BURSA MALAYSIA

Bursa Malaysia: Pioneering and Inclusive

alaysia, strategically located in ment choices, making it an inclusive mar- sizes. Home to more than 900 companies Southeast Asia and one of the re- ketplace, while being pioneering in many across 60 economic activities, Bursa Malay- M gions’ most vibrant economies, ways. This resonates with the exchange’s sia is the largest bourse in ASEAN in terms is seen as a gateway to ASEAN. The coun- clarion call that there is “Something for ev- of number of companies (Figure 1). try’s economic progress is the fruit of de- eryone on Bursa Malaysia.” Comprising the Main Market for cades of growth-focused policies, political large-cap established companies, the ACE stability and a melting pot of cultural and Market for emerging companies of all siz- economic diversity. Few countries have es, and the Leading Entrepreneur Accel- access to the natural advantages Malaysia erator Platform (LEAP) Market, designed enjoys, with strength in diversity coming for small and medium-sized enterprises from multiple sources of growth, blooming Attractive Securities (SMEs), including start-ups, Bursa Malaysia from the fields of agriculture, commodi- offers a strong platform for capital-raising ties, manufacturing, construction, services Market Offerings and investment, providing greater expo- and finance. sure and diversification. These combined Nestled on Exchange Square in the factors strongly establish Bursa Malaysia heart of ’s financial district, as one of the preferred exchanges in the sits Bursa Malaysia, the country’s only fully region among domestic and international integrated exchange offering a compre- At Bursa Malaysia, we are proud to be investors. hensive range of products and services. an exchange that serves companies of all Established in 1973, Bursa Malaysia plays a prominent role and functions as a vehicle for unlocking the growth potential of the Figure 1: Sector Diversity of Public Listed Companies (PLCs) Malaysian economy. Solid economic fundamentals, pro- Oil & Gas Banks gressive transformation plans and a robust 4% Others Construction & 19% capital market framework have provided Materials 10% a conducive backdrop for the exchange to 4% sow the seeds of growth through continu- Healthcare Industrial Goods & Services 5% 11% ous product innovations and diversity in Travel & Leisure investment offerings. The companies on 5% Bursa Malaysia have successfully financed Chemicals national economic development by provid- 6% ing market-based solutions with over MYR Real Estate Food & Beverage 7% 11% 1 trillion being raised through corporate Telecommunications bonds and IPOs since 2000. Utillties 9% 9% Having grown from strength to Note: As of 15 Dec 2017 strength over the decades, the exchange Source: Bloomberg increasingly provides a plethora of invest-

