Page 98 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

Domestically, against the backdrop of a more Meanwhile, trading activities in the secondary
challenging and uncertain global environment, market will continue to be driven by external
the Malaysian economy is anticipated to remain developments, mainly movements in portfolio flows
on a steady growth path, backed by firm domestic arising from the shift in global liquidity and the
private sector activities (Chart 14). Growth will be general increase in global financial market volatility.
underpinned by sustained manufacturing activities
and further supported by resilient services sector Notably, the developments observed in the
expansion, especially in wholesale and retail trade aftermath of the GFC indicate that the underlying
sub-sectors. On the demand side, steady wage and trend movement in non-resident portfolio flows
employment growth will continue to drive private was, to a large extent, determined by major central
consumption expansion while new and ongoing banks’ monetary policy directions, especially the Fed
projects in the services and manufacturing sectors (Chart 15). Beyond the trend movement, episodes
will remain supportive of private investment growth. of financial market volatility post-GFC could be
The government’s effort to promote the adoption attributed to specific negative events ranging from
of digital technology and automation will also be an the European debt crisis, taper tantrum, China’s
important catalyst for future investment activities. surprise yuan devaluation, the collapse in oil prices,
US presidential election and more recently, the
The domestic capital market will continue to play trade tension. The outlook for the domestic capital
an important role in supporting economic growth market in 2019 will continue to be influenced by
through financing of business expansion and key global developments, mainly the direction and
infrastructure. Total capital raising through primary pace of global monetary policy with volatility driven
and secondary issuances is expected to remain by continued uncertainty surrounding major risks,
robust especially in the bond market.

Chart 15
The US monetary policy is a key factor in the underlying trend of non-resident portfolio flows in
Malaysia’s capital markets

250 145
Unprecedented monetary US Fed’s stimulus exit
policies by US Fed
200 140

135
150
RM billion 100 130 % GDP

Europe sovereign debt crisis US Presidential election 125

50 Taper tantrum Oil price decline Trade tensions 120

0 115
Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18

Non-resident portfolio flows in bonds and Domestic liquidity – M3 (% of GDP) (RHS)
equities since 2010 (LHS)
Source: Bursa Malaysia, BNM, SC’s calculations

88 | PART 4 »» CAPITAL MARKET REVIEW AND OUTLOOK

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