KUALA LUMPUR: The Malaysian capital market has continued to remain resilient despite the global challenges and uncertainties that was seen in 2023.
However, the Securities Commission (SC) points out that it had exhibited a lagged recovery since 2019, noting that the bulk of the trading activities were mostly concentrated on small-cap counters, particularly driven by retail investors.
It also noted the dwindling foreign investor interest in the Malaysian capital market, citing data that foreign holdings of Malaysian equities stood at 19.54% in 2023 – which is lower than its five-year average.
“Foreign investors continue paring down their holdings and participation in the component stocks as their preferences are in other emerging markets, which offer opportunities in terms of exposure to the new economy and market depth.
“The exchange rate will continue to influence the attractiveness of the domestic capital market,” the regulator said. The SC also said the liquidity strain as seen through the decreasing trading value and volumes on the local bourse could potentially result in further widening of bid-ask spreads for stocks.
It stated that there needs to be a strategy by the government to actively tackle these issues.“A new tapestry of actions and innovations is essential to enhance the attractiveness of the capital market – particularly the equity market. Medium and long-term coordinated measures should be implemented to stimulate trading activities,” the SC said.
Meanwhile, the regulator had also urged companies to be cognisant of the increasing environmental, social and governance (ESG)-related matters that is a pertinent issue among global investors these days.
“Delays in transition journey by public-listed companies may create unnecessary loss of opportunities as ESG measures and policies are gradually being implemented globally. Companies that are not moving in line with this would be deemed as unattractive by investors,” it said.