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On 4 March 2020, Financial Market Association of Malaysia (FMAM) in collaboration with Bank Negara Malaysia (BNM) conducted an investor engagement video conference with various portfolio managers, FX and fixed income traders and global custodians in London. The conference is part of a series of engagements with financial market participants to discuss and provide insights and obtain their feedback on the latest developments surrounding Malaysia’s financial market. This interactive session was led by Bank Negara Malaysia Assistant Governors Norzila Abdul Aziz and Marzunisham Omar.
Key topics discussed include among others, the impact of the novel coronavirus (COVID-19) on the global and domestic economy, development on FTSE Russell, China’s inclusion in global bond indices, the dynamic hedging programme, progress on the Appointed Overseas Office (AOO) pilot program as well as liquidity in the bond and foreign exchange market.
The conference also deliberated on the recent stimulus package announced by the Malaysian Government and the monetary policy easing by BNM as part of efforts to address the wider impact of COVID-19 outbreak on economic activities. The stimulus package, which is timely and targeted, aims to provide support to cushion the impact to the sectors which are most affected such as tourism, transportation and manufacturing while spurring private consumption.
Participants were also updated on recent engagements between BNM and global bond index providers, whereby their feedback were incorporated in recent development initiatives such as featuring more re-openings in the 2020 auction calendar to build larger benchmark outstanding sizes and reduce number of bonds in the index. This facilitates index tracking activities by passive investors and will boost liquidity in the bond market. On the impact of China’s inclusion in the JP Morgan GBI-EM index, market participants acknowledged that the inclusion will be implemented gradually in terms of timing and positioning. Malaysia’s deep and liquid financial market with a large base of domestic institutional investors will be able to absorb any potential impact.
The dynamic hedging programme has gained traction with the registration of 108 investors managing USD38 billion of ringgit assets. Based on feedback received from registered investors, the current dynamic hedging programme is sufficient in serving investors’ needs to manage their FX risk exposures from their underlying assets. Additional flexibilities have also been granted to investors on a case by case basis. Nonetheless, BNM welcomes further feedback from market participants to improve the onshore foreign exchange market.
The 2-hour event also touched on the progress in market development initiatives which translated into more efficient market functioning and improved investment experience. Investors welcomed the ability to get competitive 2-way USD/MYR prices from the pilot Appointed Overseas Office (AOO) banks during London and New York hours. USD/MYR reference prices are also available on Bloomberg after local onshore hours, allowing for better price transparency. Overall, the event was well received by all participants and clarity was provided in terms of the Bank’s stance and direction moving forward.
“While market developments are aimed to be progressive, the Bank undertakes a phased approach in liberalisation initiatives, whilst balancing financial stability objectives to promote a well-functioning financial market that supports and complements the real economy. I must also emphasize that communication is key, and all feedback are very much appreciated and welcomed. These inputs allow us to assess if we’re on the right track in terms of our targeted development and liberalisation initiatives”, said Assistant Governor Norzila Abdul Aziz.
“FMAM is pleased to play our part in engaging and updating global market participants on the various steps undertaken to improve market accessibility and liquidity. Collaboration between regulators and market participants via the Financial Markets Committee (FMC) have led to impressive and tangible financial market performance as these development initiatives continue to progress. Based on the feedback received from investors, we sense that there is a genuine understanding of Malaysia’s approach to develop our market in a holistic and balanced manner. We feel that investors appreciate the efforts made by both FMAM and BNM to continuously engage them”, said Mr. Chu Kok Wei, President of FMAM.
Bank Negara Malaysia
12 Mar 2020
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