14 | NOMURA JOURNAL OF ASIAN CAPITAL MARKETS | Spring 2018 Vol.2/No.2 Group, and very clearly have the new economy, the exchange launched Gateway to ASEAN footprint and operations in most ASEAN the ground-breaking LEAP Market in July Bursa Malaysia offers a diverse nations. Being at the epicenter of ASEAN 2017 as a platform to nurture high growth, range of high quality companies with location-wise, Malaysian companies are innovative companies and support the de- strong financial performance. As a listing poised and primed to harness and ride on velopment of the SME segment. This listing destination, the exchange is committed to the strong wave of growth in the region. platform, the first of its kind in ASEAN, ensuring high quality securities are traded, Investors who want instantaneous ASEAN was designed to provide SMEs an alter- and upholding Bursa Malaysia’s reputation exposure of investments can also invest in native and efficient fund-raising platform as a well-established destination for inves- cross-market offerings like the CIMB FTSE through the capital market by bringing tors looking for growth opportunities. In ASEAN 40 Malaysia listed on Bursa Malay- together all the relevant players onto one 2017, the companies listed on Bursa Ma- sia, which tracks the largest 40 companies platform and to create a conducive envi- laysia delivered solid dividend yields of 3.9 by full market value that are listed in five ronment to raise funds in an efficient, fast percent, among the highest in ASEAN. ASEAN nations. and transparent marketplace. A number of leading companies in For SMEs, the LEAP market can serve diverse industries with operations across Gems not just in blue chips to enhance their visibility and profile by the globe have chosen to raise funds on Investors eyeing growth, however, being listed entities. The LEAP market can Bursa Malaysia, reflecting their confidence should not confine themselves only to the also function as an incubator, potentially in the exchange as a destination for listing large stocks. The exchange also offers trea- facilitating the companies’ listings on the in ASEAN. Constituents of the benchmark sures in the mid- and small cap segment ACE or Main Markets in the future. For FTSE Bursa Malaysia KLCI (FBMKLCI), (Figure 2). Demonstrating our belief in this sophisticated investors (high net-worth comprising the thirty largest companies potentially high growth market segment, entities or individuals), the LEAP market by market capitalisation on the exchange, the exchange introduced the Mid and provides a platform to participate in high include Astro, , Genting, IHH Health- Small Cap Research Scheme (Bursa MidS) growth companies which can potential- care, Chemicals Group, and in 2017, to elevate the profile of mid- and ly be the next ‘Big’ thing while offering YTL Corporation, which rise from different small cap companies that have been gen- the comfort of investing in a transparent sectors. Bursa Malaysia has also attracted erally under researched, to further spur and orderly market, regulated on a “light the listing of companies that are world the vibrancy of the segment by way of touch” basis, but balanced by prudential class in their respective industries such as increasing interest in their trading. In its standards. (the world’s biggest glove man- first phase, 100 listed securities were iden- Although all SMEs in various sectors ufacturer), Hartalega (the world’s larg- tified to receive analyst coverage from 20 can qualify for the LEAP market, coinci- est manufacturer of nitrile gloves), Sime research houses, with the number of listed dentally, the first two listings in its initial Darby Plantation (the world’s largest oil companies under the research scheme to four months were technology companies, palm planter by land area as well as the grow further. To help market participants signifying a strong interest amongst and world’s largest producer of segregated cer- track performance of this segment, the ex- for innovative SMEs in this new market. tified sustainable and traceable palm oil change also introduced two indices – the The early issuers on the LEAP market have products and derivatives), and Karex (the FTSE Bursa Malaysia MidS Cap Index and demonstrated that Bursa Malaysia can at- world’s largest condom maker). FTSE Bursa Malaysia MidS Cap Shariah In- tract high growth potential and innovative The beauty of investing in blue chip dex, which have demonstrated growth. technology companies to list, including companies listed on the exchange is that Besides industry giants and estab- those with headquarters outside of Malay- many are, in fact, regional companies. The lished companies, Bursa Malaysia also sia. companies on FBMKLCI generate roughly offers investment opportunities in up- 37 percent of their revenue from over- and-coming, high growth companies at seas operation. Widely known companies the smaller end of the scale. Acknowledg- on Bursa Malaysia such as AirAsia, CIMB ing the growing importance of SMEs in Sustainability and Figure 2: FTSE Bursa Malaysia MidS Cap Index Performance Corporate Governance MYR FTSE Bursa Malaysia MidS Cap FTSE Bursa Malaysia KLCI 170

160

150 Bursa Malaysia is a strong advocate of 140 sustainability and has for more than a decade put in place building blocks to cre- 130 ate a more sustainable marketplace. The 120 exchange has taken deliberate steps to de- 110 velop a sustainability-themed index and through the Bursa Malaysia Sustainability 100 Framework, we aim for listed issuers to Index Rebased (31 Dec 2012 = 100) 90 not only practise corporate sustainability Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 disclosures but also realise the positive Source: FTSE Russell impact sustainability practices can have

