Category: Investments

Bursa Malaysia Berhad (“Bursa Malaysia” or the “Exchange”) recorded a Profit After Tax and Zakat (“PAT”) of RM226.6 million for the financial year ended 31 December 2022 (“FY2022”), a 36.2% reduction from the RM355.3 million reported in the previous financial year ended 31 December 2021 (“FY2021”). The decrease was due to lower overall trading revenue of RM377.1 million in FY2022, lower by 30.7% as compared to FY2021. Total operating expenses in FY2022 increased marginally by 1.4% to RM292.7 million from RM288.6 million in FY2021.

The Board of Directors approved and declared a final dividend of 11.5 sen per share amounting to approximately RM93.1 million. This brings the total dividend payout for FY2022 to 26.5 sen per share, which includes the interim dividend of 15 sen per share paid out in August 2022.

The Securities Market registered trading revenue of RM263.5 million in FY2022 compared to RM442.9 million in FY2021, a decrease of 40.5%, due to lower Average Daily Value (“ADV”) traded for Securities Market’s on-market trades and direct business transactions. Meanwhile, the Derivatives Market trading revenue rose by 11.3% to RM97.2 million in FY2022 from RM87.3 million in FY2021, in part due to higher collateral management fees earned, as well as higher number of FCPO and FKLI contracts traded. Bursa Suq Al-Sila’s (“BSAS”) trading revenue increased by 17.8% to RM16.4 million in FY2022 from RM14.0 million in FY2021.

“Bursa Malaysia enjoyed another year of resilient performance despite challenging global operating conditions resulting in the softening of trading in Securities Market. Trading value declined by 41.5% with ADV of RM2.1 billion in 2022 but this is still higher than pre-pandemic ADV of RM1.9 billion. The Derivatives Market, however, performed better with Average Daily Contracts (“ADC”) increasing by 4.6% from 75,178 contracts in FY2021 to 78,621 contracts in FY2022. Our Commodity Murabahah platform, BSAS similarly performed well with 22.3% higher ADV from RM37.3 billion to RM45.6 billion,” commented Tan Sri Abdul Wahid Omar, Chairman of Bursa Malaysia.

He added, “We also had a very active listing interest on the Exchange with 35 IPOs recorded in FY2022 that raised a total of RM3.5 billion, higher than the 30 IPOs recorded in FY2021. These numbers prove that both companies and investors have confidence in the Malaysian capital market, and look at Bursa Malaysia as a worthy platform for fundraising and investing.”

“In our Derivatives Market, we are offering more products and better access. To encourage more participation from global traders, the Exchange was recently recognised as a Third-Country Central Counterparty by the European Securities and Markets Authority. This recognition, together with the After-Hours (T+1) Night Trading Session (“After-Hours Trading”), will generate greater trading volume for the Exchange,” said Datuk Muhamad Umar Swift, Chief Executive Officer of Bursa Malaysia.

Bursa Malaysia made significant progress on a number of pioneering market development initiatives in FY2022, which included the launch of the world’s first Shariah-compliant carbon exchange, the inaugural East Malaysia Palm & Lauric Oils Price Outlook Conference & Exhibition (“emPOC2022”) and the inception of the PLC Transformation Programme. The Exchange was recognised with several industry awards last year, including The Edge Billion Ringgit Club Awards 2022 for “Highest Return on Equity Over 3 Years in the Financial Services Sector (for RM10 billion market cap)”.

Commented Datuk Muhamad Umar Swift, “The Market Data business segment improved in FY2022, delivering 12.5% growth to RM60.8 million from RM54.0 million in FY2021. To achieve further growth in our non-trading revenue, we will continue improving the delivery of richer data to clients to empower the industry to undertake analytics or offer better products or services. The Exchange recently signed MOUs with the Companies Commission of Malaysia and the Department of Statistics Malaysia, to collaborate on mutual data sharing arrangements with the objective of unlocking new revenue opportunities, while supporting the national data and digitalisation agenda.”

“We are becoming a multi-asset Exchange and diversifying our revenue streams. With the launch of the Bursa Carbon Exchange in December 2022, we are now better able to facilitate the journey for Corporate Malaysia to become a global ESG investment destination. Among our priorities in 2023 is to help develop the carbon market ecosystem, and strengthen our engagement with listed companies to raise their understanding and improve their ESG practices and disclosures,” concluded Datuk Muhamad Umar Swift.

