slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The Asian Market: Malaysia’s Experience PowerPoint Presentation
Download Presentation
The Asian Market: Malaysia’s Experience

Loading in 2 Seconds...

play fullscreen
1 / 36

The Asian Market: Malaysia’s Experience - PowerPoint PPT Presentation


  • 128 Views
  • Uploaded on

5 th CVM Seminar : Financial and Capital Markets in the Islamic World Opportunities and Challenges 8 December 2008. The Asian Market: Malaysia’s Experience. Nik Ramlah Mahmood Securities Commission Malaysia. The Development of Malaysia’s Islamic Capital Market –

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Asian Market: Malaysia’s Experience' - ramona-cummings


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1
5th CVM Seminar : Financial and Capital Markets in the Islamic World Opportunities and Challenges8 December 2008

The Asian Market:

Malaysia’s Experience

Nik Ramlah Mahmood

Securities Commission

Malaysia

slide2

The Development of

Malaysia’s Islamic Capital Market –

A Regulatory Perspective

the malaysian capital market forms a significant component of the overall financial system
The Malaysian capital market forms a significant component of the overall financial system…

Total value of capital market (nov-2008)

USD327 billion

Total value of

capital market (1990)

USD61.5 billion

Bonds

USD145 bn

(44%)

Equity

USD182 bn

(56%)

Equity

USD40.6 bn

(66%)

Bonds

USD20.9 bn

(34%)

with islamic securities forming a substantial portion
…with Islamic securities forming a substantial portion

Total value of capital market

(Nov-2008): USD327 billion

Islamic capital market value

(Nov 2008): USD171 billion

Islamic Bonds/

sukuk

US$54 bn

(32%)

Bonds

USD145 bn

(44%)

Equity

USD182 bn

(56%)

Islamic equity

US$117 bn

(68%)

slide5

Islamic finance in Malaysia is relatively well diversified…

  • Malaysia inherited the British system of governance including the conventional financial services industry
  • The evolution of Islamic finance began from the setting up of the Pilgrims Fund Board
    • a savings mechanism under which funds for performing the Hajj were set aside to cover the costs of performing the annual pilgrimage
  • Government and regulatory bodies recognized the need to develop ICM in order to create a financial niche for Malaysia
  • The evolution of Islamic finance in Malaysia :

1969 : Establishment of Pilgrim Fund Board

1983 : Islamic Banking Act enacted and the establishment

of first Islamic bank

1984 : Takaful Act enacted and the establishment of first

takaful (Islamic insurance) entity

1993 : Securities Commission Act enacted providing SC with mandate

to develop capital market

2007 : Capital Market Services Act

To cater for

domestic

demand

and has evolved to provide viable investment and financing alternatives for local institutions
…and has evolved to provide viable investment and financing alternatives for local institutions
  • An efficient conduit for mobilisation of funds for Malaysian corporates
    • long term fund raising and investment; enhances depth & resilience of Malaysian Islamic financial system and overall financial system
    • 55% of outstanding corporate bonds are structured using Shariah principles
    • 87% of companies on the stock exchange are Shariah compliant
  • Malaysian ICM products are accepted by both Islamic and non-Islamic local investors as well as investors across various jurisdictions
    • Conventional investors regard ICM products as a new asset class
    • Emergence of new demand from the Middle East, South-East Asia, South Asia and North Africa
malaysia is now the leading islamic capital market in the world
Malaysia is now the leading Islamic capital market in the world…
  • Malaysia is regarded as the leading center for Islamic finance
    • Two thirds of global sukuk originates from Malaysia
    • Islamic unit trust is the fastest growing segment of the Islamic capital market
    • Leading international fund management companies establishing operations in Malaysia
  • Issuance of sukuk is not confined to Islamic institutions
    • Multilateral institutions such as World Bank and IFC have issued sukuk
    • Non-Islamic institutions have issued sukuk
    • Non-Muslim majority countries have shown interest to issue sukuk
  • Local and foreign financial institutions are now actively intermediating and structuring ICM products
    • Sukuk
    • Islamic investment products
    • Islamic exchange traded funds
    • Islamic REITS
malaysian icm has been developed through clear vision and well articulated policies
Malaysian ICM has been developed through clear vision and well articulated policies

