Yang Berhomat Dato' Wira Haji Amiruddin bin Haji Hamzah, Deputy Finance Minister of Malaysia; Assalamualaikum warahmatullahi wabarakatu, and a very good morning to everybody. |
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| 1. | Welcome to Securities Commission Malaysia. A special welcome to our Deputy Minister, Yang Berhormat Dato' Wira Haji Amiruddin. Thank you for taking time to be here this morning. |
| 2. | Allow me to congratulate the Malaysian Rating Corporation Berhad and Amanie Group for another successful collaboration. As a regulator, the SC takes an active interest in thought leadership platforms – more so when they are proactive and industry-driven. |
| 3. | From my experience, the best solutions are often borne of diversity and collaboration. By bringing together diverse minds and expertise, this conference will be fertile ground for new ideas and fresh perspectives. |
| 4. | At the same time, for policy to be effective, it must be informed by those it is meant to support. So, public feedback is critical in this regard. Events like this conference allow the SC to keep our ears to the ground, and garner feedback on matters relevant to the capital market. |
| 5. | Given the comprehensive agenda, I will not focus on market specifics. Rather, I will share some thoughts on how policy and regulation can play a role in catalysing change. This thinking informs how the SC designs its priorities for the Malaysian bond and sukuk market. |
Yang Berhormat, ladies and gentlemen; Meeting the needs of the real economy |
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| 6. | The true measure of a capital market is by how well it serves the real economy. How effective is the market in generating wealth creation opportunities for investors, and how efficient is it in mobilising capital to meet demand for financing? |
| 7. | In this sense, the SC's priorities are shaped by asking the question, "what does the economy need?" and "what must the capital market provide in order to meet these needs?" By knowing the answers to these questions, the SC can use policy and regulatory levers to mould the capital market into a relevant support system for the economy. |
| 8. | The Malaysian corporate bond and sukuk market is the perfect example. The Asian Financial Crisis in the late 1990s laid bare the need for long-dated, local currency financing. This would provide corporations with a stable source of funds and mitigate risks from currency or maturity mismatch. |
| 9. | From the National Bond Market Committee in 1999 to strategies in the first and second Capital Market Masterplans, the bond and sukuk market has now grown into an important source of financing for Malaysian corporates. |
| 10. | Based on data up to October 2019, RM112.1 billion have been raised through corporate bond and sukuk issuances. This sum has exceeded the full-year tally for 2018 of RM105.4 billion. |
| Imperative for change | |
| 11. | However, as the Malaysian economy evolves, so must the capital market meet the emerging needs. With strong foundations already in place, what is the way forward for the bond and sukuk market? |
| 12. | Our answer lies in what is taking place across the globe. As I speak today, extreme weather events such as forest fires and flooding in the last 50 years have been particularly severe. |
| 13. | Asia too has not been excluded from these calamities. Asian countries rank among the most vulnerable economies in the recent Global Climate Risk Index. The perfect storm of extreme weather events, looming water and food insecurity, as well as rising energy demand present an urgent set of challenges to policymakers. |
| 14. | Clearly, status quo is no longer tenable. Transition to sustainable growth will have wide-ranging impact on the way we live, consume and do business. This requires extensive investments in innovation, particularly so vulnerable segments of society are not left behind. |
| 15. | To address this, vast amounts of capital need to be mobilised. UNCTAD estimates that approximately USD5-7 trillion are required every year to meet the funding needs of Sustainable Development Goals. However, the payoff is also tremendous. According to the World Bank, "a shift to low-carbon, resilient economies could create over 65 million net new jobs globally out to 2030." |
| 16. | The capital market must rise to this challenge. This requires a shift in mind-set, and the way we think about value as we do in the past must also change. Dollars and cents alone, no longer make sense. |
Ladies and gentlemen, Financing Malaysia's transition to a sustainable growth path |
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| 17. | Based on this conviction, the SC has pivoted our efforts towards sustainability in the capital market. In 2014, we introduced the SRI Sukuk Framework to facilitate the financing of projects which benefit the environment and community through the issuance of green, social and sustainability sukuk. |
| 18. | As at end-October 2019, a total of 10 SRI sukuk have been issued under the Framework, amounting to RM4.3 billion. |
| 19. | We have since revised the SRI Sukuk Framework to closely align with international standards. The changes include expanding the list of eligible SRI projects, enhancing disclosure and reporting requirements and further clarification on the role of the external reviewers. The revisions are expected to increase the SRI sukuk's appeal to a broader demographic, which includes foreign issuers. |
| 20. | Underscoring our commitment to the sustainability agenda, two days ago the SC also released the Sustainable and Responsible Investment Roadmap for the Malaysian Capital Market, which was launched by our Minister of Finance. |
| 21. | Closely related to sustainability, is also the notion of inclusiveness. Indeed, I would argue that markets cannot truly be sustainable unless they are inclusive, and vice versa. |
| 22. | From an investor standpoint, the SC sought to broaden participation by introducing a retail bond and sukuk framework. The framework has been subsequently enhanced. Key changes include the introduction of bond seasoning and streamlined disclosure requirements. The setting up of the Bond Information Exchange (BIX) also played an important role in facilitating access to information by retail investors. |
| 23. | Nevertheless, more needs to done on the capital-raising front. Earlier this year, I spoke on the need to broaden the credit spectrum of issuers in the Malaysian bond market, and this issue still remains on the table. The challenge however, is how the bond and sukuk market can be adapted so it could finance presently lower-rated issuers who may, in the future, become Malaysia's corporate champions. |
Ladies and gentlemen, Conclusion |
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| 24. | I hope that my thoughts have provided some context to the work done by the SC in this area. I look forward to the discussions ahead and I wish everyone a very productive conference. |
| Thank you. | |