“We are invariably focused on enhancing the attractiveness of the Exchange to market participants, and our shareholders,” said Tan Sri Abdul Wahid Omar. “As espoused under the PLC Transformation Programme, we are stepping up by committing to five Headline KPIs for FY2023 − covering targets for Profit Before Tax, Non-Trading Revenue growth of 5% to 7%, 39 IPOs, innovative product launches including the Bursa Gold Dinar, and reduction in our organisation’s emissions1.”

The financial results for FY2022 is available on Bursa Malaysia’s website at www.bursamalaysia.com. Details of the FY2022 financial results and the FY2023 Headline KPIs can be found in the Condensed Consolidated Financial Statements report which was released today (as appended and also available on our website).

1 The headline KPIs are targets or aspirations set by the Company as a transparent performance management practice. These headline KPIs shall not be construed as either forecasts, projections or estimates of the Company or representations of any future performance, occurrence or matter as the headline KPIs are merely a set of targets/aspirations of future performance aligned to the Company’s strategy.

About Bursa Malaysia

Bursa Malaysia is an exchange holding company incorporated in 1976 and listed in 2005, and has grown to be one of the largest bourses in ASEAN today. Bursa Malaysia operates and regulates a fully-integrated exchange offering a comprehensive range of exchange-related facilities, and is committed to Creating Opportunities, Growing Value. Learn more at www.bursamalaysia.com.

As we navigate these turbulent times of uncertainty, we are constantly under pressure to make investment decisions and to look for investment strategies or styles that can enhance returns for our long-term investment.

As we are advised to brace for the impact of increasing market volatility, inflation risks and interest rates while investing, we are dissuaded from investing based on rumours when making investment decisions.

We are always cautioned to conduct more analyses with facts after verifying from trusted sources such as Bursa Malaysia, Bank Negara Malaysia and Securities Industry Development Corporation (SIDC) before investing.

In the past, we may pin the blame on rumour mongers and the lack of information for our inability to invest well. But with more information available now, are we more prolific in making informed decisions that produce better investment outcomes?

While some of us are instilled with knowledge for investing, some still perceive investing as a daunting task. Inevitably, many of us are still prone to making suboptimal decisions despite religiously adhering to tips from the pundits.

Read: Six Golden Rules In Getting Favorable Returns And Growth, When Investing In Unit Trusts

While Is It Hard To Make The Right Investment Decisions?

This is because making the right investment decisions also becomes trickier with an ever-increasing assortment of financial products to suit our investment palates.

We are also reminded by the investment community to keep our emotions in check when investing. This is because emotions can lead to perverse and suboptimal decisions in investing.

We feel lousy and we may blame it on luck to make us feel better while some of us become mentally depressed when things turn out badly. Some of us cringe at making investment decisions and shy away from financial products after encountering some painful experiences in the past.

Thus, can we ignore our emotions when investing? If not, do we need robo-advisory services or digital asset managers proclaiming on investing without emotions to help us in making the right investment decisions?

Read: Investing And ESG

Emotions Affecting Investment Decisions

On the other hand, according to research, not exhibiting the appropriate emotions could impair our ability in making investment decisions.

So, why are we so hard on ourselves? After all, we are emotional creatures. We can’t possibly ignore our emotions when investing. I suppose if we could understand our emotions and what drives our emotions in the process of decision-making, we could be less subjected to unhealthy thoughts.

As decision-making is a complex process, we tend to use mental shortcuts termed as ‘heuristics’ by psychologists to solve problems instead.

According to psychologists, we simply make judgements and decisions by consulting our emotions. We ask ourselves: “Do we like it? Do we hate it? How strongly do we feel about it?”

We form opinions quickly, make judgements and take risks as expressions of our feelings on the basis of mental images without realising why we are doing so.

Researchers suggest that our brains exhibit tardiness in adjusting our impression once our mind has been framed. Festinger posits the ‘theory of cognitive dissonance’ and encapsulates that we will try to look for information that reaffirms our initial opinions so that the opinions we form earlier do not contradict the information we receive later. This somewhat explains ‘confirmation bias’ and ‘first impression bias’.

