Ms Au Foong Yee, Managing Director, The Edge
En Azam Aris, Senior Managing Editor, The Edge
Mr Xav Feng, Head of Research, Lipper Asia
Distinguished guests,
Members of the media,
Ladies and gentlemen
- Good afternoon. I would like to thank the Edge and Lipper for the privilege of inviting me to attend the Edge-Lipper Malaysia Funds Award 2014. This is indeed a key event in the calendar of the unit trust industry. The awards accorded at this event are a testament to the significant role of the players in the investment management industry in Malaysia. Both the Edge and Lipper play a very important role in providing relevant and reliable information to facilitate informed investment decisions, something that is very close to the heart of the SC.
Ladies and Gentlemen,
GROWTH OF THE UNIT TRUST INDUSTRY
- 2013 was another strong year for the Malaysian capital market, following the record capital market performance of 2012. Fund raising activity remained robust despite some volatility and uncertainties observed in capital markets. Malaysian stocks performed well, with equally strong performance from the bond market. The capital market ended the year at RM2.7 trillion, an overall increase of 10.5% from the preceding year. Our market continues to demonstrate resilience and continues to grow, despite global volatility.
- The year also marked two decades since the establishment of the SC. Today, as we recognise the award winners for their achievements, let me also recognise the collective effort of all involved in the growth and success of the unit trust industry. The industry has performed well, and is now a major segment of our capital market, representing 20% of total market capitalisation. In 2013, the industry grew approximately 14%, recording total net asset value (NAV) of RM 335.5 billion across 595 funds at year end. With an aggregate NAV of RM28 billion across 44 funds in 1993, this is a 12 fold growth for the industry over the last 20 years.
- Regulation of unit trust industry was centralised with the SC about twenty years ago, allowing the implementation of a streamlined regulatory framework. At each stage of growth, we have endeavoured to provide a suitably facilitative regulatory environment without compromising on investor interests.Over time, greater flexibility has been introduced, ranging from products that could be made available to progressive market access by foreign intermediaries to enhance product offerings and skills.
- Pivotal to the growth of the collective investment schemes (CIS) industry is the industry’s ability to anticipate, identify and meet the varied financial needs of investors through innovation in products and services.
- Partnerships between domestic and foreign players have helped the industry stay globally competitive, while our local talent pool continues to provide diversity in service offerings. Investors are no longer restricted to basic investment strategies, but can now participate in various strategies, ranging from active management to absolute returns and capital protection.
- In further supporting the development of innovative products and services, the Private Retirement Scheme was introduced in 2012. The scheme extends access to investment and saving opportunities to a wider section of the population under a well-supervised and regulated framework. The scheme has had a promising start, with NAV of RM300 million across 44 funds. More encouraging is the growth in the number of account holders – 65,000 of them – with 79% participation from the employed segment, and the remaining 21% comprising of the self-employed, retirees and others.
TRUST AND CONFIDENCE IN OUR MARKET
- The growth of the unit trust industry and the capital market as a whole reflects the trust and confidence in our market. Trust and confidence is an integral part of the capital market; we have seen how a deficit of trust has affected markets around the world, particularly economies which have been impacted by the global financial crisis. Short termism, in particular, is one of the major causes of this issue. With short termism, ethics take a back seat in the sales process and products are engineered solely for the profit of its architects, without creating value over the long term for investors.
- In this industry, trust is imperative in creating and cultivating sustainable relationships, and no legal or regulatory requirement can create or replace the trust firms build with their clients. Ethical values, particularly integrity and fairness, are an integral part of operating in the capital market.
- Recently, we issued the Guidelines on Sales Practices of Unlisted Capital Market Products to promote responsible and ethical conduct in the development and sale of unlisted capital market products, which include unlisted CIS.
- These guidelines, among others, require product issuers and product distributors to give due regard to the interests of the investors throughout the lifecycle of the product.
- We are happy with the progress of implementation of the Sales Practice Guidelines and acknowledge the efforts put in place, including measures to enhance the product knowledge of sales forces. We have noted cases where product launches have even been withheld to ensure the sales team first undergoes the necessary training to ensure sufficient knowledge on the product.
Ladies and Gentlemen,
GREATER CROSS-BORDER OPPORTUNITIES
- As we continue to capitalise on opportunities in the face of Asia’s emerging wealth and demographic trends, the domestic success of the CIS industry signals the readiness of the industry to move into a more regional and global role. Last year, as you may recall, I touched on the SC’s work on the ASEAN Capital Market Forum (ACMF) Framework for the Cross-Border Offerings of CIS. I am pleased to report to you that in October 2013, the capital market regulators of Malaysia, Singapore and Thailand became the pioneer signatories in 2 memorandums of understanding (MOU) for the cross-border offerings of CIS to retail and non-retail investors respectively.
Ladies and Gentlemen,
CO-ORDINATED AND FACILITATIVE REGULATORY FRAMEWORK
- As we look ahead into 2014, global markets continue to face significant challenges. Market pressures, while particularly high on emerging markets, have become more widespread since Jan 2014; risk aversion is observed to have risen across all asset classes, not just the emerging markets. The world is standing at convergence of markets and economies. As markets and economies become increasingly interconnected, so must regulation and policy. Greater international cooperation among policymakers is vital in dealing with uncertainty over global economic outlook.
- Over the next 3 days, some of the most influential securities regulators will meet in Kuala Lumpur. Senior representatives from 32 securities markets jurisdictions around the world will discuss the G20 regulatory reform agenda which is implemented by IOSCO and FSB, as well as risks affecting markets. Reflecting the growing prominence of emerging markets in the international financial system, IOSCO members will also review current market conditions and continue to reinforce their commitment to an agenda of strengthening the resilience of emerging markets.
- In the context of the development of the Malaysian capital market, the SC will continue to pursue an agenda of growth with resilience. We will continue to emphasise the need for a facilitative regulatory framework – one that is systematically designed to ensure accessibility and inclusiveness whilst ensuring the protection of investors, efficiency in intermediation, fair and orderly markets as well as mitigation of risks.
Ladies and Gentlemen,
CONCLUSION
- We have seen strong growth in the unit trust industry over the past decade which demonstrates your ability to continually innovate, exhibit high professional standards and services, and apply effective marketing strategies. With a large domestic savings pool worth RM1 trillion for intermediation through the capital market, there is great opportunity for further expansion of this industry. The future path for this industry is promising, and with the right enablers, I am confident that we are poised for great success.
- Thank you for your attention, and congratulations to all the award winners this year.
