A multi-year effort is underway to modernise the financial market infrastructure of Malaysia. Various initiatives have been undertaken by Bank Negara Malaysia to promote market stability and develop new payment and settlement systems. The goal of these projects is to enhance the market’s resiliency and internationalisation. These initiatives will support the development of the country’s financial sector and strengthen the country’s economy.
The Malayan Stock Exchange (MSE) was established in 1960. At that time, the market was comprised of 19 member firms, with ten in Singapore, four in Kuala Lumpur, three in Penang, and two in Ipoh. During that time, the trading rooms were connected by telephone. There were approximately 250 listed companies, including 150 foreign companies, and 68 industrial and general companies.
The financial market continued to serve its important roles as a source of domestic savings and financing. Total funds raised through the market in 2021 increased to RM130.9 billion, exceeding the five-year pre-pandemic average of RM121.4 billion. Of this total, RM16.6 billion was raised through the equity market, and RM114.3 billion was raised through the corporate bond market.
The recent rally in the Malaysian financial market is not sustainable, as many uncertainties remain. While there is a new government in the country, the factors contributing to the previous political uncertainty are still in play. Nevertheless, the success of the vaccination campaign is encouraging and should help to sustain market performance. But there is a long way to go before the market reaches a high level of stability.
The Malaysian financial market is one of the largest and most active in Asia. It has a corporate bond market that is larger than half of the country’s GDP, which facilitates the efficient financing of various economic activities. In addition, Malaysia is one of the leading nations in the Islamic finance market, and has an active sukuk market.
The government of Malaysia is actively engaged in maintaining financial stability. This is achieved through prudent monetary policies by the Bank Negara Malaysia. It also sets limits on foreign loans, which reduces the government’s exposure to currency fluctuations. It also supports the financial stability of the country by ensuring that the exchange rate of the ringgit remains stable.
The Malaysian government bonds market continues to attract non-resident investors. The government bond market alone received RM17.4 billion in net inflows from July 2017 to February 2018. The government bond market has seen a rise in its weightage in the JP Morgan Government Bond Index due to yield seeking activities. Further, the Malaysian bond market is growing in size.
This is a positive step for the Malaysian financial market. It is expected to improve the country’s reputation among investors in the global financial community. Furthermore, the Malaysia Ministry of Finance will continue to work with relevant authorities to further develop the country’s financial market.
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