Thursday, March 21

Capital market continues financing domestic economy

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KUALA LUMPUR: The Malaysian capital market continued to play a vital role in financing the domestic economy last year with the total size amounted to RM3.1 trillion in 2018, retaining above the RM3 trillion mark, with debt securities outstanding rising to RM1.4 trillion, while equity market capitalisation contracted to RM1.7 trillion.

The Securities Commission Annual Report 2018 released yesterday stated that the country’s capital market witnessed a more moderate level of fundraising activities during the year with total funds raised amounting to RM114.6 billion in 2018, given the challenging global environment and ongoing domestic policy reforms.

“A total of RM105.4 billion was raised in the corporate bond and sukuk market, while RM9.2 billion was raised via the equity market. Total bond and sukuk issuance exceeded the five-year average of RM97.7 billion with new issuances, mainly in utilities and financial services. Sukuk made up 68.9 per cent of total issuances in 2018.

“Meanwhile, out of the total funds raised in the equity market, RM700 million was raised via Initial Public Offerings with 21 new equity listings in the primary market, and RM8.5 billion via secondary fundraising,” it said.

For 2018, the report stated that two companies were listed on the Main Market, nine on the ACE market and the remainder on the LEAP Market.

Overall, it said the non-resident portfolio outflows amounted to -RM33.6 billion in 2018 against an inflow of +RM2.8 billion in 2017, in tandem with regional trend, albeit at a lesser degree with a sum of 65 per cent of the net outflow was from the bond market at -RM21.9 billion, while the remainder of -RM11.7 billion was from the equity market.

“The Malaysian bond market grew 8.8 per cent from RM1.3 trillion in 2017 to RM1.4 trillion as at end of December 2018, with Malaysia remaining as the third largest local currency bond market as a percentage of gross domestic product in Asia in 2018, after Japan and South Korea.

“Ongoing trade tensions, tighter financial conditions globally due to monetary policy normalisation by major central banks and general risk-off sentiments towards emerging markets stemming from contagion fears, however, drove volatility in the bond market throughout 2018,” it said.

Meanwhile, the Malaysian equity market capitalisation contracted by 10.8 per cent to RM1.7 trillion in 2018 from RM1.9 trillion in 2017, amid challenging external developments, the report stated.

“The domestic stock market commenced the year on a stronger footing, mirroring global equity markets performances but settled lower towards the end of the year amid heightened external headwinds from the escalating trade tensions between the US and China, the uncertainties surrounding US monetary policy tightening, fear of contagion from the emerging market economies and volatile oil prices,” it added. — Bernama