Malaysia PE/VC capital commitment at $1.45b in 2016

View of Kuala Lumpur City at night

Malaysia witnessed funds committed in venture capital (VC) and private equity (PE) space at $1.45 billion (MYR 6.5 billion) last year, less than doubling in the past ten years amid concerns around the quality of underlying assets to be held by the investor firms.

Malaysia’s Securities Commission, however is working on recommendations for the concerns through a task force it has constituted for looking at the concerns in the PE and VC industry in the country, the recommendations that could be out by the middle of this year.

“…Some of the challenges are to find investee companies, where to put the capital. This is one of the key areas which the task force is looking at in the recommendations on creating more diversity and quality of potential investee companies for the PE and VC funds,” said SC Managing Director Zainal Izlan Zainal Abidin on a query from the portal on Thursday at the release event for SC Annual Report 2016.

The key factor, according to him is finding the right underlying investment which once addressed can find more capital commitment in the PE and VC space in the country.

Further, in addition to the quality of assets, the task force is also looking at tax framework to give a boost to the PE and VC space. “It is an issue in our engagement with the (PE/VC) industry. Others are talent development that we are also looking”.

The Malaysian VC industry, established in 1984 with the formation of Malaysian Ventures Sdn Bhd has seen total capital available grow substantially from $740 million (MYR3.3 billion) in 2006 to $1.45 billion (MYR6.5 billion) in 2016, according to the Annual Report 2016.

From SC Malaysia Annual Report 2016

From SC Malaysia Annual Report 2016

 

From SC Malaysia Annual Report 2016

From SC Malaysia Annual Report 2016

The growth in the VC and PE activity in the country, though not large, has grown from 91 registered VC and PE outfits in 2006 to 109 in 2016.

“To accelerate industry growth to the next level, the Malaysian Venture Capital and Private Equity Development Council (MVCDC) has formed a dedicated working group co-chaired by the Malaysia Venture Capital Management Bhd (MAVCAP), the country’s largest venture capital company, and Ekuiti Nasional Bhd (Ekuinas), a private equity company owned by the Government of Malaysia, to identify challenges and provide specific recommendations for industry development,” the report said.

With all these enabling framework and alternative funding avenues in place, the capital market will continue to support businesses that are gearing up to deliver the right product, quality, solution and service at competitive prices, both in domestic and international markets.

“Aligned to the Government’s efforts in promoting the growth of start-ups and MSMEs, the SC has always supported efforts to promote capital formation by having a facilitative framework for the venture capital and private equity industry,” it added.

This is further augmented through SC’s role as the chair of the Malaysian Venture Capital and Private Equity Development Council (MVCDC), a one stop co-ordinating entity which provides strategic direction and advice to the Government on developmental initiatives for the industry.

Meanwhile, the country’s capital market grew from MYR2.8 trillion in 2016 with total capital raised at MYR 98.5 billion.

“We expect higher levels of fundraising in 2017, with current estimates of between MYR102 billion to MYR 105 billion…,” said SC Chairman Ranjit Ajit Singh.

The Malaysian capital market is well positioned to leverage on the renewed interest in emerging markets. Underpinned by higher levels of corporate activity against a backdrop of sound economic fundamentals and higher earnings forecast consensus, the overall outlook for the capital market is positive, the SC said.

In addition, domestic financial conditions remain accommodative to support growth and ensure sufficient liquidity. As domestic businesses expand with expected revival in private investment and infrastructure spending, the capital market will continue to support the
financing needs of the economy.

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