Malaysia’s capital market grows 5.6% in 2023 despite lower fundraising: Securities Commission

[KUALA LUMPUR] Malaysia’s capital market grew 5.6 per cent in 2023 to RM3.8 trillion (S$1.08 trillion), largely driven by growth in the local bourse’s market capitalisation, bonds and sukuk market, and despite lower fundraising activities.

The growth was achieved amid heightened global economic uncertainty and constant shifts in investor sentiment across global financial markets last year, according to the Securities Commission (SC) Malaysia’s 2023 annual report released on Monday (Mar 25).

Total funds raised in Malaysia’s capital market moderated to RM127.7 billion last year, down from a record high of RM179.4 billion in 2022, as a result of “exceptional events”, said SC’s executive chairman Awang Adek.

The year 2022 was led by a multi-billion ringgit Celcom-Digi merger deal and higher bond issuances totalling RM31 billion that year.

“Last year, with the absence of large issuances and merger activities, the capital market returned to pre-pandemic levels (in 2019), but remained resilient,” he told reporters at a media conference called in conjunction with the release of SC’s annual report. Malaysia’s capital market raised RM139.4 billion in the bond and equity markets in 2019.

Corporate bond and sukuk issuances fell more than 23 per cent to RM118.3 billion, owing to lower refinancing demand.

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In the equity market, primary issuances improved nearly 3 per cent to RM3.6 billion following 32 initial public offerings (IPOs); secondary fundraising activities declined sharply by 74 per cent to RM5.8 billion from lower corporate activities.

Despite the capital market’s mixed performance, Awang said it continued to stay strong in 2023, amid global economic challenges and diverging expectations of monetary policies in major economies.

Malaysia’s fund management industry expanded in 2023, with total assets under management (AUM) hitting a record high of RM975.5 billion – up nearly 8 per cent from the year before. SC attributed the growth to improvement in market value and greater asset allocation in developed markets.

The unit trust segment remained the largest source of funds, comprising more than half or 51.3 per cent of total AUM.

Awang attributed the sterling performance of the funds management industry in part to the depreciation of the ringgit, which resulted in higher valuations of external assets.

Fundraising activities in equity crowdfunding and peer-to-peer (P2P) platforms also grew robustly, with total funds raised climbing 26 per cent to RM3.8 billion.

Since their inception in 2019, these platforms have aided some 15,000 micro, small and medium-sized enterprises to raise over RM6 billion.

Although the stock market’s benchmark – the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) – capped 2023 lower by 2.7 per cent, other market indices gained. Awang said this reflected investors’ interest in firms with higher growth potential, particularly mid and small-cap segments.

Currently, the domestic equity market is among the best performing markets in the region, with the FBM KLCI gaining over 6 per cent in the year to date. On Friday (Mar 22), it closed at 1,542.39 points.

SC anticipates an increase in IPOs this year, as more funds are expected to be raised. “We expect there will be 40 to 42 new company listings on Bursa Malaysia, surpassing last year’s 32 IPOs, which raised RM3.6 billion,” noted Awang.

The regulator expects the domestic capital market to continue to be influenced by momentum in the domestic economy and corporate developments, with some volatility due to global economic uncertainties. This involves the direction of global monetary policy and evolving geopolitical tensions.

Awang said he expects the favourable momentum in the latter part of 2023 to continue this year, underpinned by ongoing supportive policy actions under Prime Minister Anwar Ibrahim’s “Ekonomi Madani” framework.