Bursa Malaysia: Pioneering and Inclusive | 15 MALAYSIA

on their businesses. In fact, Malaysia ing, respectively. The foresight in provid- Together with Bursa Malaysia’s unique was the first emerging market to launch ing innovative market-based financing positioning and key differentiator as the the globally benchmarked FTSE4Good solutions has enabled Bursa Malaysia to leading center of the Islamic capital mar- Bursa Malaysia Index in December 2014, consecutively earn global recognitions as ket, interest from international investors designed to measure the performance of the best and most innovative exchange in in Shariah–compliant offerings is expected companies demonstrating good environ- the area of Shariah investment. to be a magnetic source of catalytic growth mental, social and governance (ESG) prac- As another case in point of our pi- for the exchange. Furthermore, Shariah tices. There has been strong growth in the oneering track record, more recently, in investments and ethical investments, al- number of FTSE4Good Bursa Malaysia December 2017, Bursa Malaysia launched though not equivalent, share some similar Index constituents (from 24 in December the Islamic Securities Selling and Buying tenets. Thus, potential investors that will 2014 to 44 as at December 2017). Negotiated Transaction (ISSBNT) frame- be drawn to Bursa Malaysia’s command- The exchange continually conducts work - the world’s first Shariah-compliant ing Islamic Capital Market offerings may engagement programmes with PLCs and alternative to Securities Borrowing and include not just faith-based Muslim inves- their boards, as part of efforts to proac- Lending. The size of Islamic fund manage- tors, but also socially responsible investors. tively foster a marketplace of sustainable ment assets is massive, both globally and in and high performing companies with Malaysia. ISSBNT was developed to enable strong corporate governance. We envi- hedging and risk management activities sion that sustainability will be part and by institutional capital market participants parcel of business strategy for our quality who manage sizeable Islamic funds. This companies. innovative provision is yet another step in Expanding Derivatives: The quality of listed companies and Bursa Malaysia’s intention to be an indis- investor confidence built through strong putable global leader as a fully integrated Suite and Access corporate governance have been key Islamic investing marketplace offering a drivers of the health and vitality of the complete set of Islamic financial market in- marketplace. Sustainability is an import- struments and trading alternatives. ant long term strategic agenda as it will As an integrated exchange, Bursa ensure competitiveness of our companies. Malaysia offers a good breadth of quality Bursa Malaysia has been the world’s big- securities (Figure 3). Seventy-six percent of gest palm oil futures trading hub since the 903 companies listed on the exchange 1980. Specifically, the Crude Palm Oil Fu- are Shariah compliant. The exchange of- tures (FCPO) contract has long been rec- fers investors a wide choice of Shariah in- ognised and referenced as the global price Recognised as The vestment products such as i-ETFs, i-REITs benchmark for the crude palm oil market. and Exchange Traded Bonds and Sukuk. With a suite of palm oil derivatives prod- Leading Exchange in As at end 2017, 56 percent of the exchange ucts – from USD Crude Palm Oil Futures; traded funds (ETFs) listed on Bursa Malay- USD Refined, Bleached and Deodorised Islamic Capital Market sia are Shariah-compliant and 22 percent Palm Olein Futures; Crude Palm Kernel Oil (4 out of 18) of real estate investment trusts Futures; and Options on Crude Palm Oil Fu- (REITs) offerings are Shariah-compliant. tures – Bursa Malaysia is firmly positioned The breadth of Islamic offerings can as the global marketplace for palm oil de- attract and cater to the growing global rivatives. Besides the aforementioned suite appetite for Shariah-compliant offerings, of palm oil derivatives, today, the exchange Introducing platforms and services that with the size of the industry exceeding USD also offers a range of other derivatives as- are global ‘firsts’ or novel in the Islamic 2 trillion and burgeoning at a rapid pace. set classes such as equity derivatives and capital market sphere is something that is synonymous with, and not new to Bursa Malaysia. On the Islamic capital market Figure 3: Bursa Malaysia Provides Ample Conventional and Islamic Products front, Bursa Malaysia has continuously delivered a comprehensive suite of prod- ucts and innovative services. First, in 2009, Shariah Conventional Bursa Suq Al-Sila’, a commodity Muraba- Stocks REITs ETF hah trading platform created to facilitate commodity-based Islamic financing and investment transactions, was introduced. Conventional Shariah Then, in September 2016, the world’s first 24% 22% Conventional end-to-end Shariah investing platform, Shariah Shariah 44% Bursa Malaysia-i, was launched. It enables 56% 76% a truly holistic and complete approach in Conventional 78% Shariah investment, and is poised to attract a growing Shariah liquidity pool – both for- eign and domestic issuers. These platforms have been internationally lauded as inno- Note: (1) As of end December 2017 (2) Excluding LEAP Market vations in facilitating Shariah-compliant Source: Bursa Malaysia commodity trading and securities invest-

