KUALA LUMPUR: Malaysia's capital market should eke out another commendable showing this year amid the ongoing Covid-19 pandemic and external uncertainties, after a robust 14.22 per cent growth in total funds raised in 2021.
This would further support corporate earnings and generate positive sentiment generally, according to the Securities Commission chairman Datuk Syed Zaid Albar.
Syed Zaid, however, cautioned that the rosy outlook would be subject to considerable uncertainty and many external risks including the ongoing conflict in Ukraine.
"Malaysia's capital market outlook will be premised on the baseline expectation of a sustained economic recovery this year and this is through the normalisation of businesses and services and the reopening of borders by April 1," he said at the launch of the SC's Annual Report 2021 today.
"As we have witnessed, impacts are already felt in various market segment worldwide especially in commodities and the possibility of a more severe impact still remained," he added.
Total funds raised in the domestic capital market edged up to RM130.9 billion last year from RM114.6 billion in 2020, above the five-year pre-pandemic average of RM121.4 billion, according to the report.
Among them, RM16.6 billion was raised via the equity market, while RM114.3 billion was raised through the corporate bond market, up from RM10 billion and RM104.6 billion in 2020.
In the equity market, RM2.3 billion was raised via 29 initial public offerings (IPOs) and RM14.3 billion through secondary fundraising.
Four of the IPOs were implemented by way of introduction and did not entail any fundraising exercise.
Overall, the size of the capital market rose to RM3.5 trillion in 2021, from RM3.4 trillion in 2020.
The report said the domestic equity market was affected by continued headwinds, both globally and domestically.
The overall market capitalisation of Bursa Malaysia and its 30 FBMKLCI stock constituents moderated to RM1.79 trillion and RM1.04 trillion respectively in 2021, from RM1.82 trillion and RM1.06 trillion in 2020.
Likewise, the FBMKLCI index declined by 3.7 per cent to end the year at 1,567.5 points.
Syed Zaid said for the moment, given the potential for further escalation and the lack of clear resolution on the Ukraine-Russia conflict, the direct impact on Malaysia was still manageable given the country's minimal exposure to Ukraine and Russia.
He added that other key risks to recovery included global supply chain disruption, given the Covid-19 related development and the pace of global monetary policy tightening.
"As such, we will expect market volatility to remain especially so in the near term. The SC will continue to monitor the market for any signs of excessive market stress and take the necessary action," he said.
Meanwhile, Syed Zaid said foreign shareholding in the equity market by value had consistently remained above 20 per cent over the years.
This was an indication that foreign investors are still vested in the long term prospects of domestic public listed companies.
Syed Zaid was responding to a Reuters report, citing the World Bank as saying that Malaysia risked falling behind in the regional competition for foreign investments due to longstanding policy and structural issues, as it came in "striking distance" of becoming a high-income nation.
The report said foreign direct investments to Malaysia fell 56 per cent to US$3.4 billion in 2020, a government report said this month, as the Covid-19 pandemic battered its trade-reliant economy.
Syed Zaid said year-to-date (YTD) foreign shareholding had increased slightly to 20.47 per cent, which is still higher than the historical low of 18.2 per cent in 2002.
"With regards to foreign fund flow, it has also been encouraging with YTD inflows of about RM5.59 billion as at March 21 and this is in comparison to the average foreign outflow from 2018 to 2021 which was about RM12.64 billion."For the long term, we have also launched the Capital Market Masterplan 3 and the Corporate Governance Strategic Priorities to support Malaysia's next stage of growth," he added.