Read: Investment Risk Management With 6 Simple Ways

This could also explain why we may fall prey to financial scams. Scammers who have a positive image and are good at manipulating our emotions with words that mesmerize us are more likely to gain our trust.

To avoid becoming an easy target by malicious people, we may need to think like scammers and beat them at their own game. Of course, we are not advocating that we act like scammers but playing defence all the time in their game can be tiring.

We need to play like a striker as the situation warrants it or find ways to change the playing field when dealing with scammers. In short, as we could not possibly suppress or ignore our feelings and emotions, we have to try to manage our emotions.

Numerous books and articles offer tips that we could adopt to improve and practise our emotional intelligence, so we can make better investment decisions.

Our decisions can be also easily affected by our moods. The effect of mood on decisions is well documented in journal articles. When we are in a bad mood, we tend to be more pessimistic about the future.

We are more likely to invest in risky assets such as equity, and conduct less critical analyses when we are in a good mood, which predisposes us to underreact to negative information about our investments. Besides this, there are many interesting journals and articles on weather effects on stock returns in the West.

For instance, Hirshleifer and Shumway in their journal article titled: “Good Day Sunshine: Stock Returns and the Weather” have unearthed that our financial decisions may be affected by sunshine. Sampling 48 developed and emerging countries, Yuan, Zheng and Zhu in their studies titled “Are Investors Moon Struck? – Lunar Phases and Stock Returns”, advanced the notion that the performance of stock exchanges is significantly higher during the new moon.

Thus, unless we are emotionally intelligent, we may not be able to make wise decisions even if we use digital asset managers for investing. But again, do you think we will be happier if we don’t use heuristics but instead utilise and filter reams of information before arriving at a conclusion?

Researchers contend that conducting too many analyses may also lead to ‘analysis or information paralysis’, a situation where we are unable to make investment decisions or reach a conclusion due to information overload.

Read: Where To Invest In 2023: Amidst The Recession And General Election

About the Author

Dr. Audrey Lim Li Chin is a lecturer and a researcher at Multimedia University (MMU) Melaka. She teaches International Finance and Derivatives. She is particularly interested in retirement planning, mental health, Fintech especially in Blockchain and data analytics. She is also a Certified Financial Planner, (CFP) and is currently pursuing Chartered Financial Analyst (CFA) certification.

I get questions dealing with investors from different backgrounds. Some of them are very experienced investors and traders. These investors sometimes have questions especially when the markets are driving them nuts. Let’s take a closer look at the year 2022 so far, and the market outlook for 2023.

So far this year, the markets around the world have certainly affected a lot of people ranging everyone’s emotions from greed to fear.

The old market saying is that when everybody is thinking the same thing, then nobody is thinking at all. For this issue, instead of the usual format, I will answer some ‘difficult’ questions raised by some of my investors in our recent meetings.

The questions may be simple, but the answers are complex. However, I was surprised that nobody asked me about the market outlook for 2023 for gold, since the yellow metal has since morphed into a holy object of worship.

Read: Six Golden Rules In Getting Favorable Returns And Growth, When Investing In Unit Trusts

Year 2022 So Far And The Market Outlook For 2023

Q1. Are you still bullish on China and its market outlook for 2023?

With boots on the ground in Shanghai and Hong Kong, I remain a long-term bull on the Chinese consumer sector. While some foreign investors remain skeptical, there are strong long-term reasons for investors to allocate to China.

Local research and insights matter more than macro news flows for anyone investing in the Chinese markets. The Chinese markets have corrected to a point that valuations mean solid companies are already priced for the worst-case scenario.

Therefore, the potential for good risk-adjusted returns are promising in the coming years.

Q2. I’m very concerned about the shock of inflation putting more pressure on the markets. What is your view on inflation and the market outlook for 2023?

Wasn’t Ukraine or another nuclear war one of our greatest concerns a couple of months ago? From the market perspective, the worst part of the inflation is behind us. From a poorer consumer perspective, inflation or the rising cost of living will continue to be a problem in the coming years.

Read: 6 Ways To Deal With Inflation

Q3. What is your view on the global economy and market outlook for 2023?

I do not care for the official definition of a recession. The current economic cycle is unlike anything we have seen before in that it has absorbed the impact of a pandemic, followed by a war in Ukraine. Economic data has been distorted for months. If you look at the history, central banks are always too late to engage their efforts and therefore, they very often have to go too far in their response.

