of the pandemic.

Syed Zaid also explained that the MCO restrictions had obviously also affected the deal-making processes, especially the ability of the managers to conduct due diligence on potential investee companies.

Meanwhile, deputy chief executive Datuk Zainal Izlan Zainal Abidin noted that the recovery in the VC firms will be supported by the establishment of Dana Penjana Nasional programme last year, which will in turn give a boost to the local startup ecosystem.

“It is also important for us to recognise that the VC/PE industry is part of the overall funding ecosystem and they play a critical role in bridging the financing needs of businesses as they grow and expand from one stage to another,” said Izlan.

Having said that, Izlan said the SC is engaging with various stakeholders directly as well as the Malaysian VC and PE development council, which the SC chairs, to get feedback on what enhancements may be required to ensure that investments are channelled more efficiently in this space.

Furthermore, Izlan expressed that the SC views favourably the MyDigital initiative, saying that it articulates the vision of how the digital economy should be shaped over the next few years.

“These policies and announcements have set a very clear tone that this segment is a priority for this country, which in turn suggests an opportunity for the PE and VC industry. Because a significant amount of investments would be needed to spur the growth of this segment,” he added.

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