Q NEWSLETTER. Malaysian capital market grew to RM2.76 trillion in Khazanah to Launch Malaysia s First Social Impact Bond

Transcription

1 Q NEWSLETTER Malaysian capital market grew to RM2.76 trillion in 2014 World s First South-East Asia Syariah ETF Listed On Bursa Khazanah to Launch Malaysia s First Social Impact Bond ASEAN CIS Investment Products Favoured By Fund Management Industry Small Cap Companies Offer Opportunity for Growth

2 ECONOMY MALAYSIAN CAPITAL MARKET GREW TO RM2.76 TRILLION IN SC The Malaysian capital market grew to RM2.76 trillion in 2014, equivalent to 2.6 times the size of the Malaysian economy, and remained resilient in an environment of global uncertainties, said the Securities Commission Malaysia (SC) in conjunction with the release of its annual report. The capital market continued to be an important source of financing for the economy, with RM91.9 billion raised through initial public offerings and private debt securities (PDS). Capital-raising exceeded RM90 billion for the third consecutive year, illustrating the capital market s deepened capacity to meet Malaysia s real economy financing needs. Malaysia affirmed its global leadership in the Islamic capital market, having grown at an average of 12% per annum over the last five years to RM1.59 trillion in 2014, accounting for 58% of the capital market. By end-2014, 74% of Malaysian listed companies were classified as shariah-compliant with market capitalisation of more than RM1 trillion. Malaysia also retained its position as the largest sukuk market in the world, accounting for 66% of global issuances. Fund management continued to be the fastest-growing market segment with assets under management (AUM) surpassing the 600-billion ringgit milestone for the first time to reach RM630 billion (+7.1%) by year end. Islamic AUM grew to RM111 billion from RM98 billion in 2013, reflecting the industry s ability to develop under Malaysia s facilitative Islamic capital market environment. Growth was driven by the expansion of channels for managed investments, with the net asset value of the unit trust industry growing to RM343 billion the largest in Southeast Asia. The nascent Private Retirement Schemes (PRS) segment, which more than doubled its AUM and membership to RM716.1 million and 128,977 members respectively, forms the third pillar of Malaysia s pension framework and is poised to become an area of future growth in the investment management industry.

3 ECONOMY NAJIB: INCLUSIVENESS, SUSTAINABILITY CORE VALUES OF 11TH MALAYSIA PLAN THE MALAY MAIL KUALA LUMPUR, April 23 Inclusiveness and sustainability will be the core values of the 11th Malaysia Plan (11MP) to be tabled in Parliament next month, Prime Minister Datuk Seri Najib Razak said. He said the values are also key pillars of Malaysia's growth vision and embedded in the Economic Transformation Programme (ETP). The government has long recognised that increasing our national prosperity means nothing, if not shared. The fruit of our success must be available to all, he said in his keynote address at the Invest Malaysia 2015 institutional investor conference here today. Najib said to make the most of the opportunities arising from the country's diverse range of Shariah-compliant investment products and services offerings, the Securities Commission (SC) is developing a comprehensive blueprint for Malaysia's Islamic Fund and Wealth Management industry. He said the blueprint, expected to be ready by year-end, would chart the medium and long-term strategic direction for the industry, as well as map out strategies and recommendations to strengthen the country's competitive edge. The prime minister said Malaysia's well-developed Islamic fund management industry held 22 per cent of the global US$73 billion (RM264 billion) Islamic assets under management as of last year. Currently, he said there are 20 companies operating under the Islamic fund management and licensed by the SC, in addition to 21 others that operate Islamic windows alongside their conventional business. Najib said growth in the fund management industry had been an important driver of the capital market, with RM630 billion under management as at end He said the scale of the capital market had deepened significantly with an annual average of RM111 billion raised through corporate bonds and initial public offerings over the last three years. The country's capital markets, he said had recorded strong growth and currently stood at RM2.82 trillion, almost three times the size of the country's economy, with the equity and bond markets at RM1.74 trillion and RM1.08 trillion respectively.

