Capital Market_Malaysia_Overview.pdf

7/28/2019 Capital Market_Malaysia_Overview.pdf

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TRANSFORMING VISION INTO OPPORTUNITIES

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MALAYSIAOVERVIEW

MALAYSIAOVERVIEW


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MALAYSIAS CAPITAL MARKET

6MALAYSIAOVERVIEW

MALAYSIA OVERVIEW

1 BNM Annual Report 2010.

2 Global Competitiveness Report 2010-2011 by the World Economic Forum.

3 UNESCO Institute for Statistics (UIS) April 2007 Assessment.

4 Ministry of Higher Education Malaysia.

Strategically locatedin the heart of Southeast Asia with easy

access to China, India, the Middle East

and Africa

Gateway to ASEAN 600 million population GDP of US$1.85 trillion 28% of the population below 15 years

and strong mid-class

Successful middleincome nation with GDP percapita of US$8,140 and domestic savings as

high as 34.2% of GNI in 2010

Facilitative foreignexchangeadministrationpolicy attracts substantialforeign direct investment

World classinfrastructure to unlockpotential economic activities andsustain economic growth


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MALAYSIAOVERVIEW

One of Asias most vibrant economies,

thanks to decades ofindustrial growth andpolitical stability

Labour force of 12.2 million1 people is

highly skilled andproductive Ranked sixth basedon its pay-to-productivity ratio2

Business friendly government with a

commitment to economictransformation andliberalisation

High rate of literacy at91.9%

3

,which compares favourably toother advanced emerging markets

Competitive coststructure on top offavourable tax environment

Multiracial, multiculturaland multilingualpopulation of 28 million living in harmony


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8MALAYSIAOVERVIEW

Globally Connected

Malaysia has strong

historical and

commencial links

with China, India, Portugal,

the Netherland, Britain as well

as Middle Eastern and North

African (MENA) countries.

These strong links have

allowed Malaysia to serve as an

important gateway for investors

and issuers alike to these

markets. For example, Chinese

issuers often leverage on the

historical ties and use Malaysia

as a platform for fund-raising

exercises targeted at MENAinvestors.

In addition, Malaysias strategic

location between the Far East

and the West, along with strong

trade ties with the US, Europe,

the Middle East, China and

India, has further strengthened

its global connectivity, allowingit to engage with new and

emerging centres of economic

growth at the same time as

dealing with the West.

Malaysia is also a gateway to

ASEAN, thereby offering easy

access to the ten-country geo-

economic alliance with a total

population of 600 million, a

combined GDP of US$1,851

billion and a market growth rate

of 6% (as at 2010).

Aided by such connectivity,

over 1,000 companies from

30 countries have set up

their regional headquarters inthe country1. These include

multinational companies like

Shell, Nestle, Intel, Kuwait

Finance House, Standard

Chartered, HSBC and Citibank

which have made Malaysia

their regional hub. The

success of Malaysias very own

regional champions such as

AirAsia, CIMB and YTL are

also a testament of how the

connectivity has helped

home-grown companies

to flourish regionally and

internationally.

Malaysia is also a gateway to ASEAN,thereby offering easy access to theten-country geo-economic alliance with

a total population of 600 million...and a market growth rate of 6%.

1 PricewaterhouseCoopers, Gateway to Asia 2008.


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MALAYSIAOVERVIEW

Business and Investment Friendly

Malaysia has

a facilitative

foreign exchange

administration policy and

attracts substantial foreign direct

investment (FDI). A total of

RM29.3 billion (US$9.7 billion)

in FDI was recorded in 2010 and

this figure is expected to exceed

RM30 billion (US$10 billion) in

20111.

Malaysias attractiveness as a

business and investment friendly

destination has been widely

recognised by a number ofinternational studies.

According to the World

Economic Forum Global

Competitive Report 20112012,

Malaysia was ranked the 6th

most competitive nation in

Asia Pacific and 21st in the

world. The country also topped

the ranks in terms of the ease

of getting credit among 183

countries surveyed by the World

Banks Ease of Doing Business

Report 20102011.

1 Ministry of International Trade and Industry, press release 23 June 2011.

NO CAPITAL CONTROLS

The common misperception is that capital controls are still in

place to restrict the flow of capital to and from Malaysia. This

may have been the case in the late 1990s and early 2000s butno longer holds true.

Capital controls were previously imposed in response to the

flow of hot money during the Asian financial crisis that led

to the worse economic depression in Malaysias short history

as an independent nation. These controls have long been

discontinued.