Capital Market Masterplan

  • Strong leadership and proactive role of government
  • Close collaboration with private sector
  • Progress of implementation closely monitored

Financial Sector Masterplan

9th Malaysia Plan

Malaysia International

Islamic Financial Centre

(MIFC)

the capital market masterplan cmp
The Capital Market Masterplan (CMP)

Launched in 2001, the CMP provides a blueprint for long-term strategic development of the Malaysian capital market with 152 recommendations covering 11 areas :

  • Equity market
  • Bond market
  • Derivatives market
  • Stockbroking industry
  • Market institutions
  • Investment management
  • Regulatory framework
  • Corporate governance
  • Islamic capital market
  • Technology & e-commerce
  • Training & education

To develop Malaysia as an international Islamic financial centre

a sound shariah framework is fundamental for icm development
A sound Shariah framework is fundamental for ICM development…
  • Main thrust of Islamic capital market is compliance with Shariah principles (Islamic jurisprudence)
  • National level Shariah Advisory Council (SAC) established under the Securities Commission Act 1993
    • Comprises prominent Shariah scholars, jurists & market practitioners
    • Advises SC on all Islamic capital market matters
    • Provides investment guidance
    • Acts as a reference point for industry
    • Promotes product harmonisation and standardisation
  • SC works closely with industry and the SAC to facilitate new products/concepts
  • Publication of Resolutions of the SAC
slide11

…with universal principles of securities regulation applied to Malaysian Islamic capital market

  • Islamic capital market products and services must
    • leverage on existing infrastructure
    • not compromise the universal goals of securities regulation
  • IOSCO’s Objectives and Principles of Securities Regulation applies
  • Protection of investors
  • Ensuring markets are fair, efficient & transparent
  • Reduction of systemic risk
  • IOSCO Islamic capital market task force 2001 affirmed key issues:
    • Conventional regulatory framework applicable to Islamic capital market products and services
    • Islamic capital market products and services may be introduced and developed within any existing well-structured securities market
    • Reaffirmed in 2008
  • IFSB efforts in setting international prudential standards
a two tier approach in regulating islamic products
A two-tier approach in regulating Islamic products…

Tier I

General regulatory requirements

applicable to both conventional

and Islamic products

Bonds - Trust deed, mandatory rating, eligible

persons, etc

Unit Trust - Investment committees, trustees,

management company, etc.

REITs - At least 75% investment in real estate

Tier 2

Shariah - specific requirements

applicable to Islamic products

Sukuk - Additional disclosure for Musyarakah

Mudharabah structures via info memo, Shariah adviser, utilisation of proceeds

Islamic

Unit Trust - Shariah adviser to certify that fund complies with Shariah requirements

Islamic

REITs - Tenants’ activities and rental income must comply with Shariah requirements

issuance of islamic capital market guidelines
…issuance of Islamic capital market guidelines…
  • Guidelines on the Offering of Islamic Securities, 2004
  • Guidelines on Islamic REITs, 2005
  • Guidelines on Islamic Fund Management, 2007
  • Guidelines and Best Practices on Islamic Venture Capital 2008

13

slide14

Products

Services

…facilitates the offering of a comprehensive range

of products and services

Islamic REITs

Islamic unit trusts

Sukuk

Shariah compliant futures contracts

Shariah compliant stocks

Islamic structured products

Islamic stockbroking

Islamic ETFs

Corporate finance / Advisory

Islamic fund management

Islamic banking & takaful

slide17

Malaysia –

An International Islamic Capital Market Hub

malaysia an international investment hub
Malaysia : An international investment hub…