4 EQUITIES SMALL CAP COMPANIES OFFER OPPORTUNITY FOR GROWTH THE SUN DAILY KUALA LUMPUR: Investors should look at investing in Asian small capitalisation equities as they have outperformed in 10 out of 15 years and have twice the opportunity set across sectors, according to Manulife Asset Management. Small and mid-cap companies comprise those with market capitalisation of US$3 billion (RM10.68 billion) or less. Manulife Asset Management head of Asia Pacific Equities Linda Csellak said small cap equities tend to outperform in both upward and downward trending markets. However, in times of significant market declines, small cap equities tend to under-perform. Once market conditions stabilise, small cap equities typically recover more rapidly than large cap equities. "Since they (small cap equities) underperformed last year, this year is looking much better and they are starting to outperform again. The odds are they're going to perform in any given (Asian) markets," she said at a media briefing to introduce the Manulife Asian Small Cap Equity Fund here yesterday. Csellak further said that investors get higher exposure to growth sectors with the small cap universe. "There's nothing wrong with banks, properties, insurance companies (financial sector) but I would argue that sometimes unless you get a big liquidity rally, those stocks don't always outperform massively. Growth in Asia is also accelerating and the pace is faster relative to the rest of the world, driven by margin rebound, thanks to lower oil price and reduced cost pressure. Csellak said small and mid-cap stocks in Asia suggest ample opportunities to benefit from pricing inefficiencies and catalysts that unlock value.

5 ISLAMIC CAPITAL MARKET WORLD S FIRST SOUTH-EAST ASIA SYARIAH ETF LISTED ON BURSA The world s first South-East Asia syariah exchange traded fund (ETF), MyETF MSCI SEA Islamic Dividend (MyETF-MSEAD) was listed on Bursa Securities Market on 7th of May, The fund, which is managed by i-vcap Management Sdn Bhd, had its prospectus launched on April 8. The MyETF-MSEAD, which is Malaysia s third syariah ETF, is an open-ended fund with an approved fund size of 500 million units with an initial issue price of RM1 per unit. Pursuant to the closing of the subscription period on April 22, a total of 20 million units of MyETF-MSEAD have been created and subscribed by retail and institutional investors. The subscription for MyETF-MSEAD during its initial offering period saw a marked improvement, doubling the subscription amount for our previous ETF launched last year. This reflects that there is growing interest by investors in ETF product and partly due to MyETF-MSEAD being the first regional syariah ETF to be listed, said i-vcap chief executive officer Mahdzir Othman. The fund tracks the MSCI South East Asia IMI Islamic High Dividend Yield 10/40 Index, which comprises of up to 30 syariah-compliant dividend yielding stocks listed on the stock exchanges in South-East Asian countries. The underlying securities and net asset value are disclosed daily to investors via Bursa Securities and the MyETF Series website.

6 ISLAMIC CAPITAL MARKET MALAYSIA S ISLAMIC BOND SALES HITS 16 MONTH HIGH IN APRIL Bloomberg figures showed sales of Islamic bonds in Malaysia hit its highest in 16 months in April at USD3.1 billion, showing sign that confidence is returning to Malaysia s Capital Market. The islamic bond issuance was registered at MYR11 billion (USD3.1 billion), a 24% rise from the issuance recorded in March. Sovereign wealth fund Khazanah Nasional Bh accounted for MYR2 billion (USD560m) of the total issuance while Danalnfra Nasional Bhd raised MYR3.5 billion. Being Malaysia s third-biggest arranger of Islamic notes, AmInvestment Bank has projected that local sukuk sales in the country will continue to gain momentum this year as several development projects are expected to move ahead in The projection was made based on the announcement by Malaysian Prime Minister Najib Razak, who stated that projects worth MYR75 billion will commence this year. Growth was driven by the expansion of channels for managed investments, with the net asset value of the unit trust industry growing to RM343 billion the largest in Southeast Asia. The nascent Private Retirement Schemes (PRS) segment, which more than doubled its AUM and membership to RM716.1 million and 128,977 members respectively, forms the third pillar of Malaysia s pension framework and is poised to become an area of future growth in the investment management industry.

7 FIXED INCOME KHAZANAH TO LAUNCH MALAYSIA S FIRST SOCIAL IMPACT BOND Khazanah Nasional is set to issue Malaysia's first social-impact sukuk, in a boost to the country's ambitions as a centre for socially responsible investment. Local agency Ram Ratings has assigned a AAA rating on the RM1bn (US$282m) Sukuk Ihsan programme in which its proceeds will go towards educational projects. "We see tremendous growth potential given Malaysia's leadership in the global Islamic finance market, as well as the increasing global and domestic demand for greater governance and ethical investments," said Ram Ratings CEO Foo Su Yin. Meanwhile, bankers commented that the bond could attract a large investor base as corporate investors with corporate social responsibility agendas could target such investments. Ihsan Sukuk, set up as a funding conduit, will be the issuer, with Khazanah the obligor under the programme and CIMB is the sole arranger.

