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FROM THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT
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Bursa Malaysia •
Annual Report 2015
UPHOLDING MARKET INTEGRITY
We would like to restate our commitment to ensuring a fair and orderly
market given the present volatility of market conditions. Our efforts in this
area are directed at protecting the rights of our market participants while
ensuring the long-term sustainability of our marketplace. Bursa Malaysia
operates on a foundation of trust, which is derived from the preservation of
our market integrity. We have also further strengthened our microstructure
to bring it in line with global best practices in order to better safeguard our
market structure and market participants.
Additional details about our initiatives to develop our market structure can
be found in our Marketplace Report: Fair and Orderly Markets on page 52.
NAVIGATING GLOBAL EXCHANGE TRENDS
Bursa Malaysia is today a stock exchange with both regional and global
access. As such, we are exposed to the dynamism of global commerce,
which can change suddenly and with little notice. To maintain our position
as a relevant exchange, we are compelled to identify and adapt to changes
in order to capitalise on our opportunities and minimise risks that may
emerge.
Our move to accelerate the development of our sustainability framework is
one example of how we are anticipating the shifts in global investor demand.
The following list includes some of the trends that we have identified to be
relevant to us going forward.
1. Growing investor interest in ESG
The Assets Under Management (“AUM”) of funds considering ESG
criteria when making investment decisions have risen significantly
over the years. According to figures from EuroSIF and the Global
Sustainable Investment Review, the total AUM invested by funds with
ESG criteria grew from just USD7 trillion in 2008 to USD21 trillion in
2014. While dedicated ESG funds make up only 1%-2% of total global
assets, the sheer size of funds making investing decisions based
on ESG criteria has presented a huge opportunity to exchanges and
issuers.
Similarly, a World Federation of Exchanges (“WFE”) survey published
in July 2015 indicated that investors are increasingly examining the
sustainability practices and policies of companies as a factor in their
investment decisions. According to the survey, 39% of respondents to
the global exchanges survey (22 out of 56) stated they had received
ESG-related queries from investors, of which 10 said that such
inquiries are on the increase. Such findings and figures indicate that
ESG concerns are growing among global capital market participants.
We have demonstrated our commitment to sustainability through our
initiatives in 2015, and we plan to leverage on them to make our case
as the regional market of choice for ESG investments going forward.
2. New business and revenue diversification
While securities trading has traditionally been the core focus of stock
exchanges in the past, a key development throughout the industry is
the diversification of revenue streams and the growth of non-trading
revenue. Securities trading and related activities currently remain
the major contributor to Bursa Malaysia’s revenue, but significant
emphasis has been placed in recent years on expanding and growing
the contributions from our Derivatives and Islamic Capital Markets.
Recent developments in the industry have also seen exchanges place
significant emphasis on developing their market data and information
services business. We expect to see stock exchanges becoming more
competitive in this new area of business, and expand their services to
add value to their customers. We have seen positive signs of growth
in Bursa Malaysia’s efforts to provide these services, and they have
become an important growth area for us.
Moving forward, Bursa Malaysia will continue to expand the
contributions from the Derivatives and Islamic Capital Markets while
exploring new opportunities and enhancing our market data services.
3. Globalisation of trading and investment
The increasing globalisation of trading and investment was put into
focus again this year when the Shanghai-Hong Kong Stock Connect,
which provides offshore investors with direct access to the Shanghai
Stock Exchange, received significant investor response. 2015 also
saw a flurry of activities and discussions on other trading links across
Asia such as the proposed trading link between the Taiwan Stock
Exchange and the Singapore Exchange.
In this respect, Bursa Malaysia has continued to support the ASEAN
Exchanges initiative and to promote ASEAN as an asset class to global
investors. Throughout 2015, Bursa Malaysia highlighted the potential
of the region through events such as the first ASEAN CAP10 Summit,
which brought together top ASEAN CEOs from across the region to
discuss the opportunities presented by ASEAN economic integration.
The Exchange has also engaged directly with institutional and retail
investors in ASEAN countries including Thailand and Singapore to
highlight the opportunities available in the Malaysian markets.
CEO’S MESSAGE
AND MANAGEMENT
DISCUSSION AND ANALYSIS