This article first appeared in The Edge Malaysia Weekly on January 26, 2026 - February 1, 2026

THE upcoming Capital Market Masterplan 4 (CMP4) will arrive at a moment of sharp contrasts for the local stock market. The initial public offering (IPO) market is hot, with a steady pipeline of new listings, yet retail participation remains weak and foreign outflows have yet to decisively reverse, even though the bellwether FBM KLCI has just breached 1,700 points for the first time since March 2019.

Against this backdrop, a key question hangs over the Securities Commission Malaysia’s (SC) next reform push: Will the CMP4 help address the capital market’s long-standing structural challenges, or will it become another blueprint that will fade with time?

Over the past 25 years, Malaysia has implemented successive capital market master plans to guide market development.

The CMP1 (2001-2010) and CMP2 (2011-2020) were credited with expanding the capital market while strengthening stability and integrity. The CMP3 (2021-2025), meanwhile, was positioned as a plan to broaden participation, with a focus on making investment products and distribution channels more inclusive and accessible to a wider segment of the population.

When the CMP1 was introduced, the challenge confronting regulators was a retail market that often treated equities like a casino. Following the equity boom that began in early 1990s, many individual investors measured performance in terms of “wins” and “losses”, with little regard for fundamentals.

As long as share prices kept rising, concerns over transparency, corporate governance or financial soundness were secondary. Rumour-driven price movements were often welcomed, even self-fuelled. The Asian financial crisis in 1997 and the dotcom crash in 2000 exposed the risks of such a mindset.

The CMP4 — expected to be unveiled in the first quarter of this year — is anticipated to lay out a 20-year strategic vision for Malaysia’s capital market, with immediate focus on a five-year action plan covering 2026 to 2030.

Making the CMP4 relevant to today’s audience will not be easy. The market landscape today is a far cry from its heyday when hotshot stockbrokers carried suitcases full of cash. It is not just noise from meme stocks, social media influencers, self-proclaimed advisers and distractions from multiple screens. Lifestyles and spending patterns have vastly changed from 30 years ago, with household budgets increasingly stretched by slower income growth, higher living costs, income tax and statutory contributions to the Employees Provident Fund (EPF). Indeed, competing financial priorities — from everyday consumption to long-term retirement planning — have reshaped how individuals engage with the stock market.

At the same time, large domestic institutional funds such as the EPF, Retirement Fund Inc (KWAP), Permodalan Nasional Bhd (PNB) and other government-linked investment companies (GLICs) have become dominant players in the market, collectively managing more than RM1.5 trillion in assets. Their scale provides stability and acts as a buffer during periods of volatility, a feature many markets would envy.

Yet their presence also raises questions about liquidity and price discovery. When markets do not correct as sharply as fundamentals might suggest, foreign investors may stay on the sidelines, deeming market multiples expensive.

Last year, Malaysia’s stock market recorded a substantial foreign net outflow of RM22.32 billion — the largest since the RM24.6 billion in 2020. In contrast, local institutional funds were strong net buyers, mopping up RM22.16 billion, more than double the RM9.94 billion recorded in 2024.

Retail investors also turned net buyers in 2025, purchasing RM160 million worth of local equities after a net selling of RM5.73 billion a year earlier. Meanwhile, foreign shareholdings of Malaysian equities declined to around 19% in 2025, close to the 2003 trough of 18.1%.

In a note dated Dec 12, 2025, CIMB Securities noted that while foreign participation in trading activity rose meaningfully — reaching 41% in the first 11 months of 2025, up from 36% in 2024 and above the historical 19%-29% range between 2013 and 2023 — the increase in trading activity did not translate into higher ownership.

Meanwhile, retail participation fell to a record low of 18% in 2025, down from pandemic-era highs of 36% in 2020 and 37% in 2021. The previous record low was 20% in 2016.

On a positive note, Bursa Malaysia hit its target of 60 IPOs in 2025, expanding funding options for small and medium enterprises (SMEs) and adding more variety to the market. But the milestone raises another question — is the bourse building a sustainable pipeline, or merely a volume-driven one?

The contrast is clearer when a comparison is made with larger exchanges overseas. A market such as Nasdaq can attract a wider range of companies, including those that may not fit the conventional mould, because it has the scale and regulatory framework to manage higher volatility and weaker listings.

On Nasdaq, if a company’s stock price is below the nominal US$1 after a prolonged period, the counter will be delisted.

Notably, Malaysian chicken claypot restaurant chain operator CCH Holdings Ltd, which recently listed on Nasdaq and saw its share price surge and tumble within a short period, is a reminder that a deeper market can accommodate more listings — for better or worse.

In terms of numbers, Bursa Malaysia did fairly well. Yet some market watchers argue that quantity alone is not enough and urge reforms to the local bourse to attract better-quality listings that can pique and sustain investor interest, thus contributing to long-term market growth and depth.

After all, a stock market is like a supermarket — it needs not only shoppers but also a wide range of good products on the shelves. Without enough quality listings, investors are likely to look elsewhere.

