20/06/2023 (Kuala Lumpur, Malaysia) - The Malaysian currency, the ringgit, may see an uptick following measures announced by Prime Minister Datuk Seri Anwar Ibrahim aimed at invigorating the local capital market. While the Prime Minister acknowledges that the measures and the ringgit's performance are not directly related, he remains optimistic that a stronger capital market will indirectly lead to improvements in the currency.
"The fundamentals of our economy are strong," said Anwar, who is also the Finance Minister, during the launch of InvestEd, formerly known as the Capital Market Graduate Programme, at the Securities Commission (SC).
Three key strategies were outlined by Anwar to increase market vibrancy and enhance the attractiveness of the local capital market. The first involves expanding investment and wealth creation opportunities, including attracting a larger investor base to support small and medium enterprises (SMEs) and new economies. Market and structural reforms are also on the cards to restore confidence in Malaysia's dynamism and competitiveness.
This follow with an immediate measure is the reduction of the stamp duty rate for shares traded on Bursa Malaysia Securities from 0.15% to 0.1% of the contract value, capped at RM1,000 per contract, effective from July.
This step is expected to reduce the cost of securities transactions and make the local stock market more competitive, attracting both domestic and foreign funds.
SMEs is also encourage to pursue initial public offerings (IPOs) and support public-listed companies in raising funds to expand and create more jobs.
The SC and Bursa Malaysia are set to implement reforms this year to facilitate listings on the exchange, including speeding up the IPO process. "The ease and pace of approval must be faster... to allow for more vibrant activity in the market," added Anwar.
The Finance Ministry and SC are also examining policies to encourage the establishment of "Family Offices" to drive greater domestic direct investments and capital ventures. Anwar highlighted the example of "enabling tax losses from corporate venturing to be utilised by the parent company to set off other sustainable investments in the group."
On the broader economic front, Singaporean bank OCBC forecasts the Malaysian economy to grow 4.4% year-on-year in 2023, despite external economic headwinds that are expected to slow down the pace of growth in the second half of the year. The forecast growth will be supported by resilient domestic demand.
As for the currency, the ringgit is likely to stay at the current level against the US dollar, at 4.60 to 4.61. Meanwhile, SMEs in Malaysia are bullish on their prospects for 2023, defying the global economic slowdown to continue hiring and demonstrating resilience. The hiring trend is particularly noticeable in the food and beverage sector, one of the hardest hit by the pandemic, indicating signs of market recovery. The median salary increase across industries in Malaysia is expected to be 5.1% in 2023, above the Asia-Pacific average of 4.4%.
New amendments to Malaysia's Employment Act 1955, effective from January 1, 2023, which include reduced working hours and flexible work arrangements, are also expected to support workers as the country navigates economic challenges. The upcoming 2023 Budget, set to be released on February 24, is eagerly anticipated by the SME sector, which the government has identified as a high-potential area for focus.