Malaysian Capital Market Developments in 2022

The Malaysian economy recovered strongly in 2022, despite an increasingly challenging external environment. Growth was underpinned by favourable domestic demand momentum, steady expansion in the external sector, and continued improvement in labour market conditions. The full resumption of economic activities and the recovery of inbound tourism following further relaxation of COVID-19 restrictions helped to underpin economic performance. Headline inflation had also increased, reflecting stronger demand conditions and elevated cost pressures. For the full year of 2022, real GDP expanded 8.7% supported by robust domestic demand as the country transitions into endemicity (Chart 3).

chart 3

The Malaysian economy continued to recover in 2022, driven by strong domestic demand as the country transitions into endemicity

Contribution to headline growth by demand components

Source: Department of Statistics Malaysia; the SC’s calculations.

The domestic capital market continued to support the real economy

The Malaysian capital market remained resilient and orderly in 2022, against the backdrop of increasingly pessimistic global economic outlook and tighter global financial conditions. Importantly, it continued to serve its roles in financing economic activity and intermediating savings. Total funds raised in the capital market increased to RM179.4 billion in 2022 (2021: RM131.3 billion), of which RM26.0 billion was raised via the equity market¹, while RM153.3 billion was issued through the corporate bond market. Likewise, alternative fundraising avenues² via ECF and P2P financing rose in 2022, and continued to support the funding needs of MSMEs.

Meanwhile, the fund management industry experienced weaker market valuation and net redemptions in 2022, with AUM totalling RM906.5 billion (2021: RM951.1 billion). The unit trust segment³ remained the largest source of funds for AUM. Overall, the size of the capital market rose to RM3.6 trillion in 2022 (2021: RM3.5 trillion), as the drop in equity market capitalisation was offset by higher bonds and sukuk outstanding (Chart 4).

chart 4

Despite the challenging environment, domestic capital market remained orderly and continued to facilitate fundraising and savings intermediation effectively

Source: Bursa Malaysia; the SC’s calculations.

The domestic equity market was affected by persistent headwinds both globally and domestically. The overall market capitalisation of Bursa Malaysia and the FBMKLCI moderated to RM1.74 trillion and RM1.03 trillion respectively in 2022 (2021: RM1.79 trillion and RM1.04 trillion respectively). Likewise, the FBMKLCI index declined by -4.6% to end the year at 1,495.49 points. In terms of trade participation, local institutions remained net sellers to a total of -RM6.53 billion in 2022. Correspondingly, non-residents turned net buyers after four consecutive years of net-sell, with total net buy amounting to RM4.40 billion (2021: -RM3.15 billion), while net buying by local retail investors totalled RM2.13 billion (Chart 5). In terms of value traded, the participation rate for retail investors declined to an average of 25.7% in 2022 (2021: 34.6%), but remained above the five-year pre-pandemic average of 18.8%. Meanwhile, the average daily trading volume also moderated in 2022 to 3.00 billion (2021: 5.85 billion), valued at an average of RM2.18 billion per day (2021: RM3.66 billion).

In the Malaysian bond market, total bonds and sukuk outstanding grew to RM1.9 trillion in 2022 from RM1.7 trillion in 2021, reflecting higher levels of bond and sukuk fundraising in the market. The overall Malaysian Government Securities (MGS) yield curve shifted upward, tracking the movements of the global bond market. This was driven by expectations of continued monetary policy normalisation globally and domestically, given elevated inflationary pressures. The spread between corporate bonds and MGS widened across major tenures, except for 3-year notes (Chart 6). Meanwhile, the domestic bond market witnessed lower foreign interest, with net outflows amounting to -RM9.8 billion in 2022 (2021: net inflow of RM33.6 billion).

SC 1st Quarter 2022 Report

SC 2nd Quarter 2022 Report

SC 3rd Quarter 2022 Report

chart 5

Malaysian equity market performance was weaker in 2022, but non-residents returned as net buyers in the equity market, the first since 2017.

Performance of Bursa Malaysia since 2021*

Note: * FBMKLCI consists of the largest 30 companies ranked by full market capitalisation in the FTSE Bursa Malaysia EMAS Index; FBM Small Cap consists of all constituents of the FTSE Bursa Malaysia EMAS Index that are not constituents of the FTSE Bursa Malaysia Top 100 Index; FBM ACE comprises all companies listed on the ACE Market.

Source: Bloomberg; Bursa Malaysia; the SC’s calculations.

chart 6

MGS bond yields experienced upward pressure across tenures, while corporate spreads widened, trailing global bond markets

Note: * Corporate bonds rated between AAA and BBB.

Source: Bloomberg; Refinitiv Eikon Datastream; the SC’s calculations.

In the equity market, RM3.5 billion was raised via 35 initial public offerings (IPOs) and RM22.6 billion through secondary fundraising.
Funds raised via ECF and P2P financing was RM1.7 billion in 2022 (2021: RM1.4 billion).
Unit trust total net asset value (NAV) of RM480.5 billion in 2022 (2021: RM526.9 billion).