Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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Until 2007, legislation governing the securities industry consisted of the Securities Industry
Act 1983, the Securities Industry (Central Depository) Act 1993, the Companies Act 1965, the
Securities Commission Act 1993 and the Futures Industry Act 1993. The Capital Markets and
Services Act 2007 (CMSA) which came into force on September 28th 2007 after being passed
by parliament in May 2007, consolidates the Securities Industry Act 1983, the Futures Industry
Act 1993 and Part IV of the Securities Commission Act 1993, which deals with fund raising
activities. The CMSA is supported by the Capital Markets and Services Regulations 2007, the
Licensing Handbook and the Guidelines on Regulation of Markets; all these documents come
into effect concurrently with the CMSA. The CMSA also introduced a single licensing regime,
according to which intermediaries hold a Capital Markets and Services Licence rather than
multiple separate licences thereby reducing administrative and compliance costs.
The development of financial markets
The government regards Malaysia’s financial services industry as an important engine of
economic growth, identifying it in the Tenth Malaysian Plan (10MP) as one of 12 sectors
expected to drive economic activity under the government’s Economic Transformation
Programme in the 2011-20 period. The authorities expect the financial sector to grow by 8-11%
per year, increase its share of GDP to 3%, and create 275,000 new jobs in the sector by 2020.
The 10MP aims to broaden the variety of financing options available, boost the development of
capital-market subsectors such as fund management, venture capital and private equity,
broaden the scope of services offered by Islamic banks, and promote further consolidation and
rationalisation in the insurance sector.
Malaysia’s financial institutions have weathered the recent volatility in global financial markets
well. They had negligible exposure to securities related to US subprime borrowing, to sovereign
debt of troubled euro zone countries or to the affected financial institutions of other countries.
More than 90% of the assets of local banks and insurance companies are denominated in the
local currency, the ringgit. The strong capital position of banks, coupled with ample liquidity in
the financial system, provided Malaysia’s financial sector with a buffer against the 2008-09
global crisis. The relatively healthy state of the financial sector is largely the result of reforms
implemented following the 1997-98 Asian financial crisis.
The central bank, Bank Negara Malaysia (BNM), is the regulator of banks, insurance companies
and licensed intermediaries such as money brokers and insurance brokers. It has encouraged
the development of financial services that conform with Islamic law. Malaysia’s Securities
Commission oversees firms that participate in the financial markets, as well as those active in
fund management, corporate-finance and investment advice, and financial planning.
Bursa Malaysia (BM) is the second largest stock exchange among the emerging bourses of
South-east Asia, behind Singapore’s exchange. In 2009, the capital markets regulator, the
Securities Commission, issued revised listing regulations, partly with the aim of enticing more
foreign companies to list on BM. The authorities would like to see more financial products
offered, although it has often proved hard to generate sustained interest in such products. For
example, only three of the ten products offered on BM’s derivatives exchange record regular
turnover.