Comprehensive Guide to Capital Markets in Malaysia

Malaysia's capital markets are a vital component of its economy, providing a platform for raising funds, investing, and trading securities. This guide will cover the structure of capital markets in Malaysia, relevant regulations, costs, procedures, and specific considerations for investors and participants.

1. Overview of Capital Markets in Malaysia

The capital markets in Malaysia consist of two main segments:

• Equity Market: This includes the trading of shares in publicly listed companies on the Bursa Malaysia (the Malaysian stock exchange).
• Debt Market: This includes the issuance and trading of bonds and sukuk (Islamic bonds).

2. Regulatory Framework

The capital markets in Malaysia are regulated primarily by the Securities Commission Malaysia (SC) and the Bursa Malaysia. Key regulations include:

• Capital Markets and Services Act 2007 (CMSA): This act governs the activities of capital market participants, including licensing, conduct of business, and disclosure requirements.
• Securities Industry Act 1983: This act regulates the securities industry, including the issuance and trading of securities.
• Islamic Financial Services Act 2013: This act governs Islamic financial institutions and products, including sukuk.

Key Regulatory Bodies:

• Securities Commission Malaysia (SC): Responsible for regulating and developing the capital markets.
• Bursa Malaysia: The main stock exchange, overseeing the listing and trading of securities.

3. Costs Involved

Engaging with Malaysia's capital markets involves various costs, including:

• Brokerage Fees: Typically range from 0.1% to 0.5% of the transaction value for equity trades.
• Stamp Duty: A stamp duty of 0.1% is imposed on the transfer of shares.
• Listing Fees: Companies seeking to list on Bursa Malaysia must pay listing fees, which vary based on the market capitalization of the company.
• Annual Fees: Companies listed on Bursa Malaysia are required to pay annual fees, which also vary based on market capitalization.
• Regulatory Fees: Fees for obtaining licenses and approvals from the SC.

4. Standard Procedures

For Investors:

1. Open a Trading Account: Investors must open a trading account with a licensed stockbroker.
2. Deposit Funds: Funds must be deposited into the trading account to facilitate transactions.
3. Place Orders: Investors can place buy or sell orders through their brokers or online trading platforms.
4. Settlement: Transactions are settled on T+2 (two business days after the trade date).

For Companies Seeking to List:

1. Engage Advisors: Companies typically engage financial advisors and legal counsel to guide them through the listing process.
2. Prepare Prospectus: A prospectus must be prepared, detailing the company’s financials, business model, and risks.
3. Submit Application: Submit the application for listing to Bursa Malaysia and obtain approval from the SC.
4. Public Offering: Conduct a public offering to raise capital, followed by the listing on Bursa Malaysia.

5. Country-Specific Considerations

• Islamic Finance: Malaysia is a global leader in Islamic finance. Investors should consider sukuk as an alternative to conventional bonds, which comply with Shariah law.
• Foreign Investment: Foreign investors can participate in the Malaysian capital markets, but certain sectors may have restrictions. The Foreign Investment Committee (FIC) guidelines should be reviewed.
• Taxation: Capital gains from the sale of shares are generally not taxed in Malaysia, but dividends are subject to withholding tax. Investors should consult with tax advisors for specific implications.
• Market Hours: Bursa Malaysia operates from 9:00 AM to 5:00 PM (GMT+8) on weekdays, with a break from 12:30 PM to 2:30 PM.

6. Conclusion

Malaysia's capital markets offer diverse opportunities for both local and foreign investors. Understanding the regulatory framework, associated costs, and procedures is crucial for successful engagement. Additionally, being aware of the unique aspects of Islamic finance and foreign investment regulations can enhance investment strategies. For anyone looking to participate in Malaysia's capital markets, thorough research and possibly consulting with financial advisors are recommended to navigate the landscape effectively.