Competitive cost structure

Conducive lifestyle

Vibrant economy

Malaysia

Islamic finance niche

Efficient business environment

Deep, broad-based capital market

slide19

…Malaysia’s real GDP shows moderate growth

Diversified and

flexible economic

structure

Stable growth at 5% – 5.5% in 2008

Low inflation of

2.0% @ Dec 2007

(2008: 5.5 – 6%)

Strong domestic

demand

conditions

Sound

Economic

Fundamentals

…high foreign exchange reserves and low external debt provide one of the strongest external positions globally

Low external debt

(end-June ’08:

34% of GNI)

Low

unemployment

(3.5% in Q2 2008)

High gross

national

savings

(38.4% of GNI)

High international

reserves

(USD100 b @

November ‘08)

Malaysia…positive economic conditions with moderate outlook…

…slowdown in economic growth due to global environment, with stable and resilient banking system…

Malaysia’s Credit Rating: A- (S&P), A3 (Moody’s)

slide20

Most attractive

India

China

Malaysia

Thailand

Brazil

Indonesia

Chile

Philippines

Bulgaria

Mexico

...and an attractive business & investment destination

Ranked 3rd for regulating directors

Ranked 4th in investor protection

Ranked 3rd for most attractive outsourcing centre

Most protected

Most

New Zealand

New Zealand

Singapore

Singapore

Malaysia

Hong Kong

Canada

Malaysia

United States

United States

Cambodia

Israel

Israel

Canada

Source: World Bank 2008

Source: World Bank 2008

Source: A T Kearney 2007

Hong Kong

Ireland

South Africa

United Kingdom

Mauritius

South Africa

World Economic Forum 2007 Global Competitiveness Index:

  • Malaysia ranked 21st in Global Competitiveness Index (World Economic Forum)
  • Investment Guarantee Agreements with over 50 countries
  • Dynamic legal, regulatory and tax framework
  • Regional Centre of Arbitration in Kuala Lumpur
  • Affordable cost of living – among cheapest in Asia
  • Liberal exchange control regime
slide21

Year

M-cap of Islamic

Equities

(RM bln)

% of M-cap

Islamic equities

2001

303.2 (USD86.6)

65.2

2002

290.5

60.3

2003

383.9

59.9

2004

448.2

62.1

2005

439.8

63.3

2006

548.4

64.6

2007

705.1

63.7

2008+

416.47 (USD119)

63.5

Shariah-compliant securities on Bursa Malaysia

Number of Shariah-compliant securities-Nov 2008

855 securities

% to total listed securities

87%

Equity market indices

31 Oct 2008

30 Nov 2008

% change

KL Composite Index (KLCI)

863.61

866.14

0.29%

FBM EMAS Shariah

5843.46

5900.37

0.97%

FBM Hijrah Shariah

6565.90

6594.18

0.43%

A large Shariah-compliant equities market…

Shariah-compliant Securities by market sector

Shariah-compliant Securities

Trading/Services

20%

Construction 6%

Properties 9%

Plantation 4%

Industrial Products 33%

Technology 12%

Others 1%

Consumer Products 15%

+As at end-Nov 2008

Source: Securities Commission

* The SAC of SC releases the updated Shariah-compliant securities list twice a year in May and November

slide22

…makes Malaysia an attractive Primary Listing Destination

Kuala Lumpur Composite Index

  • Market capitalisation as at end-November 2008 stood at RM657 billion (USD188 b)
  • Largest number of listed companies in ASEAN (982 as at Sept-08)‏
  • Well-balanced participation ~ with retail, domestic institutional and foreign institutional accounting for roughly a third of trading values each
  • Market Diversity - 15 Sectors with 50 economic activities
  • Product Diversity – Structured Warrants, REITs, ETFs, Shariah compliant products
  • A total of 13 listed REIT – 2 Islamic and 1 conventional converting to an Islamic at the end of the year
  • 3 listed ETFs, FTSE Bursa Malaysia Large 30 Index, ABF Malaysia Bond Index Fund & MyETF Dow Jones Islamic Market Malaysia Titans 25 (First Shariah ETF launched in Asia)
  • Resilient performer – Among top performing markets in 2007 and performing in line with other Asian exchanges in 2008