8 FIXED INCOME MOODY S ASSIGNS A3 TO MALAYSIA SOVEREIGN SUKUK S DEBT NOTES Moody s Investors Service assigned a definitive A3 senior unsecured rating to the US dollar trust certificates (sukuk) issued by Malaysia Sovereign Sukuk Bhd, a special purpose vehicle established by the Malaysian government. The proceeds of the sukuk will be used by the issuer to invest in the purchase of an asset pool consisting of Ijara assets, the right to participate in the provision of transportation services in Malaysia, and Shariah-compliant commodities. In January 2015, Moody s affirmed Malaysia s sovereign bond rating at A3 and maintained the outlook at positive. The key drivers of the decision were the government s intention to adhere to its policy of deficit reduction, Malaysia s fundamental strengths, notably macroeconomic stability, domestic capital market depth and predominantly local currency-denominated debt that provide a considerable amount of resistance to an adverse external economic environment as well as global financial market volatility.

9 ASSET MANAGEMENT ASEAN CIS INVESTMENT PRODUCTS FAVOURED BY FUND MANAGEMENT INDUSTRY BERNAMA KUALA LUMPUR: The cross-border investment products under the ASEAN Collective Investment Scheme (CIS) framework will be the flavour of the year for the fund management industry, the Federation of Investment Managers Malaysia (FIMM) said. The framework was established last year by the Securities Commission Malaysia (SC), the Monetary Authority of Singapore (MAS) and the Securities and Exchange Commission of Thailand (SET). It is aimed at facilitating cross-border offerings of collective investment schemes, such as unit trusts, thus enabling fund managers from Malaysia, Singapore and Thailand to offer their investment products directly to retail investors in the three countries under a streamlined process. FIMM Chief executive officer Nazaruddin Othman said five products had been approved, two by the Malaysian authorities and three by Singapore, while Thailand is currently considering one for approval. It will provide more options to Malaysian investors in terms of products offerings, he told Bernama. He said the distribution of investment products by foreign fund managers in Malaysia would depend on the market conditions in the country, as well as the ability of the fund managers to appoint a distributor locally. Nazaruddin said the framework, which was introduced in line with the liberalisation of fund flows across the three countries, has also attracted the interest of other ASEAN members. He added however, countries intending to participate in the framework need to enhance regulations in their own countries first, to be on par with that of the existing signatories and which are considered as more advanced in terms of regulations and supervision. According to the SC, there are 76 fund management companies in Malaysia as of Sept 30 last year, with total assets under management of RM billion.

10 ASSET MANAGEMENT ACMF FACILITATES CROSS BORDER FUND RAISING AND INVESTMENTS- SC The ASEAN Capital Markets Forum (ACMF) announced today that the Securities Commission Malaysia (SC), the Monetary Authority of Singapore (MAS), the Securities and Exchange Commission (SEC), Thailand and the Singapore Exchange (SGX) have signed a Memorandum of Understanding (MoU) to establish a Streamlined Review Framework for the ASEAN Common Prospectus. The signing ceremony was attended by senior ASEAN regulators and representatives from regional bodies. It was held in conjunction with the 22nd ACMF meeting in Kuala Lumpur hosted by the SC, the current Chair of ACMF. The Streamlined Review Framework, an initiative under the ACMF Implementation Plan endorsed by the ASEAN Finance Ministers, will enhance ASEAN s attractiveness as a fund-raising centre. Under the Framework, issuers planning to offer or list equity or plain debt securities can now expect a shorter time-to-market and faster access to capital across signatory countries through a streamlined review process. The MoU signatories target to implement the Framework by the third quarter of 2015 with a handbook to be jointly issued. The handbook will provide guidance on the various administrative and procedural matters including the criteria for issues, the application procedures and the review timeline. The ACMF meeting also announced the authorisation for five funds as Qualifying Collective Investment Schemes (CIS) under the ASEAN Framework for cross-border offering of CIS, which was implemented in August The five qualified funds were approved by the SC and MAS while the SEC Thailand is in the process of reviewing one fund application. These qualified funds are allowed to be offered to retail investors in the signatory countries including Malaysia, Singapore and Thailand.

11 UPCOMING EVENTS 22ND CLSA INVESTORS FORUM Date: 14th to 18th September 2015 Venue: Hong Kong Official Website