With the backing of more than 400 PhD economists, the Fed’s Chairman Powell, one of the most powerful people on the planet, keeps aggressively tightening an economy that is already showing a lot of weakness with inflation peaking, so economic risk is surging going into 2023.

Q4. Do you think Powell will want to destroy the US economy in order to save it?

He will back off. If you believe in the destruction theory, pack your bags and head for the hills with canned food and ammo. The last thing Powell wants is to be blamed for a global financial accident before Christmas. Oops… he already blew up Great Britain and he probably has more phone calls from other central bankers.

On this note, The Bank of England is in a mess and it looks like the UK is an emerging market now. Politically, it is out of the frying pan and into the fire for the UK government.

Q5. Can you tell me more about the volatile stock market and its market outlook for 2023?

Please leave your emotions aside. It is foolish to try and guess the short-term conditions that are so volatile and unpredictable. The long-term bull market is still alive and kicking despite the stomach-churning volatility we have experienced so far this year.

The human mind always projects the recent past onto the future thinking that bad times will never end. Prices could go a lot higher and longer than people think in the coming months and years.

What happens after this long-term bull market ends and how will we deal with that later?

At one stage, the sentiment was so bad especially during the Covid-19 crash. Well, the stock market is a forward-looking mechanism. Extreme volatile markets shake out the weak hands and give long-term investors a strategic mindset and a chance to buy at lower valuations to multiply their wealth.

Q6. 2022 has been unusually volatile for US equities. A renowned economist predicted the market outlook for 2023, and a stock market crash is expected in the coming months. Do you agree with him?

No crash or meltdown. The stock market and the economy are very clearly two different things. What if the bear market is not over and I am wrong? As a mere mortal, I have been wrong many times in the past.

Legendary investor Peter Lynch reminds me that in our business, if you are good, you are right six times out of ten. You are never going to be right nine times out of ten. I do not put all my eggs in one basket.

Q7. What is your view on cryptocurrencies and its market outlook for 2023?

Grab a coffee and enjoy the wild ride. Sentiment can change on a dime and it is not a surprise that most institutional investors have concerns around the risk and volatility of the cryptoasset market.

However, it can further be seen empirically that a simple ‘buy-and-hold’ strategy with an allocation as small as 1% of an investor’s portfolio has resulted in an outperformance of more than 10% over the past seven years. I am a long-term bull and patience is a virtue.

Read: Stabilising The Unstable Stablecoins

Q8. You have been a US Dollar bull for a number of years now. What’s the market outlook for 2023 for US Dollar, are you still bullish?

The US Dollar’s strength has been fairly obvious in the last 12 months, so if anyone is shocked by this, it is probably time to go hands off on his or her finances and get professional help. Since May 2021, the US Dollar has risen 19% against the Euro, even reaching parity in recent weeks.

It has appreciated 20% against the Pound Sterling, and is up 28% against the Japanese Yen. The market outlook for 2023 is that I am still bullish, but the US Dollar is overbought at the current levels.

Read: Managing Currency Exposure In Your Portfolio

Q9. Where is the best place to put your money in the world today?

Drumroll please… and sorry to disappoint the doom and gloomers, but the US remains the best place for both safety of capital and future growth prospects.

Q10. Why have you been able to stay calm despite the chaos so far in 2022?

Those who joined the industry a few years ago are now learning that maybe their success or arrogance in the last few years had more to do with a rising tide lifting all ships and exposure to higher beta areas, than it did their investing acumen. Everyone is a rational investor when things are going higher every day.

I have seen multiple cycles and survived much worse than this and yet some ‘experts’ are terrified. Regular meditation gives me a sense of calm, peace and balance in my work and overall life.

Q11. What about the Russia- Ukriaine War?

I do not have anything to add as the war continues to drag on.

Q12. What about oil?

I am not the bear you are looking for. The spike in oil prices we have seen in spring and early summer has faded. Macro worries will continue to keep a ceiling on crude oil but the fundamentals have now set a solid floor.

OPEC has shown that it is willing to do what is needed to keep markets tight. At some point down, the price range will break to the upside given how constrained supplies will be going forward.

Q13. What is your advice for those who turn to cash as a source of diversification?

I have come across people who choose to hold significant amounts of cash. I can feel their pain. The supposedly conservative strategy of putting money in the bank is actually destroying your purchasing power at a rather alarming rate.