16 | NOMURA JOURNAL OF ASIAN CAPITAL MARKETS | Spring 2018 Vol.2/No.2 financial derivatives. operations – with technology investments Bursa Malaysia will thus also broaden our Bursa Malaysia’s partnership with into enterprise data warehouse to provide derivatives product offerings to ensure rel- Chicago Mercantile Exchange (CME) Group rich insights for strategic planning, and evance and attractiveness to market par- (the world’s leading and most diverse de- more targeted products for our market ticipants, based on continual assessment rivatives marketplace) since 2009 accel- participants. of market needs. We will introduce more erated the internationalisation of Bursa commodity-based derivatives products, Malaysia Derivatives (BMD). CME’s Globex Exciting products on the horizon solidifying our leadership position in this electronic trading platform provides glob- In view of our long-term aspirations, space in ASEAN. In addition, subject to pro- al accessibility and visibility enabling cus- Bursa Malaysia will continue to pioneer in curing the necessary regulatory approvals, tomers from around the world to easily ac- the region, orchestrating innovative ways we hope to launch for the first time in Ma- cess BMD products for trading and hedging with targeted partners to deliver offerings laysia, two currency futures – introduction opportunities. BMD has also been granted to the capital market, to fulfill the diverse of USD and Chinese Offshore Yuan (CNH) registration as a Foreign Board of Trade by needs of investors and issuers. We will be against Ringgit futures. These would be the US Commodity Futures Trading Com- looking to develop the breadth of products progressive steps towards a more liber- mission, meaning identified members and in all markets. alised and conducive financial market- other participants located in the US can A primary focus will be to formulate place, and provide retail and institutional directly access the Malaysian market to the next step change in growth of the ETF participants a new avenue of managing hedge and arbitrage. market. In 2017, the Securities Commission currency exposure. Widespread international market of Malaysia led a task force to spur inno- promotion and market access will contin- vation and drive ETF market growth. With Leveraging technology ue to be a core focus underpinning BMD’s liberalisations and incentives recently put Investment opportunities via prod- growth strategy, to ensure market vibrancy in place and with concerted effort, ETF of- ucts pique investor interest. However, in- and liquidity. As an example, BMD and Da- ferings on Bursa Malaysia are expected to vestor confidence from transparent infor- lian Commodity Exchange have co-organ- expand to other types of ETFs. Recently, in mation, coupled with market vibrancy and ised the annual China International Oils & December 2017, a Shariah-compliant ETF a smooth experience are keys to sustaining Oilseeds Conference for more than a de- backed by physical gold was listed on Bursa trading interest. At Bursa Malaysia, we see cade, providing an international platform Malaysia. The gold ETF marked Bursa Ma- the potential and promise of technology to for information exchange, to push forward laysia’s first commodity ETF, broadening transform customer experience – to more the development of the oils and oilseed fu- the asset classes of ETFs that were already efficiently and aptly cater to the needs of tures market in the world. Going forward, offered in the form of bond or equity