Business

Thursday April 14, 2011

Market players optimistic about CMP2

By CECILIA KOK, LEE KIAN SEONG and THOMAS HUONG
starbiz@thestar.com.my


Strict implementation key to success, say market veterans

KUALA LUMPUR: Market veterans are optimistic about the newly-launched Capital Market Masterplan Two (CMP2) but point out that the strict implementation of the plan will be the key for success.

Maybank Investment Bank chief executive officer Tengku Datuk Zafrul Aziz said the Government's target was very clear in boosting the capital market locally but more details were needed for the said plan and the implementation efforts were essential to make it a success.

“Dual licensing scheme is a good idea and the pension scheme is also quite important. The effort to increase the number of proprietary day traders is also welcomed,” he told StarBiz at the sideline of Invest Malaysia 2011 yesterday.

Overall, he said CMP2 was a good initiative to boost the capital market and there were more things to work in order to reach the target.

As reported, the introduction of a dual licensing scheme will make it easier for dealers in the equity market to also be licensed to trade in the derivatives market. Meanwhile, there is plan to increase the number of proprietary day traders by almost threefold.

In a nutshell, Malaysian Investment Development Authority director-general and chief executive officer Datuk Jalilah Baba said capital market roadmap was needed to create the synergy for growth in the capital market.

“I was with Prime Minister Datuk Seri Najib Tun Razak and Bursa Malaysia in Hong Kong last year when the fund managers commented that our capital market is not vibrant, low liquidity, not interesting and so on,” she said.

She said that was why CMP2 was important in creating a roadmap where we were heading and the way to achieve it in order to create a conducive environment for investors to invest by making it more vibrant.

“This is why the listing of some of the companies were announced by the Prime Minister and by inviting more foreign capital and fund managers to also take part to look at Malaysia's capital market which is getting more interesting now. I'm definitely very optimistic about CMP2,” she said.

Michael FG, who is the principal consultant for Amosho business management consultancy, reckoned that CMP2 would drive higher levels of foreign capital inflows.

The objectives of CMP2 are consistent with Bursa Malaysia’s plans to increase the velocity of the equity market.

“The targets and time frame set out in CMP2 are achievable, with the right environment and government incentives as well as political stability. As such, it is important that skilled human capital be developed and expanded in line with CMP2 targets,” he said.

He said: “I think we have done fairly well with CMP1, and CMP2 will keep the momentum going.”

However, a chief investment officer from a local capital management firm said there was no specific plan now yet as the plan was too general. “There are a lot of issues that foreign investors are worries about Malaysia's capital market. The size of the market is an issue but the quality of the companies is another key matter,” he said.

He said quality of Malaysian companies with good corporate governance was important but this was an ongoing effort that could not be reached by night.

CMP2 is the successor of CMP1, which aims to further unlock the potential of the capital market estimated to reach RM5.8 trillion in value over the next 10 years from the current RM2 trillion.

Internationalisation was one of the key priorities of CMP2, which sets to shift focus on Islamic finance from serving domestic needs towards tapping growth opportunities from intermediating international investments and corporate transactions.

Meanwhile, research houses generally welcome the newly launched CMP2.

Hwang-DBS Investment Bhd said with the objectives of the CMP2 outlined, the next crucial point was the revelation of details on how the strategies in the CMP2 would be implemented.

CIMB Investment Bank Bhd in its latest report yesterday said basically there were no surprises.

The information in the CMP2, including the growth strategies, was broadly in line with the research unit expectations.

It reflected the Government's fundamental objective of expanding the capital markets, which in turn, will help to support economic growth in the next 10 years, it said.

The objectives are consistent with Bursa Malaysia's plans to increase the velocity of the equity market and promote the linkages of equity markets in the region by launching the Asean link.

Maybank Investment Bank Bhd said a solid foundation was built under the first Capital Market Masterplan (2000-2010), with 95% of the 152 initiatives proposed under the plan completed.

“We've seen the Malaysian capital market achieving major strides and becoming more resilient during the period despite the onslaught of the global financial crisis in 2008/09,” it said.

For instance, Malaysia's capital market size grew at a compounded 11% per annum over 2000-2010, outpacing economic growth, and had crossed the RM2 trillion mark as at end-2010. The country also has also emerged as a leading regional bond market with an average issue size of RM670mil. CMP2 bodes well for the continuous growth of Malaysia's capital market.

The growth strategies in CMP2 will address key structural challenges and critical linkages for new growth opportunities, while the focus on stronger governance will better manage risks especially those that come from financial innovations amid rising financial activities and the increasing complexity of financial products.

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