There are other investment opportunities which can help to meet their financial objectives. They just might have to look a little harder.

Well there you go with what’s been going on for the year 2022, and what the market outlook for 2023 is in store for us.

Read: Saving vs Investing, Should I Save Or Invest?

About the Author

YH Wong has over two decades of experience in the financial services industry. His clients include high net worth investors and boutique institutions such as family offices and investment partnerships in the region. He is currently a senior partner with Satori Consultancy Ltd, a financial services company regulated by the Mauritian Financial Services Commission. He can be reached at yhwong@satoriconsultancy.com.

A Unit Trust is an investment scheme that pools money from many investors who have similar investment objectives, strategies and risk appetites. The pooled moneys are then invested into a diversified portfolio of investment assets, such as shares, bonds, and cash equivalents.

Lets look at how you can get favorable returns when investing in unit trusts.

Read: Getting To Know Unit Trust Schemes

Golden Rule No 1: Invest long-term

It is important to know that when when investing in unit trusts, it should be a long-term game. But how long is long, you may ask? 

Unit trusts need to be invested for at least 10 years to see favorable results. As upfront service charges maybe relatively higher than investing in shares, it is advisable to keep it there for the longer term. 

If you invest in a fund which gives consistent distributions, the distributions declared will eventually bring down the average cost per unit of your fund. And the longer your maintain your fund, the lower you will see your average cost per unit.

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.“

Warren Buffett

and

“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

Warren Buffett

Investing is not trading. Investing has a totally different objective. Investing is about minimizing risk to generate wealth over the long term. Do some homework about the fundamentals and financial status of the stocks invested, the direction and management of the company and the industry potential.

Golden Rule No 2: Dollar Cost Average

When investing in unit trusts, it is important that you do dollar cost average (DCA). Dollar cost average means investing a fixed amount on a regular schedule, usually on a monthly basis. Investors get more units when prices are low and fewer units when prices are high. 

DCA works favorably for funds with a higher volatility factor and consistent distributions.

Read: 5 Drawbacks Of Unit Trusts Investment That You Should Know Before Investing

Golden Rule No 3: Value Cost Average

While Dollar Cost Average means putting a fixed amount in regular intervals, Value Cost Average means investing a lump sum when prices are low to bring down their average cost by a substantial percentage.

If RM 1.00 drops to RM 0.50 how much have we lost? 50% right?

If we purchase then at RM 0.50 and it goes back up to RM 1.00, how much have we gained? 

Most people would say 50%, but look carefully. Do the math. 0.50 to 1.00 is doubling up, which means we gained 100%. 

Let’s take a look at this illustration below:

Having said that, do ensure that the fund stocks have strong fundamentals meaning the fund consists of stocks which are of value when investing in unit trusts.

Golden Rule No 4: Have a balanced asset allocation

As we all know, the popular term in investment is ‘Don’t put all your eggs into one basket.’ The same holds true when investing in unit trusts.

Although the funds asset allocation are already pretty diversified in different asset classes eg. industrial, consumer, technology, telecommunications, etc., we can also spread out our portfolio to:

• local, regional and global
• equity, balanced and bonds
• big cap, mid cap and small cap.

For the younger group, investing in some bonds or money market funds acts as a reserve when there’s a huge market correction. Switch over some of your bonds/money market funds to your equity funds (Value Cost Averaging principle) to bring down your average cost per unit.

Read: Best Unit Trust In Malaysia

Golden Rule No 5: Reinvest your distributions

This rule is more applicable for the younger age group, from your 20’s to 40’s. Reinvesting your distributions will bring down your average cost per unit in the long run.

Leverage on the power of compound interest when you reinvest your distributions.

Golden Rule No 6: Choose a reliable fund management company with strong fundamentals and good investment track record

There has been cases where smaller fund houses were founded and went bust. Qualification of the fund managers were questionable. Do your homework on the fund management company before entrusting your money with them. 

Be wary of money games and ponzi schemes that promises a monthly return of 3-10% (?!) No proper and legitimate investment vehicle promises those kind of returns. Get out while you can.

A legitimate investment company would be regulated by FIMM (Federation of Investment Managers Malaysia) and Securities Commission and are willing to disclose their financial statements.

