Bursa Malaysia has emerged as one the region’s top destinations for fundraising, bearing testament to the nation’s efforts to enhance the vibrancy of its capital market.
The Financial Services National Key Economic Area (NKEA) exceeded its key performance indicator (KPI) targets for last year and remains on track to achieve its targets of growing the industry’s GNI contribution to RM180.2 billion and create 275,400 jobs by 2020.
In the Economic Transformation Programme (ETP) Annual Report 2014, the Performance Management and Deliver Unit (PEMANDU) said: “The progress of this NKEA in 2014 demonstrated that Malaysia’s financial services stakeholders possess the right capabilities to transform the financial landscape.”
“There are still significant opportunities in the areas of risk pricing, reducing the cost and increasing the competition in channel management and generally in driving down transaction costs. Collectively these will continue to allow providers of finance to enhance and share in the success of the broad Malaysian economy,” it said.
PEMANDU projects growth in the financial industry in 2015, driven by general economic growth and demand for asset accumulation. “Greater integration in ASEAN is expected to create new market opportunities. The insurance market is also expected to grow progressively while alternative investment vehicles for retirement such as Private Retirement Schemes, which provide new and more accessible avenues for the public to grow their wealth, are expected to contribute to the growth of the investment market.”
Minister of Finance II Dato’ Seri Ahmad Husni Mohamad Hanadzlah (pic) highlighted that during the year, Bursa Malaysia has emerged as one the region’s top destinations for fundraising, bearing testament to the nation’s efforts to enhance the vibrancy of its capital market.
“This was further bolstered by Malaysia’s standing as a continued frontrunner in global Sukuk issuances, cementing our position as a global leader in Islamic finance. We also made significant inroads in the regionalisation of our financial services industry, with Bank Negara Malaysia (BNM) and its ASEAN counterparts leading the development of the ASEAN Banking Integration Framework. The framework, which has been finalised and approved by all ASEAN Central Bank Governors on 31 December 2014, will support regional banking expansion and integration,” he said.
The Minister said that in ensuring the continued competitiveness of Malaysia’s financial services industry, strengthening the nation’s social safety nets and extending access to financial services is of great importance. “In this regard, efforts under this NKEA to increase the insurance penetration [latest data shows only 60% of Malaysian population insured] and drive the growth of the private pension industry play a key role in ensuring adequate financial protection for the rakyat.”
He noted that Islamic finance remains a core growth driver of the financial services industry and that Malaysia will continue to leverage its expertise as one of the world’s early movers in this industry to drive further development of the financial services industry as a whole. He also sees plenty of room for growth in the wealth and asset management industry given the nation’s rising annual GNI.
Entry Point Projects (EPPs) under this NKEA:
- EPP 1: Revitalising Malaysia’s Equity Market – EPP champion: Bursa Malaysia
- EPP 2: Deepening and Broadening Bond Markets – EPP champion: Securities Commission of Malaysia (SC)
- EPP 3: Transforming Development Financial Institutions (DFIs) – EPP champion: BNM
- EPP 4: Creating an Integrated Payment Ecosystem – EPP champion: BNM
- EPP 5: Insuring Most, If Not All, Of Our Population – EPP champion: BNM
- EPP 6: Accelerating the Growth of the Private Pension Industry – EPP champion: SC
- EPP 7: Spurring the Growth of the Nascent Wealth Management Industry – EPP champion: SC
- EPP 8: Accelerating and Sustaining a Significant Asset Management Industry – EPP champion: SC
- EPP 9: Nurturing Regional Banking Champions – EPP champion: BNM
- EPP 10: Becoming the Indisputable Global Hub for Islamic Finance – EPP champion: BNM
Below are some of the highlights of the EPPs’ achievements during the year.
EPP 1: Revitalising Malaysia’s Equity Market
On 28 April 2014, Bursa launched the BursaMarketplace, a first-of-its-kind one-stop online portal for all traders and investors, with the aim of creating an active and vibrant eCommunity focusing on enhancing trading and developing financial literacy.
On 26 August 2014, Bursa introduced the ASEAN Post Trade Services, as an extension of the existing ASEAN Trading Link, to facilitate the clearing and settlement of outbound trades executed on the respective participating stock exchanges including safekeeping of the securities traded. Bursa is the single contact point in respect of the clearing, settlement and custody of the foreign securities in relation to their outbound trades executed on any of the participating ASEAN Stock Exchanges.
