Address by
YBhg Tan Sri Zarinah Anwar
Chairman, Securities Commission Malaysia

at the
Capital Market Forum 2010

5th August 2010
Kuala Lumpur, Malaysia


Yang Berhormat Senator Tan Sri Dr Koh Tsu Koon, Minister in the Prime Minister’s Department
Mr Gu Jingqi, Charge d’Affaires ad interim, Embassy of the People’s Republic of China in Malaysia
Yang Bhg. Tan Sri law Hieng Ding, Chairman Finance and Investment Bureau, Malaysia-China Friendship Association
Yang Bhg. Dato Abdul Majid Ahmad Khan, President Malaysia-China Friendship Association
Fellow regulators from the China Securities Regulatory Commission (CSRC) and China Banking Regulatory Commission (CBRC)
Members of the delegation from China
Distinguished guests
Ladies and gentlemen


On behalf of the Securities Commission Malaysia, I am indeed very pleased to welcome all of you to this Capital Market Forum 2010, organised by the Malaysia-China Friendship Association and the Chinese People’s Association for Friendship with Foreign Countries. The SC is delighted to be able host this milestone event which seeks to explore opportunities for doing business in the capital markets of China and Malaysia.


Before I proceed further, please allow me to thank Yang Berhormat Senator Tan Sri Dr Koh Tsu Koon, Minister in the Prime Minister’s Department for his presence this morning and for graciously agreeing to deliver the keynote address. It is also a great honour to have Mr Gu Jingqifrom the Embassy of the People’s Republic of China in Malaysia.


To our colleagues from from the China Securities Regulatory Commission (CSRC) and the China Banking Regulatory Commission (CBRC), and all other distinguished guests from China, we extend you a very warm welcome toMalaysia and to the Securities Commission- “Huan Ying Ni dao Ma Lai Xi Ya

Ladies and gentlemen,


The SC and the CSRC have had a long established relationship. As far back as in 1997 we signed a Memorandum of Understanding, pursuant to which the SC has recently received confirmation from the CSRC that Malaysia is recognised as an approved investment destination under the CSRC’s Qualified Domestic Institutional Investors (QDII) investment scheme.


On 23rd June 2010, the SC signed a Letter of Exchange with the CBRC pursuant to which Malaysia is recognised as an investment destination under the CBRC’s QDII investment scheme, making Malaysia only the 11th member of a small group of approved investment destinations recognised by the CBRC. Malaysia is indeed hounoured to receive recognition as an investment destination by both the CSRC and the CBRC under their respective QDII schemes. This recognition will facilitate the pooling by fund managers, securities firms and financial institutions, of funds from domestic investors in China for investment in Malaysia securities.


In this regard, it is encouraging to note that the State Administration of Foreign Exchange (SAFE) has resumed its QDII quota allocation in October 2009 after a 17-month suspension following the global financial crisis. In addition, the rebound in the world capital markets, has resulted in a new wave of QDII funds being offered to the Chinese market. As a recognised QDII investment destination, we hope that these positive actions on the part of the Chinese government will result in larger flows of funds making its way to the Malaysian capital market.

Ladies and gentlemen
Value proposition of Malaysia’s capital market


Over the past 10 years, there has been tremendous growth in trade and investment between Malaysia and China.And as alluded to by Mr Gu Malaysia’s total trade with China exceeded USD36 billion. Malaysia’s exports to China in the first five months of this year rose by 82.2% to USD19.1 billion compared with the same period last year, making China Malaysia’s largest trading partner.


However, the level of cross-border participation and investment in the capital markets between China and Malaysia remains relatively low. With the recognition of Malaysia as a QDII investment destination, it is our hope that Chinese participation in the Malaysian capital market and vice versa will show a step jump in improvement.


Malaysia’s capital market offers a unique value proposition and can be an attractive investment destination for Chinese investors. We have an active market for corporate transactions and we have high levels of foreign participation in our financial and capital markets.


With 962 companies listed on it, our stock exchange, Bursa Malaysia, offers the widest and largest selection of companies in ASEAN1. Investors can therefore have access to an extensive selection of stocks across diversified industries for broader and deeper investment portfolios. Dividend yields in Malaysian equity are attractive and supported by sustained corporate earnings and dividend payouts. At the end of December 2009, the average dividend yield for companies listed on Bursa Malaysia was recorded at 3.3%, a relatively attractive yield compared to other regional markets.


Bursa Malaysia is home to several of the world’s largest plantation companies and is the world centre for price discovery of crude palm oil.


The liberalisation of our Equity guidelines two years ago have seen the listing of several Chinese companies on Bursa Malaysia, and we hope that this new phase in the development of the relationship between our two markets will see greater interest from Chinese companies seeking to raise funds in the Malaysian market, complemented by deeper and more sustained interest in Chinese companies by Malaysian investors.


