Mushtak Parker Saudi Gazette LONDON – The world will see an exciting new asset class in the Association of South East Asian Nations (Asean), Ranjit Ajit Singh, the new Chairman of the Securities Commission Malaysia (SC) who took office in April this year, said. He said he would like to see the emergence of an internationalized single Asean asset class that can compete with other major regional or global asset classes. “Not only must the Malaysian capital market be internationalized, but there need to be internationalization of Asean as a single asset class. The success of Asean as a single asset class on the global stage will also translate to better and wider access for the capital markets of each member country,” Singh said in his keynote address to the 17th Malaysian Capital Market Summit held in Kuala Lumpur recently. The 10 Asean countries are currently engaged in the development and integration of the group's capital markets through the Asean Capital Markets Forum (ACMF) primarily focusing on facilitating greater cross-border offerings of capital market products and services in the region. ACFM is particularly keen in developing a set of harmonized disclosure standards to facilitate multi-jurisdictional offerings of equity and debt securities, including Sukuk Ijarah, to the general public through retail offerings. In addition, an Asean Collective Investment Scheme (CIS) framework is being developed for the cross-border offering of CIS within the region. But given the political and economic diversity of the Asean nations – ranging from functional democracies to quasi democracies to Marxist states – the challenge of integrating the Asean capital markets is not easy. “There are many challenges to be overcome, ranging from differing legal structures and regulatory philosophies to market practices and language. Clear protocols and understanding must be established to ensure that suitability requirements, disclosures, selling practices, enforcement and dispute resolution across all the member countries will not be arbitraged. Nevertheless, integration is inevitable and all participants must share the task of making it work,” Singh noted. Moreover, he said “for internationalization to succeed, capital market professionals must step up to the challenge and meet global standards. They must also remember to put the long-term interests of the market and professionalism ahead of profits. Companies must recognize that going to the public markets is only the beginning of a journey and not the final destination. Post listing performance, obligations and conduct are critical and the company's directors and senior executives must be fully prepared for this transformational journey.” Kuala Lumpur is quietly upbeat about the progress of the Malaysian Capital Market (MCM). Its size, according the latest data of the SC, grew by 14 percent from RM2.1 trillion as at the end of 2011 to RM2.4 trillion at the end of September this year. The rising start of the MCM is undoubtedly the bond and Sukuk market with funds raised totaling RM100 billion up to end of September 2012, surpassing 2011's record total issuances of RM70 billion. The RM30.2 billion Sukuk issued by PLUS Berhad, the national road operator, at the beginning of this year remains the single largest Sukuk to date in the world. As at end of September 2012, the total amount of bonds outstanding stood at close to RM980 billion, compared to RM841 billion as at the end of last year, reflecting the continued growth of the bond market and propelling Malaysia as the 3rd largest local currency bond market in Asia. The strong performance and resilience of the Malaysian capital market, emphasized the SC's Singh, “is the culmination of structured and directed efforts to build the ecosystem and connect all its key components. Two of these key components are a solid and effective regulatory framework and market liquidity. The SC believes that the quality of the market and the high standards of conduct of its participants cannot be compromised. The Capital Market Masterplan 2 sets the tone for the future of our capital market and its implementation is designed to capture the dynamic nature of the changing environment.” Singh strongly believes that the capital markets must be fit for purpose – not just a vehicle for capital formation for big corporations and investors, but increasingly supporting the New Economy and the real sector. These include two important sectors – agriculture to help mitigate concerns over food security, and the small-and-medium-sized enterprises (SME). In order to help facilitate the flow of capital to the agricultural sector, the SC is working with the industry towards introducing an integrated framework for unlisted agricultural managed investment schemes and tax incentivized agricultural Sukuk, providing latitude for issuers to optimize their cost of capital. The SC also continues to develop areas where capital formation can be made more inclusive – a form of “People's Capital Market”.