During the year, Bursa also launched the MyETF MSCI Malaysia Islamic Dividend, the USD denominated RBD Palm Olein Futures Contract (FPOL) and the enhanced 5-Year Malaysia Government Securities Futures (FMG 5). In addition, the number of securities available stocks for Securities Borrowing and Lending (SBL) was increased from 171 to 227, while Macquarie Capital was brought in an effort to increase the issuance of structured warrants.
A key development which set Bursa apart from other Asian Exchanges in 2014 was the introduction of the Environmental, Social and Governance (ESG) Index in December. This was a key milestone and demonstrates Malaysia’s commitment to develop and encourage high quality companies which are committed to improving their ESG practices. The immediate impact of this enhancement will be to put Malaysia on the radar screen of rapidly growing Socially Responsible Investment (SRI) funds.
Meanwhile, the SC has during the year developed a draft conceptual regulatory framework for the equity crowdfunding (ECF) Platform, conducted continuous engagement with prospective operators and issued a public consultation paper on 21 August 2014. Revisions to the proposed framework have been published via a public response paper on 25 September 2014. The tabling of the necessary legislative amendments to the Capital Markets & Services Act 2007 (CMSA) to allow for ECF is expected at the next Parliamentary session.
EPP 3: Transforming Development Financial Institutions (DFIs)
The Development Financial Institutions Act 2002 (DFIA) is currently being amended to further strengthen the capacity and capability of the DFIs to ensure that DFIs continue to provide financing support to strategic sectors mandated by the government, especially small and medium-sized enterprises (SMEs) and micro businesses. Towards the end of 2014, BNM had sought public feedback on the draft bill to amend the DFIA.
EPP 4: Creating an Integrated Payment Ecosystem
In 2014, BNM introduced a number of measures to promote the adoption of Interbank GIRO (IBG). A tiered pricing structure was implemented to provide further incentives for customers to use more cost-effective payment channels – online IBG is the lowest, capped at 10sen.
In line with the imposition of 50 sen cheque processing fee, BNM has also established the e-Payment Incentive Fund (ePIF) framework. Under this framework, banks will channel the 50 sen cheque processing fee into developing incentives for their customers to adopt e-payments such as waiver of security token fees and monthly maintenance fees for internet banking services.
EPP 5: Insuring Most, If Not All, Of Our Population
Throughout 2014, BNM held extensive engagements with key stakeholders to ensure effective implementation of the proposed initiatives under the Life Insurance and Family Takaful Framework to ensure that the interests of various stakeholders are aligned and safeguarded. The framework is expected to be finalised this year.
Meanwhile, two microinsurance and microtakaful pilot projects were rolled out by BNM, in collaboration with insurance companies and takaful operators. The first product provides basic financial protection in the event of an accident, illness or death, while the latter is a basic material damage cover for rural area dwellers. Experience from the pilot projects will form the basis for the concept paper on microinsurance and microtakaful products.
EPP 6: Accelerating the Growth of the Private Pension Industry
To cultivate retirement savings culture amongst the younger demographic, the government in the 2014 Budget announced a one-off Private Retirement Scheme (PRS) contribution of RM500 to contributors aged 20-30 who participate in the PRS scheme with a minimum cumulative investment of RM1,000 within a year. This incentive is valid from 1 January 2014 for a period of five years. Since its announcement, the incentive has been effective in attracting youths to invest in PRS. As at October 2014, there were 21,086 youths or 20% of total PRS contributors versus a mere 3,218 youths or 8% of total PRS contributors as at October 2013.
The assets under management (AUM) for PRS jumped 91% from end-2013 to October 2014, while the number of new members rose 138% compared to the same period in 2013.
EPP 10: Becoming the Indisputable Global Hub for Islamic Finance
As at 3Q 2014, the Islamic banking sector commanded 25% of total assets in Malaysia’s overall banking system. The Islamic AUM in Malaysia was reported at RM109 billion.In 2014, Malaysia’s
In 2014, Malaysia’s sukuk marketplace accounted for 56.9% of the global sukuk outstanding; and 64.9% of global sukuk new issuances with a total of USD61.4 billion. Malaysian Islamic financial institutions have also been active lead managers for several sovereign and corporate issuances from other parts of the world. Malaysia has also been actively providing Islamic finance technical assistance to other countries including United Kingdom, Luxembourg, Hong Kong and Japan.