As you are aware, national infrastructure investment needs in Asia-Pacific are projected at US$8 trillion between 2010 and 2020, which translates to an average of US$730 billion per year⁶. Given the substantial amounts of financing required, the SC has been actively collaborating with policymakers from around the region to pursue efforts aimed at facilitating capital raising for infrastructure development, through the ASEAN Capital Markets Forum (ACMF) as well as the Asian Bond Markets Initiative (ABMI). Additionally, the SC expects to play a significant role in IOSCO’s new workstream on infrastructure financing, which will garner the participation of members from advanced and emerging markets.

1. Finally, as a consequence of having a well-developed bond and sukuk market that can effectively channel funding for big projects over an extended period of time, greater diversity is achieved in the financial system and adds to resilience of our markets. As we have seen, the banking system has experienced considerable deleveraging following the financial crisis of 2007/2008. This has led to a gradual shift towards market-based financing where bond markets have increasingly provided a viable alternative to bank funding. Further, local currency bond markets can serve as a source of resilience given their ability to address risks stemming from currency and maturity mismatches. 
2. In the Malaysian context, the bond and sukuk market has exhibited strong resilience⁷ during periods of challenging market conditions. Capital outflows due to the decline of foreign ownership in Malaysian bonds and sukuk last year were relatively well-absorbed by the large pools of domestic liquidity. Since the start of 2016, foreign holdings of ringgit bonds and sukuk have rebounded and increased by 8.4% to RM232.8 billion⁸. Concurrently, corporate bond and sukuk issuance in the first quarter of 2016 has increased by 65% to RM18.2 billion, as compared to the corresponding quarter in 2015.
   

1. It is absolutely critical that we continue to work together and apply our minds to take the Malaysian bond and sukuk market to the next level of development given its significance to the capital market and overall economy. Over the years, the SC has undertaken measured initiatives to elevate the financing capacity and investment potential of the domestic fixed income market, and has worked closely with the industry to develop the sukuk segment. 
2. Given the attractiveness of bonds and sukuk for long-term savings, the retail framework was introduced in 2012 to provide direct retail access whilst widening the pool of investors for issuers. Through the listed retail sukuk offerings of DanaInfra Nasional Berhad, the country’s citizens have been able to participate in the nation’s development of the first Mass Rapid Transit line. More recently in 2014, the SC had launched the Sustainable and Responsible Investment (SRI) Sukuk framework to promote socially responsible financing and investment, in line with changing trends. Capitalising on this framework, Khazanah Nasional Berhad had issued the world’s first SRI Sukuk in June last year and RAM had assigned the credit rating for this inaugural issuance. 
3. In driving further development of the Malaysian bond and sukuk market, the SC is working closely with industry experts to formulate targeted developmental initiatives. As a priority, the SC is reviewing measures to expand the offering of bonds and sukuk to the retail market including reviewing the conversion of existing wholesale bonds and sukuk for retail investors under a seasoning framework. 
4. Broadening bond and sukuk market access will also entail a review to facilitate the entry of a wider base of industries and projects to raise financing, and provide investors with a wider range of credits to choose from. In addition, the SC will work towards improving information transparency in both the primary and secondary markets to facilitate informed investment decisions, which is expected to ultimately contribute to enhanced liquidity in the secondary bond and sukuk market.
   

Ladies and gentlemen,

1. The world has witnessed an erosion of investor confidence in advanced markets following the aftermath of the global financial crisis, and this has had a crippling effect on certain segments of the financial market⁹. Governance failures exemplified by the Libor and forex rigging scandals that rocked the financial system, has also had a significant effect in diminishing public trust in the marketplace. 
2. Clearly, the success of any component of the capital market relies on investor trust and confidence. This in turn requires industry participants to not lose sight on the importance of having good conduct and high standards of governance. The SC therefore adopts a pre-emptive supervisory approach that encompasses registration and on-going monitoring of bond market intermediaries, including credit rating agencies, to safeguard market integrity. The SC’s oversight function also entails assurance that bond market intermediaries have vigorous processes in place to handle conflict of interest situations as well as proper internal channels for escalation of misconduct issues. Additionally, the SC continuously reviews its supervisory framework to ensure relevance and proportionality, and to effectively address market concerns as well as regulatory gaps. 
3. Whilst the SC will continue to do its part to enhance the regulatory architecture required for a well-functioning bond and sukuk market, the industry has a shared responsibility to contribute towards building a sound ecosystem that fosters investor trust and confidence. This will go a long way towards preserving integrity of the capital market, including the domestic bond and sukuk market as it continues on its developmental path to remain as an effective platform that intermediates the fundraising needs of companies with the investment demands of investors.