KUALA LUMPUR: The size of Malaysia's capital market grew to RM3.8 trillion in 2023 from RM3.6 trillion in 2022, driven by broad-based growth in both total Bursa Malaysia market capitalisation and bonds and sukuk outstanding. 

The Securities Commission (SC), in its Annual Report 2023, said the fund management industry expanded in 2023, with total assets under management (AUM) rising to a record high of RM975.5 billion (2022: RM906.5 billion).

This was amid improvement in market value and greater asset allocation in developed markets.

The unit trust segment remained the largest source of funds, comprising 51.3 per cent of total AUM (2022: 53.9 per cent of total). 

However, total funds raised in the capital market moderated to RM127.7 billion in 2023, compared to a high of RM179.4 billion in 2022. 

Corporate bonds and sukuk market saw total issuances normalised to RM118.3 billion in 2023 (2022: RM153.3 billion), due to higher refinancing demand in the previous year. 

"There was an exceptional surge in refinancing demand in 2022 amid the introduction of various relief programmes aimed at assisting issuers and intermediaries in their post pandemic recovery. Total issuances remained healthy and in line with the 10-year average of RM111.2 billion per annum," the SC said. 

Meanwhile, overall market capitalisation of the local bourse ended higher at RM1.80 trillion in 2023 (2022: RM1.74 trillion), while FTSE Bursa Malaysia KLCI moderated to RM1.01 trillion (2022: RM1.03 trillion). 

"This reflects a positive shift in sentiments favouring medium and small-size companies, as reflected by the favourable performances of FBM Mid 70 and FBM Small Cap.

"The benchmark FBMKLCI index declined by 2.73 per cent to end the year at 1,454.66 points (2022: down 4.60 per cent), while the FBM Mid 70 and FBM Small Cap rose by 12.28 per cent and 9.57 per cent (2022:  down 8.41 per cent and  down 5.30 per cent) to 14,612.98 points and 16,353.38 points respectively."

The report outlined that the domestic equity market was influenced by developments in the domestic economy and global headwinds, with volatility driven by the direction and pace of global monetary policy, ongoing geopolitical conflicts and slower global growth.

The market saw local institutional investors accumulate a sum of RM3.30 billion in 2023 (2022:  down RM6.53 billion), while local retail investors turned net sellers totalling at RM0.96 billion (2022: RM2.13 billion). 

"Despite a net sell position, the participation rate for retail investors improved to an average of 27.45 per cent in 2023 (2022: 25.65 per cent), suggesting that the domestic equity market continued to provide opportunities for a wide range of investors," it added. 

Meanwhile, the average daily trading volume improved to 3.55 billion units in 2023 (2022: 3.00 billion units), and at a higher average value of RM2.29 billion per day (2022: RM2.18 billion). 

In the Malaysian bond market, total bonds and sukuk outstanding grew to RM2 trillion (2022: RM1.87 trillion), on the back of continued bond and sukuk fundraising, particularly from the public sector. 

The overall Malaysian Government Securities (MGS) yield curve shifted downward, tracking the performance of the global bond market. 

The SC said this largely mirrored monetary policy expectations globally, alongside expectations of a broadly stable domestic interest rate environment throughout the year. 

The domestic bond market witnessed the return of foreign investors, with net inflows amounting to RM25.78 billion in 2023 (2022: net outflows of RM9.78 billion).

Moving forward, the SC projected the Malaysian economy to remain on a steady growth trajectory in 2024, backed by firm domestic demand, primarily through continued expansion in private sector spending. 

"The Finance Ministry expects growth of the Malaysian economy to accelerate to 4-5 per cent in 2024 from 3.7 per cent in 2023," it said.

 However, the SC noted risks to growth remain tilted to the downside given ongoing external challenges.

Domestic capital market will continue to be influenced by momentum in the domestic economy and corporate developments, with volatility likely to be driven primarily by uncertainties surrounding the global economy, particularly the direction of global monetary policy and evolving geopolitical tensions. 

"Nevertheless, favourable momentum in the latter part of 2023 is expected to continue into 2024, underpinned by ongoing supportive policy actions under the Ekonomi Madani framework, which includes the New Industrial Master Plan 2030 and the National Energy Transition Roadmap. 

"These national policies are expected to provide a tailwind in the short- to medium term, amid greater policy clarity and a continued commitment by the government towards improving medium-term economic growth prospects," it said.  

Market expectations remained broadly positive as the benchmark FBMKLCI is expected to end 2024 at around 1,600 points. 

Meanwhile, the domestic capital market is expected to remain orderly and will continue to play an integral role in supporting the economy, underpinned by firm macroeconomic fundamentals, ample domestic liquidity and a facilitative capital market framework. 

On the global front, economic growth is expected to remain tepid in 2024 amid heightened economic uncertainties. 

The SC added that the gradual moderation in global inflationary pressure led to a reassessment of monetary policy expectations from a prolonged period of high global interest rates to anticipation about the timing of the easing cycle. 

"This, coupled with ongoing geopolitical fragmentation, will be key determinants of the pace of global economic recovery. Meanwhile, developments in the global capital market are expected to be in tandem with the economic outlook," it said. 

https://www.nst.com.my/business/corporate/2024/03/1030095/malaysias-capital-market-expands-rm38tril-2023-rm36tril-2022-sc