Investors are free to repatriate any amount of their own funds

in Malaysia at any time including capital, divestment proceeds,

profits, dividends, rental, fees and interest arising from

investments in Malaysia.

In terms of foreign currency exchange, the ringgit is under a

managed float regime and has the necessary flexibility to adjust

to movements in capital flows and its value is determined by

market forces. The central banks role vis--vis foreign exchange

on a day-to-day basis is to ensure that market adjustments are

orderly.

Since 2007, Bursa Malaysia has allowed regulated short selling.

Additionally, overseas companies do not require local equity

participation as a requisite for listing on Bursa Malaysia.


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10MALAYSIAOVERVIEW

1 A global study in 2011 by international consultancy firm &samhoud.2 MSC Malaysia press release October 2010 quoting global study by A.T. Kearney.

In addition, Malaysia is the

16th most competitive nation

in the world and ranked first in

financial risk factor (covering

new financial instruments

and NPLs) in the Swiss-based

Institute for Management

Development (IMD) World

Competitiveness Yearbook

2011.

While the government

implements policies to improve

competitiveness, businesses

have leveraged on this business

friendly climate to create

opportunities.

Malaysia has the highest

percentage of companies with

an inspiring corporate vision and

in the implementation of those

corporate visions throughout

all layers of the company.1

Malaysia outperformed more

developed economies like

the USA, China, India, the

Netherlands and Germany.

Malaysia is also among the

top three shared service

outsourcing locations in the

world.2 Many foreign and local

companies in the country nowperform various shared service

outsourcing, including in the

outsourcing of knowledge, IT

and business processes.

While the governmentimplements policies to improvecompetitiveness, businesses haveleveraged on this business friendlyclimate to create opportunities.


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MALAYSIAOVERVIEW

Economic Transformation

Malaysia is a

successful upper

middle income

country. Its Gross

Domestic Product (GDP) per

capita amounted to US$8,140 in

2010 . Year-on-year GDP growth

amounted to 7.2% in 2010 and

is expected to grow at a rate

of between 5.5% and 6.0% in

2011.

The countrys total population

of 28.6 million (as of 2010) also

has one of the highest rates of

domestic savings, which stoodat 34.2% of Gross National

Income (GNI) in 2010.

Despite past economic

successes, Malaysias economy is

currently undergoing structural

changes. The government

has launched the Economic

Transformation Programme

(ETP) in October 2010 to

transform the country from a

middle income to a high income

economy. Under the ETP, 12

national key economic areas

have been identified that will

be advanced by 131 entry point

projects (EPPs) to drive economic

growth and development across

various industries.

As at August 2011, a total of

53 EPPs with a total investment

value of RM291 billion (US$97

billion) have been announced;

and 84% of the initiativesannounced have commenced

implementation. These initiatives

are generating RM228.5 billion

(US$76.2 billion) in GNI and

creating over 372,000 new jobs

in the process.

In addition to the ETP, the

government is also embarking

on transformation programmes

for the development of

five regional cities and

corresponding economic

corridors in Malaysia as part of

its economic transformation

plan and to further propel the

countrys economic growth.

The programmes will facilitate

the development of five

secondary cities and economic

corridors namely:

Georgetown and theNorthern Corridor Economic

Region;

Kuantan and the East Coast

Economic Region;

Johor Bahru and Iskandar

Malaysia;

Kuching and the Sarawak

Corridor of Renewable

Energy; and

Kota Kinabalu and the

Sabah Development

Corridor.

The development of these

five regional cities will in turn

generate significant growth to

the Malaysian economy and the

capital market.


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12MALAYSIAOVERVIEW

The ETP was launched by the government in

2010 with the objective of propelling the country

from a middle income economy to a high income

nation.

The goal is to elevate the countrys per capita GNI

from the US$6,700 recorded in 2009 to a level

exceeding US$15,000 by 2020. In order for this

goal to be achieved, a targeted annual growth of

6% in GNI over the next decade has been set as

the objective.

Under the ETP, the Malaysian economy is expected

to undergo significant changes to become a

developed nation. This would require a shift

towards a predominantly service-based economy.

During this period, the contribution from the

services sector is expected to grow 58% to 65%

by 2020.

The ETP identifies 12 key areas known as National

Key Economic Areas (NKEA), which are expected

to contribute substantially to Malaysias economic

growth. As 92% of the RM1.4 trillion funding

required for the NKEAs is expected come from the

private sector, the ETP is expected to be primarilyprivate-sector driven but facilitated by the

government through prioritized public investment

and policy support.

