Kuala Lumpur, 12 April 2011

Capital Market Masterplan 2: Growth with Governance

The Capital Market Masterplan 2 (CMP2), the  Securities Commission Malaysia’s (SC) strategic blueprint for the development of the Malaysian capital market over the next 10 years, was launched today by the Prime Minister, YAB Dato’ Sri Najib Tun Abdul Razak at Invest Malaysia 2011.

“The CMP2 forms another vital contribution to the collective and coordinated efforts to invigorate the economy through expanding the role of the capital market in financing the country’s development,” said the Prime Minister.

CMP 2 will leverage on the sound foundation built during the first Capital Market Masterplan or CMP1. Over its ten-year period, 95% of the 152 recommendations contained in CMP1 have been implemented, building a diversified market with strong intermediaries operating in a well-regulated environment.

Themed Growth with Governance, CMP2 tackles the challenges for Malaysia’s capital market in expanding its role in invigorating national economic growth while addressing concerns about the efficacy of markets in the aftermath of the global financial crisis.

Tan Sri Zarinah Anwar, Chairman of the SC, said “CMP2 outlines the strategies to unleash the competitive dynamics that will enable our markets to more effectively utilise domestic savings for capital formation and to foster entrepreneurial and innovative zeal.”

Key growth strategies include the need to increase the capacity and efficiency of the capital market in financing investment requirements for economic growth, address efficiency of savings intermediation, deepen secondary market liquidity, facilitate scale-driven strategies, identify new growth opportunities, as well as build capacity and strengthen information infrastructure to support transition to an electronic environment.

In this regard, the expansion of capital market intermediaries will be facilitated to enable the offering of a wide range of domestic and international products and services.  The SC will also facilitate and work with intermediaries to help them evolve their business models through allowing decoupling and further outsourcing, for specialised activities in trading, promoting small and mid-cap companies, for pre-IPOs, for retail clients and for market-making and trading across markets.

“It is equally important to learn from lessons of past financial crises that growth is only sustainable if it is underpinned by a proper system of accountabilities and governance. Therefore, the hallmark of the market that we aspire to build is one that will be distinguished by the quality of its governance” emphasized Tan Sri Zarinah.

Experience from past financial crises also indicates that innovation and complexity will create risks that will continuously test the resilience of the Malaysian capital market, making the management of these risks the key challenge in further deepening and broadening the Malaysian capital market.

By focusing on investor protection and governance, which are increasingly highly-valued by investors, the SC will facilitate growing interest in Malaysian intermediaries.  Governance arrangements will be strengthened to ensure clear points of accountability with effective regulatory oversight and reach.  Intermediaries will be required to operate on higher standards and capabilities and there will be greater focus on managing risks. Corporate governance standards will also be further strengthened and stakeholder participation in governance will be broadened. There will also be an enhanced focus by the SC on systemic stability.

The SC will implement the CMP2 through its annual business planning process.  In this regard, major deliverables have already been identified for 2011, which is the first year of implementation of CMP2. These include the introduction of a regulatory framework for private retirement schemes, a five year corporate governance blueprint and the recently issued Guidelines on the Registration of Credit Rating Agencies (CRA) in March. The regulatory framework for fund raising and product approval and for licensing renewal is also being reviewed to enhance process efficiency.

The pdf copy of CMP2 is available here and the publication is also available for purchase.