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Saturday, April 5, 2008

Malaysia: SC forecasts more active capital market this year

(The Star, 1 April 08)

KUALA LUMPUR: The Securities Commission (SC) is expecting an increase in capital market activity this year after a roaring 2007 that saw strong double-digit growth in the equities and bond markets.

Despite the global uncertainties that loom over the horizon, the SC has in the first quarter seen a substantial increase in the value of bond issuance to RM38.3bil from RM16.6bil in the first quarter of 2007.

Proposals in the pipeline indicate initial public offerings (IPOs) in the first quarter of 2008 are likely to exceed that of the first quarter of last year.

“Although we are optimistic it is still subject to uncertainties,'' SC chairman Datuk Zarinah Anwar told a media briefing on the release of the SC annual report 2007 yesterday.

She said there was strong growth momentum in 2007 and the SC expected the market fundamentals to remain favourable for the capital market to maintain a positive growth trend in 2008.

For the first quarter, the SC approved 13 IPOs with a market capitalisation of RM35.6bil. Of that, six were main board stocks, three second board and four headed for the Mesdaq market. The SC has another seven more companies in the pipeline to consider for a listing.

In 2007, total capital market capitalisation increased by 24% to RM1.6 trillion. The Islamic capital market grew by 29% to RM875bil and funds under asset management companies by 44% to RM237bil.

The capital market masterplan, whereby 85% of all 152 recommendations have been fulfilled, has resulted in a deeper and broader Malaysian capital market and the SC said Malaysia had one of the most balanced and diversified capital markets in Asia.

Zarinah said the SC's priority for 2008 was to focus on further strengthening the competitiveness of the capital market as a source for efficient capital raising and maintaining an attractive investment environment for domestic and foreign investors.

The SC said the merger of the main and second boards and the introduction of a sponsor-driven and broadly-based Mesdaq market would provide further opportunities for Malaysian companies to access the capital market.

The bond market is expected to further consolidate its position as one of the largest in Asia and the world for sukuk issuance.

“We continue to see sizeable issuance activity in the bond and sukuk markets from both local and foreign issuers with over RM38.3bil approved in the first quarter of this year,'' said Zarinah in a statement.

“With additional measures being implemented, such as the introduction of an Electronic Trading Platform for bond trading and price dissemination, the establishment of a third credit rating agency and further liberalisation in the approval process for bonds, we expect this segment of the capital market to continue playing a key role in the overall growth of the market.''

Another area for growth in 2008 is the investment management industry and here, the SC has embarked on strategies to further promote the industry and to position Malaysia as a leader in Islamic fund management.

Several global fund managers are operating in Malaysia and the SC expects more of them to establish operations here in the next 12 months. The latest licence approved is for Franklin Templeton Investments, which has US$644bil of assets under management, to set up operations here.

The SC also said its regulatory efforts would continue to be directed at ensuring high standards of corporate governance, market conduct and professionalism and two areas the SC would focus on this year were corporate disclosures and investor education.

“The quality of disclosures made by companies, advisers and sponsors who work with them must be of an extremely high standard in terms of information content, relevance, timeliness and completeness."

“We expect this in all corporate submissions as well as an on-going basis by all listed companies,'' Zarinah said.

The SC will also implement its investor blueprint in 2008. This blueprint aims to develop knowledgeable and vigilant investors through a long-term strategy of promoting nationwide financial literacy and encouraging industry to strengthen its role in educating its customers.

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