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While the trading volume on the derivatives exchange has more than doubled in the last decade, fuelled by increased foreign participation, this is largely attributed to the benchmark crude palm oil futures (FCPO) contract. Most other exchange-traded derivative contracts have not seen significant growth. OTC derivatives for hedging, predominantly in currency and interest rates, still remain almost exclusively the domain of banks with little transactional transparency to other capital market players.
Diagram 3
THE FUNDING ESCALATOR ACROSS THE GROWTH CYCLE OF COMPANIES
Pre- Commercialisation
Early Stage
Financing needs of companies across their growth cycles
Growth Stage Late Stage Matured
LEAP Market
ACE Market
Main Market
Private placement
Bonds/Sukuk
IEO
P2P financing
Conventional funding sources
Alternative funding sources
Bank loans, trade credit
VC
PE
Angel investing
ECF
Source: SC.
STAYING AHEAD OF THE CURVE
As the economy recovers from the effects of the pandemic, the emphasis now shifts towards ‘building back better’, where resources will be focused towards strategic sectors to reposition the nation for the future. Collectively, these present significant opportunities for domestic businesses to scale up, diversify and grow, with access to financing being crucial to their success.
For the capital market, the need to have more tailored financing options, appropriate for each stage of a company’s growth cycle and suited to its specific needs, has never been greater. As such, it is imperative to develop a deeper understanding of issuers’ needs, greater insights for each sector, better appreciation of pricing risks, and greater efficiency in completing fundraising exercises. While the SC has facilitated the introduction of innovations in financing models, markets and intermediaries, there is still a sizeable gap to be addressed collectively. Incumbent market participants should also re-examine their offerings and operating models to ensure that they remain dynamic and relevant when faced with fast-shifting market demands.
CAPITAL MARKET MASTERPLAN 3
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