Many emerging markets and developing economies (EMDEs) face challenges in developing a vibrant domestic bond market. Only a few have developed such markets to a level of full maturity as Malaysia has. Although the overall size of most domestic corporate bond markets in EMDEs (in terms of percentage to GDP) remains small, the Malaysian capital market is one of the most well-developed among its neighbors and countries of comparable size and characteristics. The IMF’s Financial Market Index, a broad-based index to measure depth, ease of access, and efficiency of financial markets (IMF 2016), ranks the Malaysian financial market fifth in Asia after Hong Kong SAR, China, Japan, the Republic of Korea, and Singapore. According to this index, Malaysia’s debt market, which is composed of corporate bonds and sukuk, is significantly more developed than those of comparable EMDEs such as Chile and Turkey. This report primarily focuses on the development of Malaysia’s local bond market as a source of long-term local currency (LCY) financing. It aims to extract the key lessons that can benefit policy makers as well as stakeholders in both the public and private sectors. This report validates the worth of the building blocks many use for capital market development, as well as the fundamental principles and forces that have shaped and sustained the growth of Malaysia’s debt capital market. Malaysia’s ability to develop specific segments of the debt capital market can be best demonstrated through two specific cases: the domestic debt capital market has played a vital role in financing Malaysia’s infrastructure, and Malaysia has played a significant role as an Islamic finance center.
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Malaysia’s Domestic Bond Market A Success Story
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The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile.
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