Read: The Benefits Of Unit Trusts Investment In Malaysia

Remember These Rules When Investing In Unit Trusts

Do make sure you abide by the six golden rules when investing in unit trusts. More importantly, do consult your trusted unit trust consultant/financial advisor/investment professional who have extensive experience in the field before embarking on an investment plan.

Source: AvrilYap.com

About the Author

Avril Yap, CFP , IFP, CBC, is a practitioner with a large fund house. She is passionate in empowering people with money management and investment skills as doing so will enable them to fulfill their purpose, live meaningful lives and have better relationships. Her vision is to develop more individuals to be CFP Practitioners with a focus on self growth and strong positive values.

A sukuk contract is simply defined as a debt arrangement agreed between the sukuk holders and sukuk issuer to engage in Shariah-compliant activities. Let’s look at how we can drive the development of ESG with sukuk.

But first, what are Shariah-compliant activities?

They are activities that are permissible as disclosed by the Shariah Advisory Council (SAC) of the Securities Commission Malaysia(SC). For example, this includes any activities that are not involved in gambling, prohibited entertainment, riba’-based transactions, tobacco, weapons, and others. When a sukuk holder invests in a sukuk, he basically has the ownership of the given assets and the sukuk is the certificate evidencing the ownership.

When sukuk holders have the ownership, it gives them the ‘financial rights’ (remember, it is a debt arrangement) stated in the terms and conditions of the sukuk. The sukuk holders are entitled to the returns generated with the underlying Shariah-compliant transactions structured and disclosed in sukuk contracts.

A sukuk contract consist of various transactions contracts which form a foundation and has different implications, such as profit sharing, leasing and sale and buyback. There are few structures commonly applied to name a few: ijarah, musharakah, mudharabah, murabahah and wakalah.

In terms of sukuk structures, features and participants there is generally a difference between the international and domestic sukuk markets hence the requirements and popularity of various sukuk financing structures also differs between the two markets. The hybrid structured sukuk is the most common structure issued representing 48% in 2021 by Sovereign Sukuk Issuers, followed by ijarah (31%) and wakalah (20%).

As far as the international sukuk market is concerned, sukuk wakalah has been the most popular structure for some time now. Malaysia on the other hand is popular with the commodity murabahah. Based on the International Islamic Financial Market 2022 Sukuk Report, sukuk issuances in the past ten years has been growing. As of 2021 the market stands at US$188.12 billion.

Throughout the past ten years, however, sukuk issuances were not in constant trajectory. The lowest decline was in 2015 due to a strategic move by Bank Negara Malaysia (BNM) to halt issuing short-term investment sukuk.

So how then we can drive the development of ESG with sukuk?

Read: The Islamic Sustainability Approach In ESG

Total Global Sukuk Issuances In USD Millions

The US$188.12 billion comprised of international sukuk issuances stood at US$49.43 billion whilst US$138.69 billion represents the domestic sukuk issued in respective countries. Malaysia issued 735 domestic sukuk issuances in 2021 totalling to US$61.045 million representing 44% of total domestic issuances globally.

Main factors for this improvement in sukuk issuances despite the global pandemic was due to continuation of economic stimulus measures implemented by respective countries coupled with rising commodity prices including oil (IIFM Sukuk 2022 Report).

Sukuk issuance had a stronger than usual start to the year, based on the considerable momentum it had built up in 2021. Total sukuk issuance reached a total of US$51.6 billion in Q1 2022, compared to US$43.4 billion issued in Q1 2021 (Source: Refinitiv).

Referring to Q4 2021 research by Moody’s, Malaysia and Saudi Arabia continued to dominate the sukuk issuance market with 37% and 29% of total issuances, respectively. However, in Q1 2022, a boost came from sukuk issued by Saudi-based entities, which amounted to US$17.9 billion, outpacing issuances from Malaysia (a market leader) for the first time. Sukuk issuance from Saudi Arabia nearly doubled from US$9.3 billion in Q1 2021.

The Saudi government ramped up issuances through its domestic sukuk programme despite higher oil prices that reached their highest level since the global financial crisis of 2008, amid rising demand for debt from highly rated issuers. The sovereign raised US$14 billion during Q1 2022, up from US$3.7 billion during the same period in 2021.

This included a US$7 billion in sukuk in March 2022, issued with the purpose of consolidating domestic public debt under the sukuk program.

