Malaysia's capital market set for more growth

ASUSTAINED economic growth and adequate liquidity are expected to support the continued expansion of the capital market this year.

Several large projects planned for this year will likely source financing through the sukuk and corporate bond markets.

The Securities Commission (SC), in its annual report 2012, expects projects under the Economic Transformation Programme to continue requiring sizeable capital market funding.

Likely sectors that will require long-term financing are oil and gas, infrastructure, utilities and property.

Funding will be needed for projects such as urban regeneration, development of petrochemical complexes, the mass rapid transit system and development of transportation links like ports and roads.

The equity market is expected to remain a significant source of financing this year and potential issuers are those related to the transportation, power and insurance sectors.

While global financial markets still appear to be susceptible to the so-called "risk-on"/"risk-off" phenomenon, the SC said resurgence in capital flows "searching for yield" can help support growth by making it easier for companies to secure financing.

Global bond and stock markets, therefore, can expect a sustained recovery if these trends are to persist over the next 12 months.

The increasing role of the Malaysian capital market in financing economic growth is reflected in strong growth of the equity and bond markets from a market size of RM717.5 billion in 2000 to RM2.47 trillion last year.

This translates into a compound growth rate of 10.9 per cent per year over the 12-year period.

Compared to other regional economies, the size of the Malaysian capital market is relatively large and more developed, providing a wider distribution of capital and risk.