From Mazli Noor
The current market volatility has highlighted the need for more diversified investment vehicles that offer capital preservation and reasonable returns for retail investors.
While Malaysia’s bond and sukuk markets represent a substantial RM2.11 trillion investment landscape, as of January 2025, there remain structural barriers that limit wider retail investor participation, creating an opportunity gap that warrants systemic reform.
The Malaysian fixed-income securities market operates with significant accessibility limitations for individual investors.
Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) are predominantly distributed through institutional channels, utilising primary market auctions and private placements.
Secondary market access, meanwhile, remains equally restrictive, with participation limited to institutional investors and high-net-worth individuals with a minimum subscription of RM250,000.
Sukuk Prihatin, the only retail-focused offering with an allocation of RM500 million and 2% annual returns over two years, remains insufficient to meet market demand, even though it is off-limits to major institutional fund managers such as EPF, Lembaga Tabung Haji, and Permodalan Nasional Bhd (PNB).
This compartmentalised bond market structure differs markedly from other regional players such as Singapore and Indonesia.
The Singapore government’s bond programme for retail investors, for example, has demonstrated the viability of democratised sovereign debt markets over the last decade, with Singapore Government Securities made accessible through secondary markets.
Indonesia’s Retail Obligations Programme launched in 2006, meanwhile, harnesses domestic banks and securities firms’ extensive networks to reach retail investors, ensuring wider accessibility to local investors.
Creating a more comprehensive retail bond market that is accessible to the retail investor will require a more robust ecosystem that facilitates interaction between retail investors, financial intermediaries, and bond issuers.
A precedent for this already exists in PNB’s unit trust platform, which provides a successful, proven framework for retail capital market participation in fixed-income securities, which would also facilitate the liberalisation of MGS and MGII markets.
Any expansion of the retail bond market access must of course be accompanied by strengthened regulatory frameworks and robust enforcement mechanisms. Such enhancements will be key to expanding the scope of the country’s financial inclusion and contribute to the depth and resilience of domestic capital markets.
Mazli Noor serves on the boards of several public and private companies and is an FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.
