KUALA LUMPUR: Exchange-traded funds (ETFs) listed on Bursa Malaysia will continue to see lacklustre investors' appetite unless the government announces significant measures or stimulus to spur the ETF investment landscape.
It seems unlikely that a huge activity uplift will be seen in the local ETF market based on past performance and trading volume, Tradeview Capital Sdn Bhd vice president Tan Cheng Wen said.
Bursa Malaysia currently has 16 listed ETFs available, and based on the historical traded volume of ETFs over the past 30 days, the highest is a Shariah China ETF at RM66,800 daily, which is minuscule compared to the average traded volume on Malaysia's main market.
"This indicates domestic investors' appetite for ETFs is very nascent," Tan told the New Straits Times.
Rakuten Trade Sdn Bhd head of equity sales Vincent Lau said despite various measures introduced by Bursa Malaysia, many areas need to be addressed in the local ETF market, such as education and awareness.
"Investors need to become more familiar with the local ETF market, and people are warming up to it. It is an asset class that investors invest in. In the ETF sphere, we see investors looking at safer havens like China and US ETFs as the local ETF market is not as vibrant as these super economies," he said.
One reason could be that the local ETFs listed on Bursa are not "that attractive" or have fewer choices compared to the foreign ETF market, and investors are more keen on investing in main market stocks rather than ETFs.
In June of this year, Prime Minister Datuk Seri Anwar Ibrahim announced several measures to beef up the capital market and create more wealth for the rakyat.
Reducing the stamp duty rate for shares traded on Bursa, promoting corporate ventures and easing the listing process were among the measures announced.
"(This is) as the capital market looks to widen affordable investment choices for the rakyat, coupled with the intent to deepen investor interest in our market," he was quoted saying at the launch of the Capital Market Graduate Programme at the Securities Commission.
According to Citi Research's report entitled "ETF Perspective Monthly Flows" for August, global ETF assets have topped US$10 trillion, with nearly half of those assets in US equity products.
On a percentage of asset under management basis, flows have been better in Europe, the Middle East, Africa and Asia Pacific regions relative to the US.
Citi Research noted that it was a soft flow month as US-listed ETFs totalled US$11.6 billion in net inflows.
Fixed income led with US$9.3 billion of net creations, but even this was below the trend for the asset class.
Underlying fixed-income flows were defensively biased as they were led by treasuries and multi-sector ETFs.
Domestic equity flows were also modest as they combined for US$5.5 billion.
The firm said this was well below recent months as outflows from trading vehicles significantly dented the inflows to allocation ETFs.
Citi Research noted that the commodity ETF faced aggregate outflows of US$3.3 billion, almost entirely attributable to precious metals ETF selling.