Kuala Lumpur, 12 April 2011
Growth strategies to expand role of capital market
The Securities Commission Malaysia’s Capital Market Masterplan 2 (CMP2) outlines growth strategies that will transform the competitive dynamics of Malaysia’s capital market over the next 10 years. The strategies aim to expand the role of the capital market in financing business ventures, creating jobs, widening ownership of assets and generating returns on long-term savings. The strategies include:
- Promote capital formation. Creating a conducive intermediation environment to seed emergent companies and industries through strengthening private sector participation in the venture capital and private equity industry, further strengthening the role of the equity market for the growth of small and mid-cap companies, strengthening the capability of the bond market to finance large and high-risk ventures, and promoting investments in socially-responsible projects.
- Expand intermediation efficiency and scope. Address structural constraints to increase the efficiency of savings intermediation and foster an innovative and diverse intermediation environment to expand the supply of assets to meet the needs of investors. This would include working with GLICs to promote greater diversity in investment strategies and depth in the investment management industry, establishing a private retirement scheme industry, widening the range of asset classes for intermediation and enabling intermediaries to evolve new business models.
- Deepen liquidity and risk intermediation. Broaden the diversity of investment strategies and strengthen market connectivity through risk intermediation products and by widening the range of participants. This would include expanding the range of direvative products and strengthening the infrastructure for cross-margining, clearing and settlement and increasing market connectivity through technology and cross-border alliances.
- Facilitate internationalisation. Expand growth boundaries by tapping global opportunities to facilitate an expansion in scale and to capitalise on hub opportunities in areas of comparative advantage. Towards this end, Malaysia’s positioning in the global exchange landscape will be strengthened and new hub oportunities will be identified. Strategies have also been identified to strengthen the service infrastructure and increase value add to expand the reach of Malaysia’s Islamic Capital Market to international customers.
- Build capacity and strengthen information infrastructure. Strengthen the knowledge base through talent development and acquisition to support the expansion of the capital market into high value-add areas and build a strong information infrastructure to address information asymmetries and promote service innovation and efficiency in a highly electronic environment.
Governance strategies for investor protection and stability
CMP2 also outlines strategies to ensure robust governance arrangements to manage the risks to investor protection and stability as follows:
- Enhance product regulation to manage risks. Foster a more conducive environment for product innovation and diversity while ensuring that active fund-raising and financial innovation benefits investors. To cater for a broadening in the variety of products, the framework for fund-raising and product offerings will be delineated to increase process efficiencies while disclosure and other regulatory requirements will be refined to ensure that adequate safeguards against risk to investors and market stability are maintained.
- Expand accountabilities as intermediation scope widens. Create an enabling environment for participants to broaden intermediation activities and strengthen industry capabilities and standards. The regulatory framework will be streamlined to enable industry to evolve new business models. In tandem with this, intermediaries will be required to strengthen their internal controls to manage conduct and operational risks.
- Robust regulatory framework for a changing market landscape. Ensure a consistent regulatory approach to a changing market environment and focus on enhancing the quality of markets. There would be extensive review of the rules and obligations for market operators to ensure that markets continue to perform their vital tasks of efficient capital allocation and to protect the interest of investors.
- Effective oversight of risks. Expand regulatory coverage, capacity and tools to ensure effective supervisory reach and strengthen oversight of risks to market stability. This would include strengthening the capabilities for examination, surveillance and enforcement, enhancing the mechanisms for investor protection and strengthening oversight over management of systemic risks in the capital market.
- Strengthen corporate governance. Strengthen the effectiveness of corporate governance regulation through broad-based approaches to promote greater stewardship, more active shareholder participation and strengthen gate-keeping accountabilities. A five-year blueprint to raise the standards of corporate governance in Malaysia will be launched soon.
- Broaden participation in governance. Promote active participation of stakeholders in shaping intermediation and corporate behaviour and to promote a culture of integrity and increased emphasis on socially-responsible goals.
SECURITIES COMMISSION MALAYSIA