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Turning to Malaysia, and the country’s experience of Covid-19 has been exceptional even by the standards of an unprecedented global event. As Jacqueline William, Head of Securities Services, Malaysia & Sub-ASEAN, explained in the opening address of the second webinar of the series, the backdrop of changes in the Malaysian market came just as Malaysians were coming to terms with a recent raft of changes to the country’s government.
Speaking to more than 200 attendees, William hailed how “the entire nation very quickly shifted its attention to what matters most”, with participants aligning to protect the welfare of the most vulnerable segment of the population, avoid disruption to essential services or capital markets, and contain the spread of the virus.
The capital market’s effort was led by the Securities Commission Malaysia (SC), which released a series of relief measures to support capital market intermediaries and investors, and whose Chairman, Datuk Syed Zaid Albar, was on hand to explain the actions taken and analyse the impact.
From the outset, the SC identified the likely a significant impacts from Covid-19 and committed itself to two goals: to ensure that the market continues to function fairly and transparently, and to provide relief for market participants by easing operational pressures for intermediaries and ensuring investors have access to the right information to make informed decisions.
As simple as these goals sounded, realising them required huge amounts of careful co-ordination. Concrete actions that were taken, included the waiving of IPO listing fees for large corporations, the easing of fundraising for listed companies through private placement, the accommodation of convertible note issuance by venture capital and private equity firms, the raising of the fundraising limit for equity crowdfunding (ECF), and the implementation of secondary trading for ECF and P2P.
In addition to this, conscious of the “new normal” of home working, the SC launched a raft of initiatives to support the digitalisation of the market, ranging from the implementation of online trading and depositary account opening through digital signatures, through to industry-specific guidelines for carrying out certain procedures digitally. This included guidance for e-corporate actions – covering virtual and hybrid meetings, digital takeovers and digital share conversion – and the online distribution of capital markets products such as unit trusts, e-service platforms and e-wallet and e-payment service providers.
Significant results were quickly achieved. On 5 June, the SC was informed that 24 listed companies had conducted fully virtual AGMs for the first time, with several more having already announced plans for fully virtual or hybrid meetings in the near future.
“If there is a silver lining to the Covid-19 crisis,” said Albar, “it is the fact that it has forced companies to forge ahead with their digital strategies to ensure compliance with their legal and regulatory obligations.”
As William noted, the Covid-19 crisis has had the effect of shaking markets from their comfort zones across the board. But this hasn’t necessarily been a bad thing. “It was a positive step that SC gave brokers the flexibility to relax margins in order to manage volatility,” she observed. Counter-intuitive as this might be, it looks to have put a stop to margin-induced negative-spiral effects – so could it be a blueprint for future responses to volatility?
Albar was reflective on this point. Margin relaxation measures – including removing the requirement to automatically liquidate client margin accounts if the equity in that account falls below 130% of the outstanding balance, and allowing brokers to accept collateral such as bonds, collective investment schemes, unit trusts and immovable properties for the purposes of maintaining their clients’ margin account – appear to have helped in the short term.
Yet these were very urgent changes implemented in a distressed situation.
“Once the pandemic is over, we will have to review and determine whether these actions would still be appropriate going forward and will have to consider the circumstances prevailing at the time of future decisions,” he concluded.