Malaysia's capital market is forecast to reach RM5.8 trillion in market capitalisation by 2020, said Prime Minister Datuk Seri Najib Tun Razak. As at 2010, the capital market is worth more than RM2 trillion, with the bond market at the third largest in Asia compared to GDP ratio, and is a global leader in Islamic financial market.
It is not impossible for Malaysia to reach such a level, and in fact it is seen as something highly likely given that the nation managed to attract more foreign funds investing in the market and also encourage better earnings amongst Malaysia-listed companies. As the economic growth is forecast to be sustainable at 6% for the next decade, it is very much a matter of when, not if, for the Malaysian capital market to reach such a scale in 10 years time.
Nevertheless, the concern is not on Malaysia's performance alone. The FTSE Bursa Malaysia is regarded as an Advance Emerging Market stock exchange. Now this could be a good sign, as the local bourse was regarded as an Advance Market with daily trades exceed that of New York's Stock Exchange in the late 90s, but after the Asian Financial Crisis in 97-98, the exit of foreign funds from the local market has turned it into a lackluster capital market.
The problem with Malaysia as a whole country or economy is that it is neither here nor there. It is yet to be classified as an advance, high-income economy by the OECD, but it is also not really an emerging market with large domestic market and low-cost labour. Countries with a clear definition of where it is today could attract the most investors, as it is easier for investors to determine where to park their money.
Investors invests in Indonesia because of its vast domestic market and low-cost labour and wage structure, Thailand because of its automotive sector which is regarded as the Detroit of Asia, Singapore for its financial services and high-technology investments such as medical equipments and oil refining, and of course China for all the good reasons you could think of ; vast domestic market, relatively low cost-structure, stable political environment, high number of technically skilled workers and so on.
Now, Malaysia has to reinvent itself economically. The nation has to agree to one inspiration, that is to propel its growth into the high-income bracket. It is now among the higher middle-income bracket, on par with Turkey, South Africa, Thailand and Taiwan. It must reinvent its economy so that it could provide a niche for investors to park their money into.
Under the Economic Transformation Program (ETP), the Malaysian government has outlined several initiatives to turn Malaysia into a high-income economy. One of it is the Islamic finance industry and halal industry. Malaysia has all the advantage in the world to become a world leader in the Islamic finance, and it has also one of the most developed Halal industry. So it could capitalize on these sectors two create niche industries which investors could have a more focused investment theme.
Even though Malaysia's Islamic finance industry is one of the most advance in the world, it does not have a mega Islamic bank, one that could rival the likes of JP Morgan, BoA Merryl Lynch, and Royal Bank of Scotland. One suggestion would be to merge locally incorporated and locally owned Islamic banks to become one single entity which could monopolize the industry. For example, CIMB Islamic, Maybank Islamic, Public Amanah, and RHB Islamic, could be merged to become a mega Islamic bank.
The other sector which Malaysia has an advantage is in Palm Oil industry. Malaysia is the second largest palm oil producer in the world after Indonesia, and the palm oil benchmark price is traded in ringgit. It is only natural that Malaysia should assume the position of world leading palm oil refiners and researchers. Palm oil could be used in the production of bio-fuel, and it has many other uses in many industries such as food processing, chemical industries and many others.
Malaysia also has a viable footprint in the oil and gas industry. Lead by Petronas, Malaysia's oil and gas industry is slated to drive the economic growth by reestablishing the industry's focus from upstream production to downstream research and developments, and oil refining activity. The southern peninsular state of Johore has recently received substantial amounts of investments in this field and is expected to complement Singapore in oil storage and exports facilities.
It is not impossible for Malaysia to reach such a level, and in fact it is seen as something highly likely given that the nation managed to attract more foreign funds investing in the market and also encourage better earnings amongst Malaysia-listed companies. As the economic growth is forecast to be sustainable at 6% for the next decade, it is very much a matter of when, not if, for the Malaysian capital market to reach such a scale in 10 years time.
Nevertheless, the concern is not on Malaysia's performance alone. The FTSE Bursa Malaysia is regarded as an Advance Emerging Market stock exchange. Now this could be a good sign, as the local bourse was regarded as an Advance Market with daily trades exceed that of New York's Stock Exchange in the late 90s, but after the Asian Financial Crisis in 97-98, the exit of foreign funds from the local market has turned it into a lackluster capital market.
The problem with Malaysia as a whole country or economy is that it is neither here nor there. It is yet to be classified as an advance, high-income economy by the OECD, but it is also not really an emerging market with large domestic market and low-cost labour. Countries with a clear definition of where it is today could attract the most investors, as it is easier for investors to determine where to park their money.
Investors invests in Indonesia because of its vast domestic market and low-cost labour and wage structure, Thailand because of its automotive sector which is regarded as the Detroit of Asia, Singapore for its financial services and high-technology investments such as medical equipments and oil refining, and of course China for all the good reasons you could think of ; vast domestic market, relatively low cost-structure, stable political environment, high number of technically skilled workers and so on.
Now, Malaysia has to reinvent itself economically. The nation has to agree to one inspiration, that is to propel its growth into the high-income bracket. It is now among the higher middle-income bracket, on par with Turkey, South Africa, Thailand and Taiwan. It must reinvent its economy so that it could provide a niche for investors to park their money into.
Under the Economic Transformation Program (ETP), the Malaysian government has outlined several initiatives to turn Malaysia into a high-income economy. One of it is the Islamic finance industry and halal industry. Malaysia has all the advantage in the world to become a world leader in the Islamic finance, and it has also one of the most developed Halal industry. So it could capitalize on these sectors two create niche industries which investors could have a more focused investment theme.
Even though Malaysia's Islamic finance industry is one of the most advance in the world, it does not have a mega Islamic bank, one that could rival the likes of JP Morgan, BoA Merryl Lynch, and Royal Bank of Scotland. One suggestion would be to merge locally incorporated and locally owned Islamic banks to become one single entity which could monopolize the industry. For example, CIMB Islamic, Maybank Islamic, Public Amanah, and RHB Islamic, could be merged to become a mega Islamic bank.
The other sector which Malaysia has an advantage is in Palm Oil industry. Malaysia is the second largest palm oil producer in the world after Indonesia, and the palm oil benchmark price is traded in ringgit. It is only natural that Malaysia should assume the position of world leading palm oil refiners and researchers. Palm oil could be used in the production of bio-fuel, and it has many other uses in many industries such as food processing, chemical industries and many others.
Malaysia also has a viable footprint in the oil and gas industry. Lead by Petronas, Malaysia's oil and gas industry is slated to drive the economic growth by reestablishing the industry's focus from upstream production to downstream research and developments, and oil refining activity. The southern peninsular state of Johore has recently received substantial amounts of investments in this field and is expected to complement Singapore in oil storage and exports facilities.
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