null Malaysian Capital Market Demonstrated Resilience in year of Covid-19: 2021 Priorities to Support Economic Recovery
Malaysian Capital Market Demonstrated Resilience in year of Covid-19: 2021 Priorities to Support Economic Recovery
22 Mar 2021 | Monday source: Securities Commission Malaysia
The Malaysian capital market continues to play a central role in financing the domestic economy and mobilising savings despite challenging conditions in 2020. The Securities Commission Malaysia (SC), while releasing its Annual Report 2020 today, said that the capital market expanded 7% to RM3.4 trillion in 2020 as compared to RM3.2 trillion in 2019.
Both the local equity and bond markets recovered from the pandemic lows, outperforming regional peers. Total funds raised via the equity and corporate bond markets was at RM115 billion, supported by a 76% increase in secondary issuances of equities. Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) financing also recorded continued growth momentum, increasing by 43% from a year ago, raising RM631 million for the Micro, Small and Medium Enterprises (MSMEs).
Overall assets under management (AUM) saw resilient growth of 10% in 2020 to RM905.5 billion, reflecting stronger investor interest in the capital market. Net Asset Value (NAV) of unit trusts and private retirement scheme industry also rose to RM519.5 billion and RM4.8 billion respectively. The AUM growth was achieved despite redemption pressures during the height of the market sell-down.
Addressing journalists at the virtual media conference to launch the SC’s annual report 2020, Datuk Syed Zaid Albar, Chairman of the SC said, “The world, our country, our people, and our industry have weathered a tumultuous 2020. With the vaccination effort being expedited at the global and domestic fronts, we are cautiously optimistic that 2021 will see a post-pandemic reset that will put the nation back on track, although recovery could be gradual and uneven across sectors and countries.”
Datuk Syed Zaid said that in 2020, the SC had recalibrated its priorities to enable the regulator and capital market participants to address and respond to the impact of the pandemic while ensuring market stability and continuity.
At the onset of the pandemic, the SC introduced a wide array of regulatory flexibilities and relief measures to ensure business continuity and facilitate orderly market operations, including time extensions for filings, fee waivers and exemptions. 389 PLCs benefitted from various listing fee waivers while 47 PLCs announced fundraising exercises under increased and general mandates. 544 hybrid and fully virtual general meetings were also conducted.
Complementing the SC’s regulatory efforts are initiatives to protect and empower investors through education and awareness. The SC increased the intensity of its anti-scam awareness measures and interventions, as there were a rising number of illegal investment schemes being offered on social media and messaging platforms. The SC issued 134 Investor Alerts, blocked 78 websites, and established a Special Task Force to focus on investigating scams and unlicensed activities. The SC’s Consumer and Investor Office has also recorded an increase of 158% in complaints and 123% in enquiries on the legitimacy of investment schemes.
Improving the culture of corporate governance (CG) remains high on the SC’s list of priorities. In 2020, the SC issued guidelines to promote the proper discharge of directors’ fiduciary duties, and strengthen board governance of company groups. An Annual General Meeting checklist was issued to encourage meaningful dialogue between shareholders and the board at general meetings. A Corporate Governance (CG) Council comprising key CG stakeholders, was also established to align and consolidate all efforts in promoting good corporate governance at the national level. The year also saw encouraging progress in participation of women on boards. The percentage of women on boards of the top 100 listed companies stands at 25.6% as at 15 March 2021 (24% as at 31 March 2020).
The SC continued to pursue swift and effective outcomes through the utilisation of a wide range of enforcement tools. Five criminal convictions were secured for securities fraud, insider trading and false financial disclosure, while close to RM3.9 million was restituted to 533 investors and RM2.2 million penalties imposed via civil action. During the year, the SC also imposed 45 administrative sanctions for various breaches of securities law and guidelines.
Last year also saw the resolution of two major investigations undertaken by the SC in relation to 1MDB. Deloitte PLT was imposed a maximum fine of RM2.2 million under the Capital Markets and Services Act for its failure to immediately report to the SC on material irregularities, while Goldman Sachs Group Inc entered into a USD3.9 billion global settlement with the Government of Malaysia to resolve all current and pending regulatory actions against Goldman Sachs group of entities for, among others, their roles in the issuance of the 1MDB related bonds.
The SC will push ahead with its 3A vision for the capital market - An agile, accessible and accountable (3As) capital market which is vibrant, innovative and well-placed to support Malaysia’s economic recovery and transformation, while ensuring shared prosperity for all.
Our priorities for 2021 will be centred on the developments we see within the industry. As the Malaysian economy and companies continue with their recovery momentum, the SC will focus on ensuring that more businesses, including the 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.
Digital development will continue to be a core industry agenda, and at such, a key priority at the SC. This will entail facilitation of more innovative intermediation within the capital market, and greater focus on the industry’s capabilities to manage technology risks, including cyber risks. At the SC, we will strengthen regulatory capabilities on risk surveillance and see greater use of technology and machine learning across our regulatory functions from supervision to enforcement.
Along with the increased focus on ESG, the SC will also prioritise the growth of Sustainable and Responsible Investments (SRI) and continue to leverage on Islamic capital market to drive SRI. The SC will be developing the Guiding Principles on SRI Taxonomy for the Malaysian capital market – a key pillar to the Government’s national sustainability agenda to transition Malaysia into a low carbon economy.
Cognisant of its critical role in supporting the country’s economic recovery and transformation moving forward, the SC will roll out the Capital Market Masterplan 3 (CMP3) in the second half of this year. The CMP3 will articulate both the developmental and regulatory approach and initiatives for the next five years, in building a relevant, efficient and diversified capital market for the future.
The SC’s Audit Oversight Board (AOB) also released its Annual Report 2020 today. Auditors and Audit Committees are reminded that they are responsible for ensuring high-quality independent auditing to promote confidence in the quality and reliability of audited financial statements of public-interest entities (PIEs) and schedule funds although they are faced with ongoing challenges posed by the pandemic.
During the year, a total of four audit firms and 242 audit engagements were scoped in for the AOB’s off-site thematic reviews on the impact of COVID-19, which revealed gaps in a number of the auditors’ verification of the PIE’s going concern assumptions and impairment assessments, as well as the adequacy of subsequent event disclosures in the audited financial statements. Additionally, the AOB continued with its regular inspections and covered 10 audit firms and 19 audit engagements. In 2020, the AOB continued to observe non-compliance by auditors with auditing standards and imposed sanctions on the auditors to emphasise the importance of high audit quality.
For more updates on the SC and AOB Annual Report 2020, please follow the SC Twitter at twitter.com/SecComMY or download the full reports at www.sc.com.my/ar-2020.
Published on 18 March 2021.