Moody’s expects the outlook for sukuk issuance in 2022 to remain divergent. It is expected that the burst in issuance momentum will wind down over the rest of the year as the Gulf Countries Corporation’s (GCC) government funding needs may reduce in the short-term.

Refinitiv’s Sukuk Perceptions and Forecast Study 2022 also echoed Moody’s forecast stating “whilst the Global sukuk issuance reached US$100.9 billion in H1 2022, issuance momentum is slowing as oil prices are elevated and the Fed leads a global monetary tightening cycle which reduces government borrowing.”

Read: 4 Things That You Should Know About ESG In Malaysia

Driving The Development Of ESG With Sukuk

Nevertheless, just like what was stated in Moody’s and Refinitiv’s report, sukuk is safely being perceived as a viable source of financing for corporate and financial institutions. This includes general purpose requirements, capital adequacies, project financing, budgetary and fiscal requirements, and of liquidity management purposes. ESG with sukuk sure can get along nicely.

In addition, the integration of ESG considerations into investment mandates is also driving the development of green, sustainable and Social Responsibility Investment (SRI) purposes, which would be attractive to sukuk investors and ultimately embodies the true concept of maqasid al-Shariah. That’s how we can drive the development of ESG with sukuk.

Read: ESG Investing And The 3 Steps To Build An ESG Portfolio

About the Author

Established IFRAC Sdn Bhd in March 2022, Baizurah, a certified HRDC trainer has 15 years of Sukuk experience. Throughout her tenure in the financial industry, she was responsible for various dealings related to Debt and Islamic Capital Market, Project Financing and Financial Advisory. Her achievements include arranging the first aviation Sukuk Musyarakah, global Sukuk Ijarah and a pioneer in financial guarantee structures relating to the plantation and real estate industry.

The Securities Commission Malaysia’s (SC) Audit Oversight Board (AOB) has called for Audit Committees of public listed companies (PLCs) to create and maintain an environment that supports and upholds auditors’ independence and high audit quality to ensure that reliable audited financial information is made available to facilitate informed decision by users.

At a recent virtual dialogue series with 823 Audit Committee members from 723 PLCs, the AOB reminded that members of the Audit Committee are instrumental in setting the right tone for the company’s financial reporting process and enabling a close working relationship between the Audit Committee and the independent auditors. It further emphasised that effective oversight by strong, knowledgeable, and independent Audit Committees shall further enhance audit quality in the marketplace.

Recognising this, the AOB regularly engages with Audit Committees to ensure that they are adequately informed and kept abreast with the relevant information to effectively carry out their oversight responsibilities. This year’s dialogue series also saw the AOB sharing the result of its survey on ‘Transparency Reporting by Audit Firms’, which is based on the responses of 151 Audit Committee members.

Introduced in December 2019, the Transparency Reports are issued by certain registered audit firms who meet the mandatory reporting criteria as stipulated by the AOB. The Transparency Reports provide information on a firm’s legal and governance structure, measures taken by the firm to uphold audit quality and manage its risks, as well as
information on the firm’s measurement of audit quality indicators.

The AOB noted that while 89% of the survey respondents are aware of the requirement for audit firms to produce Transparency Reports, only 68% of the respondents have read the Transparency Reports.

The AOB strongly encourages Audit Committee members to read the reports in view that 94% of the survey respondents who have done so have found the information disclosed to be useful to facilitate a more effective selection and assessment towards appointment (including re-appointment) of the external auditors. For good corporate governance, the decision for the appointment or re-appointment of auditors shall be made by the Audit
Committees and not management.

The recently concluded dialogue series, held on 17 November and 6 December 2022, reflects the SC’s efforts to improve corporate governance in PLCs as well as strengthen the ecosystem for audit quality and increase investors’ confidence in the quality and reliability of audited financial statements.

It also provides a platform for Audit Committees to raise any issues with respect to their oversight function and to share good practices in supporting audit quality.

About the Securities Commission Malaysia:

The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.

About the Audit Oversight Board:

The Audit Oversight Board (AOB) is established under the Securities Commission Malaysia Act 1993 which came into force on 1 April 2010 to promote and develop an effective audit oversight framework and to promote confidence in the quality and reliability of audited financial statements in Malaysia. More information about the AOB is available at www.sc.com.my.