KLCI record high: 1516.22 on 11th Jan 2008

Oct-08*

Gives excellent market coverage, peer comparisons, sector premiums

slide23

Attractive value propositions

  • Vibrant economy with competitive cost structure, efficient business environment & conducive lifestyle
  • Strategic, Islamic connectivity for Middle Eastern funds to capitalize on Malaysian growth opportunities
  • Valuation is comparable to regional exchanges and relatively higher valuation on niche sectors
  • Non-resident PLCs can repatriate any amount of
  • capital raised during IPO without BNM approval
  • Companies can choose to have their Shariah
  • compliant status determined pre-IPO
slide24

PE Valuations

KLCI Sectoral PE Valuations

(end-Q3 2008)‏

Regional PE Valuations

(end-Q3 2008)‏

slide25

Direct listing requirements for foreign companies

Requirement

Main Board

MESDAQ

Paid-up share capital

Min RM60 mil (USD17.14 m)

Min RM2 mil (USD0.57 m); or

Min RM20 mil (USD5.7 m) (technology incubators)‏

Operating history

At least 3-5 full financial years

  • Tech-based companies:

None

  • Tech incubators:

At least 12 months in operations

  • Others:

3 years operating revenue

Profit Track Record Test

  • Uninterrupted profit after tax (PAT) of 3-5 FYs;
  • Aggregate PAT of at least RM30 mil (USD8.6 m); and
  • PAT of at least RM8 mil (USD2.3m) for latest FY

N/A

Market Capitalisation/

Profit Test

  • Market capitalisation of at least RM500 mil (USD142.9 m)
  • PAT of at least RM30 mil (USD8.6 m) for latest FY

N/A

IPC test

  • Must have right to build an infrastructure project –
  • which contributes to economic growth of Malaysia
  • concession not < 15 yrs
  • cost not < RM500 mil (USD142.9 m)

N/A

slide26

Secondary listing requirements for foreign corporations

  • Flexible requirements for a foreign corporation seeking a secondary listing on Bursa Malaysia:
    • The applicant’s home exchange must be a member of the World Federation of Exchanges and must have standards of disclosure rules at least equivalent to those of Bursa Malaysia
    • Market capitalisation at least equivalent to RMI billion (USD285.7m) on its home exchange
    • After tax profits of at least equivalent to RM60 million (USD17.14 m) based on the audited financial statements for the most recent full financial year
    • The applicant must be incorporated in a jurisdiction whose corporation laws and other laws and regulations have standards at least equivalent to those in Malaysia, particularly with respect to-
      • Corporate governance
      • Shareholders and minority interest protection and
      • Regulation of take-overs and mergers
slide27

The Malaysian Islamic Capital Market – Active global sukuk centre

10x oversubscribed

Despite financial volatility due to continued uncertainties, many large issuances in 2007 and 1H 2008 were made signifying large demand for sukuk

Malaysia has competitive advantage:

  • Local currency bond market is largest in ASEAN region, as of end-Nov 2008
    • total: RM523 bn (USD 145 bn)
    • sukuk: RM194 bn (USD 54 bn)
  • New asset class, wide investor base
  • 57% of corporate debt securities are sukuk
  • Corporate sukuk issued in 2007: USD 20 bn
    • 1H 2008: > USD 4.3 bn
slide28

Sukuk - Primary Market Activity in 2008

Sukuk approved based on various Shariah principles

Corporate Approval

2007

  • Decrease in amount of Sukuk approved in 2008 is partly due to:
  • - Local and foreign FIs whose assets are conventional based, tapping the bond market;
  • - One off large Cagamas issuance in 2007 amounting to RM60 billion

Jan – Sep 2008

Corporate Issuance

slide29

A fast growing Islamic fund management industry – Islamic REITs & ETFs

  • Malaysia – 1st to issue Guidelines for Islamic REIT (2005)
  • Malaysia – 1st to have a Shariah-compliant REIT listed on the stock exchange.
  • Currently, 2 listed Shariah-compliant REIT –
    • a healthcare REIT; and
    • a plantation REIT (oil palm)

Lower income tax for investors

Tax transparency introduced. SC issued new Guidelines.

