SC marks its 10th year with salute to strong regulator-industry collaboration

The strength of the Malaysian capital market today has been built on the close consultation and cooperation between the capital market regulator and the industry over the years, Securities Commission (SC) chairman Datuk Ali Abdul Kadir said today in conjunction with the SC’s 10th anniversary tomorrow.

The SC was established on 1 March 1993 as a self-funded, statutory body reporting to the Minister of Finance. Set up under the Securities Commission Act 1993, the SC is the sole regulatory agency for the regulation and development of capital markets. It has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Securities Industry Act 1983 and Futures Industry Act 1993.

Datuk Ali said the Commission appreciates the collaboration that all market players had given to the Commission over the decade, in giving feedback and ideas, and in implementing the shared vision for the market.

He said the spirit of consultation on the part of the SC was instilled right from the set-up of the SC in 1993, during the leadership of Dato’ Dr Munir Majid, the first chairman who was at the helm for the first six years.

While the market has gone through its ups and downs over the last 10 years, the Commission has continuously endeavoured to provide leadership throughout these times, with the support of the market institutions and other players.

Despite some challenging times, the market has grown manifold. Most evidently, the capital market has evolved into a key driver of growth for the Malaysian economy – the ratio of the funds raised in the capital market over Gross Domestic Product was 17% as at end 2002 compared to 12% in 1992. The market capitalisation of the stock market stands at RM481.6 billion (end-2002) compared to RM245.8 billion (end-1992).

Meanwhile, the number of listed companies on the Kuala Lumpur Stock Exchange (KLSE) has also grown by leaps and bounds – 20 years ago, in 1973 there were 262 companies listed on the KLSE. And just before the setting up of the SC, at end-1992, there were 369 KLSE-listed companies. With the establishment of the SC, the market saw greater efficiencies in the fund-raising process and this was reflected in the number of KLSE-listed companies which had more than doubled 10 years later to 868. Malaysia now has the largest number of listed companies in ASEAN, exceeding Singapore and Thailand combined.

Today, the Malaysian capital market is the leading market in ASEAN; with it constituting 40% of the market capitalisation of the ASEAN market and larger than the combined market capitalization of the Thailand, Indonesian and the Philippines markets.

The bond market has flourished into a highly-sought source of funding with a total of RM199.2 billion raised between 1993-2002 compared with RM13.8 billion raised in the 10 years prior to the set-up of the Commission (which represents an almost 14-fold increase).

Datuk Ali said that the Government’s vision and courage in implementing, what was considered at that time, a controversial policy, had helped Malaysia through the difficult Asian crisis. During that time, the SC ensured that the operational and prudential controls were sufficiently robust, and as a result the Malaysian capital market was able to withstand the systemic stress triggered by contagion and emerged in a fairly healthy position.

“The spirit of collaboration has been vital to our growth, and we have always felt that a consultative approach was important especially for our development work, and to ensure that we have a constant pulse on the market. This spirit extends to the collaboration we have with fellow authorities like the Attorney General’s Office, Bank Negara Malaysia, the Police, the Companies Commission of Malaysia, and the various committees like the Foreign Investment Committee (FIC), the National Economic Action Council (NEAC), and ministries with whom we work closely with,” he said.

“The Capital Market Masterplan (CMP) launched in 2001 is, to my mind, a good example of consultation by the Securities Commission, and true spirit of collaboration on the side of the industry, market institutions and other fellow regulators,” he said.

“We also felt that consultation was not only important during policy formulation but also for the purpose of implementation, and as such, had formed the 15-member Capital Market Advisory Council, made up of senior market players to give advice on implementation,” he said.

“The Commission always takes into consideration the market perspective in the development of our policies, and balances the sometimes conflicting needs of the various stakeholders,” said Datuk Ali.

He said that while regulations and enforcement were important pillars of a robust capital market, another important aspect was the level of sophistication of its investors.

He was pleased that investors have become more proactive in defending their rights, and taking greater interest in their investment.

He said this was becoming increasingly more important under the full disclosure regime, where the investors’ ability to understand their own investments were increasingly important.

He said investor protection and education were important to the SC that it runs awareness campaigns, for example, against spot commodities, and carries out free briefings all over the country.

Datuk Ali also said that the corporates in building up their companies and strengthening shareholder value also had a direct positive impact on the strength of the corporate scene as a whole.

He said amongst its peers, the Malaysian Securities Commission was much respected and this has been reflected in its leadership of various committees in the International Organisation of Securities Commissions (IOSCO), notably the Emerging Markets Committee, the Asia Pacific Regional Committee and the Islamic Capital Market Task Force. The SC is also a significant player in the international policy making through its participation in, among others, the Asia-Pacific Economic Cooperation (APEC) and the World Trade Organisation (WTO).

28 February 2003