Page 61 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

Diagram 8
Risk assessment of various components in the Malaysian capital market

• Sufficient domestic liquidity to facilitate efficient investment activities
Equity Market • Market-wide circuit breaker and price limit on equity are part of the risk
and management mechanism to address excessive market volatility. In 2018,
no circuit breaker was triggered
Infrastructure • Safety nets i.e. Securities and Derivatives Clearing Guarantee Funds are in
place to manage sudden surge of stress
• Marginal yield movements relative to other regional markets, supported
Bond Market by ample domestic liquidity
• Internal bond-at-risk model indicated the stress level within the corporate
bond market was minimal
• Corporate earnings in 2018 declined due to general economic conditions
Listed and increase in impairments by PLCs
companies • Overall, corporate leverage remained healthy with stable trend of gearing
ratios
• Net outflows in the equity market is among the lowest in the region
Foreign investors as a percentage of shareholdings saw minimal
Investment fluctuations and remained above the 3-year average
Flow • For bond market, foreign holdings reduction was attributed to issuances
that have matured. Currently, more than 55% of foreign investors are
long-term in nature i.e. central banks, sovereign wealth funds, pension
funds and insurance
• Fund managers have measures in place to manage liquidity risk i.e.
Investment liquidity management framework to safeguard against any adverse
Management market conditions
• Cash and liquid assets held are sufficient to meet investors’ redemption
• Stockbrokers are well-capitalised, supported by sufficient liquidity buffers
Stockbroking to address any realised or potential losses that may arise during times of
stress
Intermediaries • Current risk-based capital position remained above the prescribed
minimum financial requirement

Various components of the Malaysian capital market This encompasses products and macro prudential
continue to function normally despite the pressure surveillance, with focus on risks and vulnerabilities
points, particularly the tightening of monetary of products and firms. The framework has clear
policies in advanced markets and US-China trade data requirements to assist the SC in identifying and
tensions. Assessments indicated that there were assessing pressure points from these segments of
no immediate major systemic risk concerns given the capital market.
the prevailing market, liquidity and infrastructure
conditions (Diagram 8). Recognising that surveillance of systemic risks is a
multifaceted process, the SC is developing a set of
risk surveillance indicators as part of its efforts to
Enhancing approach in surveillance of continue enhancing the systemic risk surveillance
systemic risks framework. Under this initiative, the SC intends to
leverage technology to gain access to more reliable
The surveillance of systemic risks is conducted based and quality data for systemic risk surveillance
on approaches outlined in an integrated framework. purposes.

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