The starting point of the ETP was to focus on specific

sectors and areas of the economy to drive such

changes. The 12 areas identified on this basis are:

Agriculture Business Services

Communication Content & Infrastructure

Education

Electronic and Electrical

Financial Services

Greater Kuala Lumpur / Klang Valley

Healthcare

Oil, Gas and Energy

Palm Oil

Tourism

Wholesale and Retail

Once the NKEAs have been identified, various EPPs

are then identified to kick start the programme. As an

NKEA, the financial services sector has been further

divided into eight sub-sectors namely:

Retail banking

Venture capital, private equity and hedge funds

Business banking

Islamic banking Micro finance / Developmental Finance

Institutions

Investment management

Insurance and Takaful

Capital market

ECONOMICTRANSFOR

MATIONPROGRAMME(ET

P)


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MALAYSIAOVERVIEW

Financial Services Encompass Full Range of Solutions Catering to Different Financial Needs

The EPPs that have been identified to drive the

growth in the financial services sector are:

Revitalising Malaysias capital markets

Deepening and broadening bond markets

Transforming and rationalising developmentalfinancial institutions

Creating an integrated payment ecosystem

Insuring up to at least 75% of the Malaysian

population by 2020

Accelerating the growth of private pension

industry

Spurring the growth of the nascent wealth

asset management industry Developing regional bank champions

Becoming the indisputable global hub for

Islamic finance

Source: ETP, Performance Management and Delivery Unit (PEMANDU), Prime Minister Department of Malaysia


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14MALAYSIAOVERVIEW

Established Financial Landscape

Malaysias

financial system

comprises a

conventional

system that operates inparallel with a well established

Islamic financial system.

In fact, Malaysias Islamic

financial system is one of the

worlds largest with assets

valued at RM1.416 trillion

(US$472 billion).

The well-developed Islamic

financial system operates

parallel to the conventionalfinancial system, offering

Muslims and non-Muslims

greater diversity in the types of

products and services offered.

BANKING AND FINANCE

Conventional Islamic

Financial Market

SC

BNM

Labuan

FSA

Banking & Financial

Institutions Act 1989

Central Bank of

Malaysia Act 1958

Insurance Act 1996

Securities

Commission

Act 1993

Capital Markets and

Services Act 2007

Labuan Offshore

Financial Services

Authority Act 1996

Offshore Banking

Act 1990

Offshore Insurance

Act 1990

Banks

Insurers

__________

Securities

Bonds

REITs

ETFs

Unit trusts

funds

Islamic BankingAct 1983

Takaful Act 1984

Shariah Advisory

Council

National Shariah

Advisory Council

(BNM)

MIFC

Islamic

banks

Takaful

operators

__________

Shariah-

compliant

securities

Sukuk

Islamic REITS

Islamic ETF

Shariah-

compliant unit

trust

Capital Market

Source: Securities Commission Malaysia


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MALAYSIAOVERVIEW

Continued Liberalisation

In 2009, the government

announced the liberalisation

of 27 service sub-sectors,

allowing foreign investors

unrestricted market access with

100 per cent equity. It was an

enterprising move, undertaken

at the height of the financial

crisis to send a clear signal

to the world that Malaysia

the outward-looking face of

South East Asia was open

for business at a time when

others were turning inwards and

taking refuge in the short-term

comforts of protectionism.

Since then, the full range of our

domestic regulations has been

reviewed to ensure that they do

not obstruct the liberalisation

measures put in place. A

number of steps to boost the

development of Malaysias

service industries have also been

taken including a roadmap of

capacity building for SMEs.

As a result, the year 2010

saw the total trade in servicesrise to RM207 billion (US$69

billion) compared to RM194

billion (US$65 billion) in 2009,

with service exports increasing

by 5.6% to RM104 billion

(US$34.6 billion) over the

same period.

The government will further

liberalise 17 services sub-sectors

in phases in 2012 to accelerate

investment. This initiative will

allow up to 100% foreign equity

participation in selected

sub-sectors.

The liberalisation measures

have also encouraged foreignplayers to invest in the

Malaysian financial sector,

and to use Malaysia as a

base for their regional and

international operations. This

further strengthened Malaysias

position in fund management,

unit trust and stockbroking

industries, and enhancing the

countrys competitiveness as a

destination for fund-raising and

investments.


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PITALMARKET

Capital Market_Malaysia_Overview.pdf

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