In conjunction with the launch of Malaysia’s Islamic Fund and
Wealth Management Blueprint
12 January 2017


Yang Berhormat Datuk Johari b Abdul Ghani, Minister of Finance II
Yang Berhormat Senator Dato’ Lee Chee Leong, Deputy Minister of Finance II
Datuk Seri Muhammad bin Ibrahim, Governor of Bank Negara Malaysia
Distinguished guests
Members of the media
Ladies and gentlemen,

1. A very good morning to everyone. I am delighted to welcome all of you to the Securities Commission Malaysia’s International Investment Fund Forum 2017. May I also take the opportunity to wish you the very best for the new year.
2. I would first of all like to thank Yang Berhormat Datuk Johari b. Abdul Ghani, Minister of Finance II, for kindly agreeing to deliver the special address on behalf of Yang Amat Berbahagia Dato’ Sri Mohd Najib b. Tun Abdul Razak, Prime Minister of Malaysia, and to launch the Islamic Fund and Wealth Management Blueprint this morning.
3. I would also like to thank our distinguished speakers who have made the time to be here at this event. I am delighted that we have a highly experienced panel of experts from leading firms and investment institutions around the world as well as Malaysia who will be speaking here this morning on the future direction and outlook of the market and the investment management industry; the growth potential of the Islamic fund and wealth management segment, and the rising interest in sustainable and responsible investing.
Ladies and gentlemen,
Global capital markets in 2016
4. Global capital markets have seen some challenging times over the past few years, with investor sentiment being influenced by uncertainties arising from an environment of subdued growth, low interest rates and commodity prices, as well as the growing influence of policy actions and monetary stimulus.
5. On top of that, in 2016 two largely unanticipated geopolitical outcomes created further episodes of volatility and uncertainty that continue to linger and influence policymakers and markets until today.
6. The start for 2017 has been generally more positive. There is a sense of cautious optimism that the year ahead should provide more positive prospects for emerging markets on the back of improving economic growth, more stable commodity prices and hopefully greater certainty in the direction and policy momentum of larger economies. Emerging markets as a consequence should see healthier portfolio inflows as they are reasonably well-positioned to benefit from improving growth prospects and stronger domestic demand drivers.
7. In the case of Malaysia, there are sound economic fundamentals in place to support a consistent growth outlook. Together with Malaysia’s strong financial and capital markets and robust regulatory environment, global investors should make a differentiation within emerging markets and continue to invest in our long-term value and growth potential.
Preserving resilience
8. In an environment where global markets have become more volatile and uncertain over the past two years, our efforts as regulators have focused on two key objectives.
9. The first is to ensure that we continue efforts to build sound and stable markets that remains resilient in times of market stress and allows for the continuous functioning of the capital market. This, I believe, has been well demonstrated over the recent few years where despite the uncertainty and volatility, there has been no systemic instability and markets have adjusted in an orderly and transparent manner with no amplification of risks.
10. This resilience is also reflected in Malaysia’s capital raising figures for 2016, which show that close to RM100 billion was raised through the capital market with RM87 billion in corporate bond issuances and IPOs while the rest was secured through secondary fundraising. A substantial portion of this financing occurred through the bond and sukuk market. Our estimates for 2017 show a figure of RM100 billion to 105 billion to be raised this year.
Growth and development of investment management
Ladies and gentlemen,
11. The second core objective of capital market regulators is to continue to focus on developing the markets to ensure that investors have access to the best possible investment opportunities to grow their wealth and to ensure that capital formation takes place effectively and efficiently to finance the economy and serve the needs of businesses.
12. This role has become increasingly important, as over the years, market-based financing has taken on greater prominence as an efficient source of capital and risk diversification, with capital markets accounting for almost three quarters of financial assets globally.
13. The rising dominance of market-based financing is reflected in the robust growth trend recorded by the global investment management sector, with the amount of assets under management (AUM) worldwide more than doubling from 2002 to reach the size of US$ 71 trillion in 2015.
14. This strong growth trajectory can also be seen in Malaysia, where the investment management industry has over the years witnessed consistent and steady growth, expanding at a double-digit rate over the past five years. The total pool of assets under management by the 74 SC licensed firms is now at RM 702 billion. We continue to see consistent net flows into our investment management industry and this is despite the uncertain market climate seen over the past two years.
SC’s investment management initiatives
15. Recognising the significance of investment management to the capital market, the SC continues to focus its development programmes in developing this market segment.
Unit trust
16. Malaysia has succeeded in building one of the largest and most established unit trust industries in Asean. Over the last 10 years, our unit trust industry has grown more than twofold to RM357 billion in net asset value with 628 funds as at the end of November 2016.
