Bridge over ocean
3 March 2021 Article

The Emerging Asia Pacific Capital Markets: Malaysia

  1. Jin Yoong Chong, CFA

With an open economy, a thriving stock exchange, and one of the most active bond markets in Asia, Malaysia is also a major hub for Islamic finance. Now the country’s regulatory authorities are focusing on fintech and alternative funding.

Malaysia achieved independence in 1957 and since then has diversified its economy from a predominantly agricultural and commodity-oriented base to one that hosts a robust manufacturing and services sectors.

Malaysia has one of the most open economies in the world, facilitating trade and investment activities. In tandem with this open economy is a robust capital market that has seen continuous developments in the past 60 years.

The nation’s stock exchange, Bursa Malaysia Berhad, is at the core of the equity capital market. It is home to more than 900 listed companies and entities and features three different markets catering to a broad range of companies. Bursa Malaysia also features a broad range of products including listed equities, commodity futures, exchange-traded funds, and financial options, among other products. The total market capitalization for the exchange stands at USD369.06 billion as of 30 June 2020.

Conversely, Malaysia’s bond market is one of the most active in the Asian market. This can be seen from the active MGS (sovereign bond) market coupled with a corporate bond market size that represents over 50% of the country’s GDP. This active bond market has facilitated efficient financing of various economic activities in the country.

Malaysia has additionally played a leading role in the sukuk markets. Islamic finance features prominently in the Malaysian capital markets, catering to the needs on both the demand (investors) and supply (issuers) sides. Malaysia prides itself as a hub for Islamic finance and has achieved several global firsts, including the world’s first Islamic real estate investment trust.

The rise of fintech and alternative funding have also been embraced fully by the Malaysian regulatory authorities, as demonstrated by the various initiatives to develop this space. Peer-to-peer lending and crowdfunding are seeing increasing traction in line with the changing demographics of the investor base.

This article is from "The Emerging Asia Pacific Capital Markets: Challenges and Opportunities," published by CFA Institute Research Foundation.

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