SC revises ETF guidelines to boost retail participation

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Written by Syndicated News

KUALA LUMPUR, Nov 26 2018 : The Securities Commission Malaysia (SC) has revised its guidelines on the Exchange Traded Funds (ETFs) to boost retail participation by allowing for the issuances of a more diversified range of ETFs in the market.

The revised guidelines will come into effect on Jan 3, 2019.

In a statement today, the SC said these included futures-based ETFs, synthetic ETFs, physical commodity ETFs and smart beta ETFs.

“The introduction of an array of ETFs aims to promote competitive growth and facilitate product innovation in the market, providing new investment opportunities and exposure for investors with varying risk appetites.

“These enhancements are in tandem with global trends, with the Asian ETF market expected to see an annual growth rate in assets of 18 per cent by 2021,” it said.

Currently, the SC noted that Malaysia has 10 listed ETFs with a combined market capitalisation of about RM2.03 billion as at October 2018.

The  SC said futures-based ETFs such as Leveraged and Inverse (L&I) ETFs would pave the way for a more cost-effective and transparent channel for investors to access the traditionally sophisticated futures market.

“Leveraged ETFs use futures contracts to provide a multiple of the underlying index’s daily return (positive or negative), while Inverse ETFs allow investors to gain from downward market,” it said.

It said due to the complexity of the L&I ETFs, prospective retail investors must meet certain pre-qualification criteria before they could invest in these products.

First time retail investors must undergo an e-learning module developed by Bursa Malaysia, as well as a performance simulator provided by management companies of L&I ETFs before they can invest in L&I ETFs, it added. – Bernama



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