Malaysia’s capital market rose to RM3.4t in 2020 despite challenging environment

KUALA LUMPUR, March 18  — The total size of the Malaysian capital market rose by seven percent to RM3.4 trillion in 2020 compared to RM3.2 trillion in the preceding year despite the challenging environment.

According to the Securities Commission Malaysia (SC) Annual Report 2020 released today, assets under management (AUM) of the fund management industry expanded by RM82.3 billion to RM905.5 billion in December 2020.

“The unit trust segment remained the largest source of funds for AUM, with a higher total net asset value (NAV) amounting to RM519.5 billion in December 2020 compared to RM482.1 billion in December 2019,” it said.

The report said the Malaysian capital market continued to play its role in financing the domestic economy and mobilising savings despite unprecedented conditions last year. 

It said high levels of domestic liquidity, alongside proactive measures taken by the authorities, have helped maintain orderly market conditions and ensure limited disruption to overall capital market activities.

The fund management industry recorded its highest monthly net withdrawal in 2020 during the height of the health crisis in March. However, it demonstrated resilience throughout this episode of market stress due to the soundness of liquidity risk management frameworks of capital market intermediaries. 

Furthermore, the SC said investment management professionals navigated market volatility through effective management strategies which led to the restoration of investor confidence. 

“By July 2020, the industry rebounded and recorded AUM of RM844.1 billion, surpassing the historical high of RM823.2 billion as at end-December 2019,” it said. 

Meanwhile, the SC said alternative fundraising avenues continued to gain traction, especially in equity crowdfunding and peer-to-peer, with total funds raised increasing to RM631 million last year.

“Although fundraising activities temporarily slowed in March to May 2020, it recovered upon resumption in economic activity given continued funding needs,” it said.

However, the report noted that the capital market witnessed a lower level of fundraising in the corporate bond and equity market, totalling RM114.6 billion for the whole year.

For the corporate market segment, the SC said total new issuances stood at RM104.6 billion, while total funds raised in the equity market rose to RM10 billion, of which RM2 billion was raised via initial public offerings and RM8 billion through secondary fundraising. 

Last year, it said two companies were listed on the Main Market, 10 companies on the ACE Market and the remaining on the LEAP Market.

The SC said the impact on the domestic market was significant especially in March 2020, reflecting the sharp worsening of the growth outlook and global risk aversion, while both the local equity and bond markets experienced steep declines.

On March 19, 2020, the FBM KLCI dropped by as much as 24.3 per cent from January 2020’s pre- pandemic high to 1,219.72 points, the lowest level since September 2009.

Meanwhile, the report said local bond yields surged sharply, with the Malaysian Government Securities (MGS) 10-year yields rising by 80.4 bps to a high of 3.57 per cent on March 24, 2020 from the low on March 4, 2020.

“Portfolio fund flows were also adversely affected with outflows in both equities and bonds totalling -RM34.1 billion in February to May last year amid intensified selling,” it said.

Nevertheless, the SC said the local capital market exhibited resiliency, underpinned by supportive policies as a broad recovery in domestic asset prices was witnessed from May 2020 onwards, mirroring global markets as sentiments continued to improve. 

Portfolio inflows, it said, recovered in tandem, driven mostly by the bond market with total non-resident inflows amounting to RM24.4 billion from June to December 2020.

— BERNAMA