17. The SC has with industry collaboration pursued the incremental liberalisation of regulation to allow the industry greater flexibility to pursue its next phase of growth. These reforms have resulted in a reduction in time-to-market via expedited approvals for non-complex funds, as well as increased operational efficiency through the easing of rules for renewal of prospectus.
18. Such regulatory reforms have been done with the aim of encouraging industry diversity and competition, which include allowing entry of foreign investment management firms and lower entry costs for boutique management firms, paving the way for players with niche expertise, and providing additional choices for investors.
Private retirement schemes
19. Recognising the importance of creating further options to save for retirement, the SC introduced the Private Retirement Scheme in 2012. The immediate goal has been to encourage more investor participation into the scheme as this would sow the seeds for future growth that will pay off as savers approach retirement. As at end 2016, we have more than 212,000 account holders with a net asset value of RM1.4 billion. The government has on its part introduced incentives to encourage PRS through the tax relief and youth incentives, and the SC will continue to work with all stakeholders to promote further uptake.
Venture capital/private equity
20. Cognisant of the importance of venture capital and private equity as an alternative asset class and avenue for market-based financing, the SC as chair of the Malaysian Venture Capital and Private Equity Development Council (MVCDC) has formed an industry-driven working group to develop specific recommendations to catalyse further growth of the VC/PE industry in Malaysia. The areas being addressed by the working group include facilitating greater mobilisation of capital into the industry, enhancing the number and quality of deal flows and strengthening the skill sets of industry professionals.
21. In building the strength and capacity of the investment management industry and to harness cross-border linkages and connectivity we have worked through the ASEAN Capital Markets Forum to spearhead initiatives to drive the connectivity of ASEAN capital markets. The ASEAN Collective Investment Schemes Framework is one such initiative. Under this framework, funds from signatory countries can be offered through an expedited process in another signatory country. To date, 13 funds have been recognised under this framework, out of which 5 have been successfully approved and launched in an Asean host jurisdiction.
Digital markets initiatives
Ladies and gentlemen,
22. In addition to the above, another area that the SC has placed major emphasis on is our digital markets initiative.
23. The rise of the digital generation, which is not limited to millennials but extends across the age demographic, has necessitated innovative investment solutions that offer greater convenience, channel access, transparency, and lower cost. As such, the SC is proactively developing a facilitative framework to encourage the provision of digital investment services in Malaysia. In 2017, we will introduce the first phase of a digital investment services framework which will facilitate the offering of automated discretionary portfolio management services, allowing a cost effective, accessible and convenient channel for investors to manage and grow their wealth.
24. The goal is to democratize investments in the capital market and allow retail investors to make better investment decisions through accessibility to curated research, analytics tools and market information that would otherwise be available to only sophisticated investors.
The Islamic Fund and Wealth Management Blueprint
Ladies and gentlemen
25. The SC continues to pursue strategies to further the development of the Islamic capital market at both domestic and international levels. With respect to the latter, in navigating an increasingly competitive global environment, it is vital that markets continue to chart new strategies to leverage on established strengths yet remain nimble enough to adapt to the ever-changing landscape. The Islamic Fund and Wealth Management Blueprint that we will launch today represents Malaysia’s focused and concerted efforts to achieve sustained growth and consolidate the international positioning of Malaysia’s Islamic capital market.
26. This segment has been identified as a key growth driver for the Islamic markets in view of the global trends that include higher economic growth forecast for OIC member countries relative to the global average that will contribute to more affluent Muslim population, and greater cross border activities that enhance market access and enable more international linkages.
27. Arising from these trends, there is strong potential for greater and sustained demand for Islamic wealth management services globally. This provides substantial opportunities for Malaysia, given its comprehensive Islamic finance sector, to establish itself as an international Islamic wealth management service provider, which will also reinforce the country’s leadership in Islamic fund management, thus contributing firmly to the Blueprint’s primary objective of positioning Malaysia as the international centre for Islamic fund and wealth management.
28. This objective will be pursued primarily through strategies that focus on strengthening Malaysia’s positioning as a global hub for Islamic funds; establishing Malaysia as a regional centre for Shariah-compliant Sustainable & Responsible Investment (or SRI); and developing Malaysia as an international provider of Islamic wealth management services.
29. The Blueprint will be operationalised through several work programmes on a phased approach over a five-year period. For the initial stage of implementation, the work programmes that have been identified include the formulation of a framework for issuance of SRI investment funds, the setting up of a global capacity building centre for Islamic capital market and the introduction of a digital investment services framework.
Concluding remarks
Ladies and gentlemen
30. I would like to take this opportunity to acknowledge the efforts of the industry representatives, as well as domestic and international stakeholders, whose views and feedback have been invaluable in assisting the SC in the formulation of the blueprint. These ongoing efforts are greatly appreciated and we hope to continue the close collaboration that we’ve had with the industry as we begin to operationalize the blueprint.
31. Thank you very much, and I hope you enjoy the rest of the forum.