ETFs. diverse investors. It is imperative to cap- the two exchanges will look to further Investors, both institutional and retail, can turing investors in future. Changing con- deepen mutually beneficial collaboration likely look forward to exciting entry points sumer preference for digital, mobile and in derivatives. beyond the current plain vanilla ETFs – to customer-friendly solutions has seen Bursa Bursa Malaysia will also continue to include Leveraged and Inverse ETFs – that Malaysia and capital market participants host the annual Palm and Lauric Oils: Price enable fresh investment strategies. work towards delivering upgraded plat- Outlook Exhibition & Conference, which We also anticipate further expansion forms for enhanced experiences. provides an avenue for international par- of REITs. In October 2017, Bursa Malaysia In 2014, Bursa Malaysia invested in ticipants (about 2,000 industry drivers launched our eleventh in-house calculat- building BursaMKTPLC, our online plat- from more than 50 countries) to engage in ed index, the Bursa Malaysia REIT Index, form that aims to improve financial liter- robust discussions on industry direction which tracks all REITs listed on Bursa Ma- acy and empower investors to participate and outlook for the market. laysia. With the launch, Malaysia joins de- in the capital market by democratising veloped markets like the US, Hong Kong, information access and providing inves- Japan, Australia and in having a tors with trading ideas. The sleek and dedicated REIT Index. The REIT Index will mobile-friendly website and app contain spur the local REIT market and also serve as information about prices and products on an attractive underlying for potential ETFs. Bursa Malaysia, making information easily Propelling toward Our Bursa Malaysia also looks forward accessible. It serves to equip potential in- to working with other member ASEAN ex- vestors with knowledge on capital markets Aspirations changes to create ASEAN-centric products and provides even experienced traders and promote ASEAN as an attractive asset with tools to make more informed invest- class to global investors. For instance, in ment decisions. Investors can access re- 2016, Bursa spearheaded the launch of the search reports on not just large companies, FTSE4Good ASEAN 5 Index, to showcase but also mid- and small cap companies. With the solid foundations we’ve put in quality companies in the region that meet Bursa Malaysia will continue to attract and place, we are making progress on our international standards of ESG practices. reach out to digital natives, and focus on chartered Business Plan to ensure Bursa We have confidence in the attractive prop- making the entire investor journey easy Malaysia remains a dynamic exchange – osition of the ASEAN asset class for inter- and inviting. specifically to achieve our 2020 aspiration national investors, and would welcome The belief in the power of technolo- of becoming a key regional player with collaborations to make these offerings gy is not held by Bursa Malaysia alone; it global reach. Our strategies will be under- available. is also recognised and supported by our girded by our growth mindset towards We also believe that growth of a de- regulator and embraced by market inter- innovation and anchored by the data-driv- rivatives market is increasingly critical to mediaries. For example, in 2017, Rakuten en culture that is being ingrained into our the sustainability of the capital market. Trade, Malaysia’s first completely online