One of the fastest growing segments of the Malaysian capital market is our investment management industry. Malaysia has the largest unit trust industry in ASEAN and a fund management industry that has been the fastest growing segment of our capital market over the past few years. As at 30 June 2010, the total net asset value of unit trust funds stood at RM207 billion (USD63.34 billion), representing almost 20% of Bursa Malaysia Securities market capitalization. The creation of new products to facilitate diversification of investment portfolios by investors and fund managers is an important feature of our market. This year, Malaysia has seen a number of milestones in the collective investment scheme industry. In July this year, 2 new ETFs, namely CIMB FTSE ASEAN 40 Malaysia and the CIMB FTSE Xinhua China 25, both being Malaysia’s first offshore invested ETFs, were listed on Bursa Malaysia thus providing investors access to the top stocks in ASEAN and China. In the same month, the Sunway REIT, one of the largest REITs in South East Asia, made its debut on Bursa Malaysia with a fund size of 2.78 billion units, valued at RM3.7 billion (USD1.13 billion).


Our bond market is another important segment of the Malaysian capital market. With current outstanding bonds of RM704 billion (USD215.29 billion), Malaysia has one of the largest bond markets in Asia; and certainly the largest in ASEAN. Notable institutions, including the World Bank, Asian Development Bank and International Finance Corporation, have all raised funds through our bond market and we have seen foreign companies seeking both primary and secondary listings for their bonds on Bursa Malaysia. As a percentage of GDP, the Malaysian bond market is the second largest market in Asia (ex Japan).

Ladies and gentlemen


Very significantly, Malaysia has, over the years, developed one of the largest and certainly, the most comprehensive Islamic capital market in the world – offering the broadest range of Shariah compliant products and services on an end-to-end basis.


Currently, 88% of the stocks listed on Bursa Malaysia making up 64% of total market capitalization are shariah-compliant. Our Sukuk market has experienced unprecedented growth over the years. In 2009, over 59% of all bonds approved by the SC were Sukuk. More than 60% of global sukuk outstanding originated from Malaysia2. (RM261 billion (USD79.82 billion).


In May this year, the Malaysian government raised a USD1.25billion sovereign sukuk; the largest US dollar sovereign sukuk globally to date, attracting more than 270 investors from around the world. The Malaysian sukuk market subsequently saw another landmark transaction in July this year when Cagamas Berhad, the national mortgage corporation launched the innovative Sukuk al-Amanah Li al-Istithmar (Sukuk ALIm), under its RM5 billion (USD1.53 billion) Islamic Commercial Paper (ICP) and Islamic Medium Term Note (IMTN) Programmes.


The Islamic unit trust industry has also made significant progress. Malaysia currently has 151 Islamic unit trust funds with a total NAV amounting to RM22.69billion (USD6.94billion). The Islamic fund management industry constitutes the fastest growing segment of the Islamic capital market with an annual compounded growth of more than 25% over the past 5 years. The Islamic fund management segment has been fully liberalised with attractive tax incentives as well as mandates to foreign players. With the liberalisation in 2009, we now have 14 full-fledged Islamic fund managers operating in Malaysia’s Islamic capital market.


We believe the strong demand for Islamic capital market products globally and the strong interest shown by international financial markets to develop their own islamic finance industry will help push the boundaries of the Islamic capital market further. Certainly this is a rich area to be exploited in developing demand between the Chinese and Malaysian investors.

Ladies and gentlemen


Over the course of the past decade, Malaysia has been able to develop a broad based capital market that has become a significant player in the regional landscape. We have an internationally benchmarked regulatory infrastructure that has been assessed to be highly compliant with international standards, and our investor protection framework has been rated consistently by the World Bank as being among the top four in the world. We continue to be mindful of the need to strengthen our regulatory framework and ensure appropriate supervision and oversight. We must heed the lessons of the global financial crisis and ensure that we continue to pay attention to investor protection.

Closing remark


The recognition of Malaysia as an approved QDII investment destination will certainly bring a wealth of benefits to both markets. I hope that investors and intermediaries from both sides will pursue the opportunities available to them with great vigour. As regulator, we will continue to facilitate and support the private sector to identify and exploit the opportunities to create value.


I believe this Forum is merely the first step towards strengthening the ties between our two markets. I hope the introductions and the networking that the Forum will facilitate will encourage more extensive engagements between capital market players from both sides and will lead to the conclusion of substantive transactions and enhanced flows of funds between our two markets. The SC will continue to strive to be facilitative and we encourage issuers and intermediaries to pro actively engage and consult with us.


Before I end, I would like to take this opportunity to once again thank the Honourable Minister for his presence today; and the Malaysia-China Friendship Association and the Chinese People’s Association for Friendship with Foreign Countries for organising this landmark event. I would also like to express my appreciation to our colleagues from the CSRC and the CBRC and to all distinguished delegates from China for making the journey to be with us today and to participate in the panel discussion.


I sincerely hope that the forum would bring much benefit to all present and I wish everyone great success.

Xie Xie da jia (Thank you everyone)

1 As at 30 June 2010

2 Source: Islamic Finance Information Service (IFIS)