Enhancing the Attractiveness of the Equity Capital Market

In 2023, the SC continued to introduce further measures to enhance the attractiveness of the equity capital market with the introduction of fractional share trading, a new accelerated transfer process to the Main Market and taking measures to safeguard investors’ interest in relation to offerings by the unlisted public companies (UPCs).

Introducing Fractional Share Trading
On 7 September 2023, the SC facilitated the offering of fractional trading on shares listed on Bursa Securities by stockbroking companies. This is part of the SC’s capital market initiatives to improve investors’ accessibility to the domestic stock market and to make investment more affordable for Malaysians.

A fractional share is a portion of stock that is less than one standard board lot. Fractional share trading will allow retail investors, particularly individuals from the younger generation, with low starting capital, to invest in high value stocks. Additionally, these retail investors will have the option to diversify their portfolio, while creating a more inclusive capital market for all Malaysian.

To safeguard the interest of investors, the Guidelines on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives was amended requiring stockbroking companies to incorporate the necessary systems, policies, and procedures when offering fractional share trading services. This is to ensure fair treatment of customers’ orders, price transparency and proper supervision of the fractional share trading service.
Accelerated Transfer Process for Transfer from ACE Market to Main Market
In December 2023, the SC had announced an accelerated transfer process to facilitate the promotion of eligible ACE Market listed corporations to the Main Market of Bursa Malaysia. This new framework will take effect on 1 January 2024.

The newly introduced accelerated transfer to Main Market framework is to provide a special pathway to encourage significantly larger and more profitable ACE Market companies with more than RM1 billion market capitalisation to transfer to the Main Market in an expedited manner.

The purpose for the introduction of the accelerated pathway to transfer to the Main Market is to promote the attractiveness of the overall equity market with larger companies listed on the Main Market, and to enable greater access to foreign and local institutional investors for these companies.

The newly simplified and accelerated transfer process should incentivise more companies listed on the ACE Market to make continuous efforts to improve their corporate values and achieve sustainable growth for shareholders.

Notwithstanding, the accelerated transfer process does not preclude any ACE Market companies that meet the Main Market entry requirements to apply for a transfer to the Main Market under the existing normal transfer process.
Issues Relating to Raising of Funds by Unlisted Public Companies
There are increasing regulatory concerns on offerings of shares by UPCs which affects investors. The SC views this seriously and has taken various steps to address the same. This includes engaging with management of the UPC and other key stakeholders involved in fundraising activities, to express its concerns as well as to highlight the expectations in terms of compliance with the relevant laws and regulations governing the fund raising activities.

Further, the SC is also undertaking a comprehensive review of the regulatory framework in respect of offerings of shares by the UPC towards greater investor protection.

Mitigating Systemic Risks And Promoting Financial Stability

Enhanced Risk Governance Framework

In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.

The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).

Intensified surveillance

The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points.

In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.

Thematic assessments

The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market.

The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.

Joint regulatory discussions

In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.

Monitoring of various components of the capital market

The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.