Bursa Malaysia: Pioneering and Inclusive | 17 MALAYSIA

equities broker entered the market. It is a investors greater flexibility in managing lio enhancement via Bursa Malaysia offer- joint venture between Malaysia's Kenan- their orders, for refined trading and risk ings. ga Investment Bank and Japan's Rakuten management strategies. We will bench- Securities. Rakuten Trade enables cus- mark against developed market peers to Moving forward tomers to open an equity trading account do even more. The global exchange business will completely online for seamless, end-to-end continue to be competitive, partly driven trading on Bursa Malaysia. Within seven Spreading our reach by technology that provides instant access months of launch, the platform recorded The exchange is reaching out to a to multiple markets across different time more than 5,000 investor accounts, many larger pool of investors to be part of our zones, and infrastructure that will be im- of which are new investors. Developments economic growth story. We launched pacted by changes brought about by tech- such as these will surely lend vitality and several fresh campaigns to energise and nological advances. help create a sustainable marketplace. reach new local, retail investors as part of The global marketplace is set to be- Fintech is evolving the capital mar- our investor education initiative. In No- come more exciting and dynamic. In a ket landscape and provides new oppor- vember 2017, we launched a three-month nutshell, Bursa Malaysia will remain fo- tunities to meet customer demands and nationwide ‘What’s Your Goal’ campaign cused on various initiatives aimed at wid- stakeholder needs. Exchanges need to in collaboration with brokerage firms, to ening our products and services offerings; embrace and become well-versed with the nurture the desire for retail investors to increasing liquidity and velocity in the opportunities and disruptions in this space, participate in the offering market; and creating a conducive capital which not only changes the front-end in- over 80 investor seminars and workshops market ecosystem for all market partici- terface with our customers and investors, across the country. Additionally, we held pants, to provide more opportunities for but also could change the backbone of how the inaugural Shariah Investing Fair, at- fund-raising, trading and wealth creation. exchanges operate in the long run. Bursa tracting 10,000 prospective retail investors, We strive to attain more momentous mile- will seek out fintech engagement oppor- to educate them on the value proposition stones, to ensure wider relevance and sus- tunities in the global capital market land- and attractiveness of Shariah-compliant tainability of our business for long-term scape to strengthen our value proposition capital market products and services. The value creation for our stakeholders. and help the exchange grow, capture new fair saw the launch of the Shariah Trader opportunities, and remain relevant in the Challenge, a virtual stock trading competi- fast-changing landscape. tion focused on trading of Shariah-compli- While we look to opportunities pre- ant stocks. This challenge was created to BURSA MALAYSIA sented by new technologies, we are cogni- raise the awareness of Shariah-compliant sant of cyber security risk that is a growing investment instruments among retail in- concern among financial market institu- vestors and also to help promote responsi- Bursa Malaysia is an approved exchange tions in the short to medium term. Bursa ble investment. holding company under Section 15 of the Capital Markets and Services Act 2007. A Malaysia stays abreast of developments public company limited by shares under the in this space to adequately mitigate or ad- Building connectivity Companies Act 2016, Bursa Malaysia oper- dress the threats. Bursa Malaysia will also A thriving and active base of di- ates a fully-integrated exchange, offering invest in increasingly sophisticated tech- verse global investors is also necessary to equities, derivatives, offshore, bonds as well nology to perform our risk management achieve our aspirations. We already have as Islamic products, and provides a diverse and regulatory functions more efficiently. steady foreign participation across our se- range of investment choices globally. curities and derivatives market. However, Developing the ecosystem we have set our sights on expanding global Our aspiration of being a developed reach and foreign participation by further market come year 2020 means having key leveraging platforms such as Bursa Malay- characteristics such as ample liquidity in sia-i, Bursa Suq Al-Sila’, and CME’s Globex. the market and an efficient center of price The exchange will also continue to discovery. We have worked and will con- make progress towards being the center tinue to work towards addressing struc- or artery of investments in the region. Cog- tural issues to increase the number and di- nisant of the need to build bridges in an versity of participants, and creating more increasingly globalised world, Bursa Ma- provisions that enable further flexibilities laysia will tap new and existing relation- in trading, on par as other developed mar- ships to build regional connectivity. We kets. will continue to seek strategic partnerships In year 2017 alone, we opened sev- with other exchanges and market players eral new avenues with several liberalisa- to facilitate cross-border investments. Our tions. Among the initiatives is a revision in efforts include enhancing cross-border the tick rule to provide market participants access of products or offering exposure to with greater price flexibility in performing different markets for instance via separate, regulated short selling. We also decoupled ongoing collaborations with the Indonesia the participantship structure in the deriv- and the Shanghai Stock atives market, to welcome stand alone, Exchange. Each of these key markets has foreign clearing members. The exchange products of interest to local investors. In- also introduced new trading features (ex- donesia and China also have both existing pansion of order types and validity) giving and latent demand for investment portfo-

18 | NOMURA JOURNAL OF ASIAN CAPITAL MARKETS | Spring 2018 Vol.2/No.2