Development of the capital market in Malaysia : a critical analysis

Abstract

Over the last three decades, the Malaysian capital market has grown from an insignificant financial sector to an indispensable part of the financial system, providing various funding and investment avenues to the economy. This research project looks at the developments of the various segments of the market, namely, the equity market, the Malaysian Government Securities (MGS) market and the Private Debt Securities (PDS) market. A critical evaluation of the developments reveals that with the economic emphasis shifted to the private sector after the mid 1980s, the MGS market will play second fiddle in terms of providing debt financing. The PDS market will expand quickly in the 1990s to satisfy the increasing financing needs of the private sector. Riding on the high economic growth and huge investment, the equity market is expected to continue with its growth and expansion. In the 1990s, two areas in the capital market are likely to experience significant growth, which are the derivatives industry and the unit trust industry. A common problem facing the three markets is the lack of liquidity in the secondary market.