Page 40 - SC SCAR 2023 ENGLISH Flipbook

PART 2 REGULATORY PERFORMANCE AND OUTCOMES
Strengthening Cross-Border Surveillance Co-operation
The SC continued to maintain close collaboration with international surveillance counterparts through informal channels of information sharing and exchange, and by engaging in dialogues on common surveillance issues during study visits to the SC. Such collaboration and engagements seek to achieve positive surveillance outcomes that mutually benefit the SC and capital market regulators from other jurisdictions.
In order to keep pace with surveillance issues arising in a fast moving market, the nature of co-operation has evolved beyond formal mutual legal assistance channels to informal exchanges of experience with regional surveillance counterparts. Regular contacts have resulted in reciprocity in sharing of experience, information and validation in dealing with certain market surveillance issues and challenges arising. These efforts ensured that the SC’s approach on key surveillance concerns are relevant and in line with international best practices.
Ongoing Monitoring and Surveillance over the Corporate Bonds and Sukuk Market
In 2023, domestic bonds yields mostly trended sideways with the 10-year MGS ranging between 3.7% to 4.2%. BNM had increased the OPR by another 25bps in May 2023. Both Malaysia’s and the US’s Consumer Price Index (CPI) readings have declined as a result of rate hikes by central banks worldwide. From the SC’s observations, these events did not have any major impact on domestic corporate bonds issuers’ ability to raise funds at competitive rates throughout the year.
As part of the SC’s continuous efforts to supervise the corporate bonds and sukuk market, the SC closely monitors corporate bonds issuers under credit stress. Presently, such corporate bonds issuers are minimal (less than 2% of the corporate bonds and sukuk market) and mainly originated from the energy and utilities, real estate and transportation sectors. These issuers have, for example, requested investors’ indulgence for extension of time to meet agreed-upon financial ratios, delays in coupon or principal payment as well as other forms of refinancing.
The corporate bonds and sukuk market had witnessed one issuer default in 2023, amounting to RM200 million or only 0.02% of total outstanding corporate bonds and sukuk. Eight rating downgrades were also observed in 2023, compared to seven in 2022. Out of the eight rating downgrades, three were from the real estate sector, two from the financial sector, one from the information technology sector, one from the industrial sector and one from the energy and utilities sector. As for rating outlook, there were 10 issuers with downward revisions in the corporate bonds rating outlook in 2023 compared to 11 in 2022.
Strengthening Bond Market Surveillance Activity
In the corporate bonds and sukuk market, market participants play a very important role in maintaining market integrity, by ensuring compliance with regulations and protecting investors’ interest. In this regard, the SC has engaged market participants such as credit rating agencies, bond pricing agency and bond and sukuk trustees throughout 2023, to exchange knowledge, offer insights, and discuss solutions to current and future challenges.
In July 2023, the SC conducted a closed-door discussion with a credit rating agency to exchange insights on the latest developments impacting the Malaysian bond and sukuk market. Among the issues discussed include the outlook post-pandemic, domestic and international interest rate expectations, probability of defaults, rating assignments and challenges and opportunities for the Malaysian bond market. The SC will continue to engage relevant market participants to keep abreast with latest market developments.
SUPERVISION
In addition to its authorisation regime for licensed and registered capital market entities, the SC also operationalises a comprehensive supervisory programme across its spectrum of regulated entities to foster ongoing compliance and enable a holistic assessment of emerging risks and vulnerabilities.
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SECURITIES COMMISSION MALAYSIA ANNUAL REPORT 2023