M’sian Govt waived RPGT and stamp duty.

ETFs:

  • 1st Islamic ETF in Asia (Jan 2008)
  • RM840 million (USD240 m) MyETF Dow Jones Islamic Market Malaysia Titans 25
  • Listed on Bursa Malaysia
slide30

Islamic fund management – Islamic unit trusts

NAV of Islamic Funds vs. Total Industry

No. of Islamic Funds vs. Total Industry

Islamic unit trust funds

(USD5 b)

(USD42.5 b)

Source: Securities Commission

slide31

Islamic fund management companies

Liberal shareholding

structure

  • Islamic fund management companies are allowed to have 100% foreign ownership
  • Islamic fund managers are permitted to manage both institutional & retail funds
  • Islamic fund management companies are allowed to invest 100% of their assets abroad
  • RM7 billion (USD2 b) in start up funding will be channeled by EPF to Islamic Fund management companies
  • Income tax exemption on all Islamic fund management activity fees until 2016
  • Income tax exemption for non-resident Islamic finance experts
  • One-stop center at the Securities Commission (SC) for all fund management queries

Facilitative

cross border

investment policy

Greater access to

institutional funds

Competitive

operating

environment

slide32

Islamic fund management companies

  • Shariah assets under management (AUM)
    • As at 30 June 2008, 10% (RM23 billion) of the total AUM of RM235 billion (USD67.14 b) for the fund management industry were Shariah mandates
    • 35 fund mgt companies in Malaysia have Shariah mandates
    • The first fully fledged local Islamic fund management company is CIMB Principal Islamic Asset Management
  • Growing interest by international companies to use Malaysia for their fund management activities
    • Aiiman Capital (owned by DBS Bank) is licensed while;
    • The following have been approved for establishment
  • - Global Investment House
      • Kuwait Investment House
      • Reliance Capital Asset Management
thank you
Thank You

Securities Commission

3 Persiaran Bukit Kiara

50490 Kuala Lumpur

Malaysia

www.sc.com.my

slide34

Company name

RM billion

1.

Sime Darby

35.15

2.

MISC

31.76

3.

Tenaga Nasional

25.57

4.

Petronas Gas

19.19

5.

IOI Corporation

19.10

6.

TM International

14.19

7.

Telekom Malaysia

13.90

8.

Plus Expressway

13.45

9.

Digi.com

13.41

10.

PPB Group

10.14

Islamic equity market: Sizable component of the

capital market

Top 3 Shariah-compliant companies by sector and market capitalization

Top 10 Shariah-compliant companies by market capitalization

Plantation

Company name

RM billion

1.

IOI Corporation

19.10

2.

Kuala Lumpur Kepong

8.91

3.

Batu Kawan

3.27

Construction

Company name

RM billion

1.

YTL Corporation

10.78

2.

Gamuda

3.39

3.

IJM Corporation

2.16

Properties

Company name

RM billion

1.

SP Setia

2.76

2.

KLCC Property

2.56

3.

IOI Property

2.04

Oil & Gas

Company name

RM billion

1.

Petronas Gas

19.19

2.

Shell

2.64

3.

SapuraCrest

0.87

  • Source: Bursa Malaysia
slide35

Dual Listing

Foreign-owned with listings on Bursa

Companies with Foreign-based Operations listed on Bursa

Gefung Holdings

Sino Hua-An International

Key West

Some existing foreign cross listings

Bursa and Copenhagen SE

Bursa and Tokyo SE

Bursa and HKEX

<-----------------Bursa and London SE-------------------->