TheStar
THE unit trust industry expanded further during the first five months of the year with the launch of new funds and an increase in the number of units in circulation.
The growth was attributed to sustained investor interest in unit trusts as a viable investment instrument.
During the period, 45 new funds were launched to reach a total of 435 funds as at end-May (end-2006: 392 funds).
Units in circulation rose 8.7% to 167.4 billion (end-December, 2006: 10.5%; 154.1 billion). The Islamic unit trust segment continued to expand with 12 new funds bringing the total to 106 as at end-May 2007 (end-2006: 95 funds).
The net asset value (NAV) of the unit trust industry rose 18% to RM143.7bil and accounted for 13.5% of the market capitalisation of Bursa Malaysia (end-2006: 23.6%; RM121.8bil; 14.4%).
The number of new unit trust funds launched that invested in foreign markets and funds already investing abroad reached 128 funds as of end-May, with investment totalling RM10.8bil.
There has been positive response to the Government's efforts to promote the development of Real Estate Investment Trusts (REITs) in the capital market. The first half of 2007 saw four new REITs listed on Bursa Malaysia bringing the total to 13 REITs.
Market capitalisation of REITs rose strongly by 73.5% to RM4.98bil as at end-June (end-2006: RM2.87bil), reflecting growing investor interest in REITs as an investment instrument to access the property market.
The development of exchange-traded funds (ETFs) has, however, been slow in the initial period, with only two listed ETFs as at end-July.
More ETFs are expected to be listed in the near future, following the call to Government-linked investment companies to participate in ETFs by selling a portion of their portfolios in exchange for units in the ETFs. A committee was set up in April to oversee the success of this exercise.
The derivatives market traded more actively during January-July 2007, with turnover increasing nearly twofold to 3.7 million contracts (January-July 2006: 2 million contracts).
Investor interest was concentrated on the KL Composite Index (KLCI) and crude palm oil (CPO) futures, with trading of the two derivatives accounting for 95.6% of total turnover.
Trading in KLCI futures doubled to 1.8 million contracts (January-July 2006: 904,573 contracts). Market buying of KLCI futures was underpinned by the stronger performance of the underlying KLCI, which posted fresh highs several times in 2007.
The CPO futures market remained active, with robust growth of 88.5% to 1.7 million contracts (January-July 2006: 918,805 contracts).
The strong turnover of CPO futures was attributed to the worldwide decline in edible oilseed production, rising demand for Malaysian CPO and market expectation of growing demand for palm oil-based biodiesel.
These developments exerted upward pressure on CPO prices, with the benchmark 3-month CPO futures averaging RM2,199 per tonne during January-July (January-July 2006: RM1,467 per tonne).
Monetary policy in 2008 would continue to be directed at sustaining the growth momentum with price stability.
Economic growth in 2008 is expected to be supported by robust domestic demand and a favourable external environment.
Inflation is projected to remain relatively benign. There are, however, risks and uncertainties to the inflation outlook, given the sustained high global prices of energy, commodities and food.
The challenge for monetary policy would be to respond pre-emptively to any signs of pressures or imbalances emerging in the economy.
The outlook for the capital market remains positive on the back of sustained domestic economic conditions and a favourable external sector.
Corporate debt issuance is likely to be driven by new investment activity, mergers and acquisitions and the implementation of projects under Ninth Malaysia Plan, including Iskandar Development Region, the Northern Corridor Economic Region and other economic corridors.
International competition in Islamic finance is likely to intensify, and Malaysia would continue to build on the Malaysian International Islamic Financial Centre MIFC initiative to further accelerate the growth of Islamic finance.
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