By M. Saraswathi

KUALA LUMPUR, April 12 (Bernama) - Prime Minister Datuk Seri Najib Tun Razak on Monday unveiled the second Capital Market Masterplan or CMP2 as a successor to the highly-successful first plan, which in the next 10 years is forecast to swell the value of the capital market to RM5.8 trillion through greater internationilisation from RM2 trillion now.

He said CMP2 would come into force immediately under the Securities Commission's annual business plan with changes to the regulatory framework for fundraising and product regulation to slash unnecessary red tape and lead to faster turnaround of approvals,

Aimed at unlocking the potential of the market, Najib, who is also Finance Minister, said that there would be a new dual licensing scheme to make it easier for dealers in the equity market to become licensed to trade in the derivatives market.

There were also plans to increase the number of Proprietary Day Traders by almost threefold to enable more dealer representatives to become specialised traders, he said at the "Invest Malaysia 2011" conference attended by captains of industry, fund managers and institutional investors and more than 850 delegates from over 200 corporations from Malaysia and the world over.

Also present at the function were Tun Mohamed Dzaiddin Haji Abdullah, chairman of Bursa Malaysia, Tnn Sri Dr Zeti Akhtar Aziz, Bank Negara Malaysia Governor, Tan Sri Zarinah Anwar, chairman of Securities Commission, Tan Sri Megat Zaharuddin Megat Mohd Nor, chairman of Maybank Goup, Datuk Tajuddin Atan, the new chief executive officer of Bursa Malaysia and Datuk Seri Abdul Wahid Omar, the chief executive officer of Maybank Group.

"These are just three of the CMP2 programmes, and they will come into force from the third quarter of this year - no distractions, no delays, just swift, effective action.

"We must do everything we can to ensure that Malaysia's capital market doesn't just grow, but grows with minimal risks in a well-regulated environment," he said, reaffirming the government's seriousness in accelerating economic growth and the social development in Malaysia.

The first CMP was successful in making Malaysia's capital market to grow to RM2 trillion despite starting from the narrowest of bases, he said.

"Our stock market is home to more public listed companies than any other inside Asean, our bond market is the third-largest in the whole of Asia when benchmarked against GDP, and our Islamic capital market leads the world," he said.

The current forecasts for the capital market size is to more than double to RM4.5 trillion by 2020, and with greater internationalisation this figure could increase to as much as RM5.8 trillion over the same period, he said.

Najib said one of the key priorities for CMP2 is to strengthen the role of the capital market in promoting capital formation from the start-up stage to the financing of innovative ventures, big new projects and cutting-edge green technology.

To achieve this, the government will allocate more funds to the venture capital and private equity industries through formalising regulatory oversight and providing targeted incentives and support.

"And to boost large-scale transactions, access to the bond market will also be widened, strengthening investor appetite for a wide range of debt products and credit risks, expanding the participation of the investment management industry and retail investors in fixed income investments, and enhancing the market infrastructure," he said.

Among others, he said Malaysia's high savings are expected to drive the rapid growth of the investment management industry, with assets under management projected to rise from RM377.4 billion in 2010 to a very substantial RM1.6 trillion in 2020.

Strong growth within the asset management industry is a key feature of any country in transition to becoming a fully developed nation.

As a reflection of the widespread confidence in Malaysia's investment management industry, he said the penetration rate of the unit trust industry is expected to almost double from 18 per cent in 2010 to 34 per cent in 2020 - levels more commonly associated with developed markets.

This will, in turn, substantially increase the creation of income-generating assets to meet the needs of domestic institutional investors, he said.

Hence, to enhance intermediation efficiency in recycling domestic savings into financing the development of a diverse and vibrant economy, there will be a review of the system-wide effects of institutional investment strategies, particularly to ensure the optimal deployment of GLIC funds.

"More efficient intermediation of national savings will have far-reaching effects on accelerating capital formation, private sector participation, secondary market liquidity, risk-taking and expanding product and service diversity," he said.

He said efforts will also be made to attract specialist fund managers and to promote greater diversity in investment strategies, strengthening the links between national savings and economic growth.

Expanding the number of products on the derivatives market is another development that will be crucial to deepening market liquidity, improving the ability to trade across markets and to hedge risks.

Specifically for the Islamic finance and banking sector, Najib said the task now for the industry is to shift the focus of Islamic finance from serving domestic needs towards tapping the tremendous growth opportunities from intermediating international investments and corporate transactions.

The internationalisation of the capital market is a necessary pre-requisite to strengthening Malaysia's Islamic Capital Market hub - set to increase almost threefold from RM1.1 trillion in 2010 to RM2.9 trillion in 2020.

CMP2 outlines strategies to enhance the distinctive value propositions offered by Malaysia for a broad range of Islamic intermediation activities, including increasing our capacity to structure cross-border transactions to make further inroads into the international sukuk market.

In addition, the Securities Commission will collaborate with key industry players to expand the range of Shariah-compliant stock broking products and services and build greater critical mass for the development of onshore portfolio management.

A seeding strategy will be developed to increase the diversification of Islamic investment strategies, particularly in nurturing high value-add Islamic fund management services such as the Shariah-compliant venture capital and private equity industries that invest based on the Islamic principles of active partnership and socially-responsible investing.

The Securities Commission will also work to encourage the wider shift from a Shariah-compliant approach to a Shariah-based approach, promoting higher levels of innovation and international marketability, he said.

-- BERNAMA