WealthTech

Malaysian Retail Investors Return to the Fold on the Back Digital Acceleration and COVID-19

by Vincent Fong March 18, 2021 0 comments

Securities Commission Malaysia (SC) revealed during their annual report press conference today, that 2020 has seen heightened participation from retail investors.

Datuk Syed Zaid Albar, Chairman of SC shared with members of the media that this was evidenced by the fact that retail investors made up 32.4% of total value traded in the stock market, which is significantly higher than the 5 year average.

While he is pleased to see higher retail participation, Datuk Syed also cautioned investors to be savvy when trading during the press conference.

“However, we have to warn that investors must be able to make informed decision when trading, investors must be cognizant of the risk and opportunities involved when investing in the market. Be cautious of social media chatrooms that try to influence investors to buy or sell certain stocks based speculations.”

He further adds.

“Please do trade on fundamentals and not be swayed by rumors or FOMO.”

Statistics from the regulator showed that 75% of these accounts belonged to investors aged above 40 and 50% of retail trading volume was contributed by investors aged between 40-60.

Meanwhile, those below 30 are the least active demographic but sees the highest percentage of trade placed electronically.

The return of retail participation is definitely a welcome one, the 1997 Asian financial crisis has caused many retail investors to shy away from investments after suffering significant financial losses from the stock market.

The rise of popularity of digital investments platforms brought on by the pandemic coupled with SC’s efforts to democratise access to wealth management products were likely the main contributors to retail investors returning to the fold. Moving forward, the regulator also revealed that one of their key focus areas in 2021 is to expand the digital outreach to the older population.

Foo Lee Mei, Chief Regulatory Officer of SC also revealed during the press conference that 2020 has seen an increase of over 700% in new account opening for robo-advisors, 1000% new accounts for crypto exchanges with 450,000 accounts across the 3 regulated platforms, and the number of investors for equity crowdfunding (ECF) and P2P financing has increased from 20,000 to 30,000 in total.

Interestingly, ECF and P2P financing outperformed Venture Capital (VC) and Private Equity (PE) as a source of fundraising for companies in Malaysia with the total amount of funds raised via the former going up by 43% in 2020.

Datuk Syed noted that the pandemic has caused many VC and PE firms to take a “wait-and-see approach” especially during the early phases of the pandemic, with many of them shifting their focus towards ensuring the business continuity of their existing portfolios.

He added that the Movement Control Order also restricted these investors’ ability to conduct due diligence on the investees. However, he is cautiously optimistic the numbers will improve as we recover from this pandemic, maintaining that VC and PE firms will continue to play an important role in bridging the funding gap in Malaysia.

He also pointed out that ECF and P2P financing has proven themselves as a method of fundraising that is resilient to the current economic turmoil. With Prime Minister Tan Sri Dato’ Haji Muhyiddin bin Haji Muhammad Yassin announcing yesterday that the limit for equity crowdfunding has been lifted from RM 10 million to RM 20 million, ECF is anticipated to play a bigger role in fundraising for Malaysian companies in 2021.