Put another way, Bursa Malaysia currently has large “anchor buyers” in domestic institutional funds but arguably fewer sizeable “anchor tenants” to keep the market stocked and demand consistent.

Billionaire investor Tan Sri Chua Ma Yu opines that Malaysia needs more mergers and acquisitions (M&A) activity, and a higher number of local corporates that can scale up into major companies.

“Our largest company is Malayan Banking Bhd (KL:MAYBANK), which has a market capitalisation of over RM135 billion, whereas Singapore’s DBS Group Holdings Ltd has over S$164 billion (RM513.2 billion). We have to attract global investors and we have to create larger companies,” he tells The Edge.

A seasoned local investor, regarded by many as an investment guru, highlights that the problems at the root of the poor performance of Malaysia’s capital markets are deeply intertwined with the overall racial, cultural, political and economic nature of the country.

“Unless there are massive changes in these, Malaysia will remain a poor-performing market. Whatever the SC or Bursa may try to do will be mired in all the prejudices and dogmas of the ruling parties,” he tells The Edge bluntly.

He argues that encouraging SMEs to list may not necessarily improve the overall performance of Bursa Malaysia.

“Most companies are listed at the pinnacle of their achievement, so their listing is merely to monetise the to-date good performance. In my experience, about 70% of new IPO companies go on to perform poorly.

“No Malaysian companies have been able to achieve the global scale or success of companies like Thailand’s Charoen Pokphand Group Co Ltd or Taiwan Semiconductor Manufacturing Co Ltd. Even the much-vaunted empire of Robert Kuok has performed poorly in recent years,” he remarks.

Astramina Advisory Sdn Bhd founder Datin Wong Muh Rong recommends a two-pronged growth strategy on IPOs and M&A for the CMP4.

“A vibrant and resilient capital market cannot rely on IPOs alone. Sustainable growth requires a balanced ecosystem in which IPOs facilitate new capital formation, while M&A enables capital recycling, consolidation and strategic corporate transformation,” she says.

Wong, who is also chairman of the Association of Corporate Finance Advisers, notes that there is a growing risk that overemphasis on IPO-led growth, coupled with relatively stringent rules governing reverse takeovers (RTOs) and backdoor listings (BDLs), may unintentionally suppress legitimate M&A activity.

“Regulatory frameworks must be purpose-driven and calibrated to avoid discouraging transactions that deepen market liquidity, promote capital recycling, and facilitate corporate renewal.”

As RTOs and BDLs are globally recognised mechanisms for M&A-led growth, Wong says as long as minority shareholders are given a fair and transparent exit through a mandatory general offer, they should be encouraged as an alternative pathway for capital market expansion.

“In developed markets such as the US, high-profile and competitive M&A transactions often progress swiftly, with approvals largely confined to boards and shareholders. Speed and decisiveness are critical in such environments,” she stresses.

At a time when Bursa Malaysia is grappling with weak retail participation and persistent foreign outflows, the growing influence of GLICs has become more apparent. Their increasing concentration of capital has, in turn, put the spotlight on how the equity market functions, with market participants questioning whether valuation adjustments and price discovery remain effective.

Pheim Asset Management Sdn Bhd founder Tan Chong Koay says the commercial independence of government-linked companies (GLCs) and institutional investors should be respected.

“Ultimately, GLCs and institutional investors will invest or divest based on their own views on the market outlook. Rather than artificially enhancing or reducing their role, we should trust them to make allocation decisions that align with the prevailing economic conditions.

“If the market outlook is positive, they will naturally be there to support it. Even during market downturns, their decision to hold cash is constructive. That liquidity acts as a buffer, preserving their capacity to step in and stabilise the market effectively once valuations become attractive again,” he explains.

EPF chief investment officer Mohamad Hafiz Kassim is of the view that the CMP4 will be an important road map that will help shape Malaysia’s capital market over the long term.

“Ultimately, the effectiveness of any capital market framework is reflected in the outcomes it delivers, including strong governance, transparent disclosures, sound capital discipline and a sufficient depth of investable companies capable of generating sustainable earnings across cycles,” he says.

While market activity goes through cyclical phases, long-term investors such as EPF place greater emphasis on fundamentals such as industry attractiveness, a firm’s strategy and earnings quality, rather than short-term liquidity or sentiment.

“EPF supports efforts that broaden investable opportunities and strengthen market integrity, as these are essential to sustaining confidence, long-term value creation and retirement financial security,” Mohamad Hafiz says.

Looking ahead, EPF expects Malaysia’s capital market to continue evolving amid global shifts, supported by domestic political stability, clear policy direction, such as the 13th Malaysia Plan and National Energy Transition Roadmap, and growing investment activity.

“A resilient, well-governed and forward-looking capital market will remain key to keeping Malaysia attractive and competitive for both domestic and international investors,” he adds.

Another institutional investor, PNB, believes the CMP4 must prioritise strengthening and materially expanding the size of the Malaysian capital market in terms of both the equity and debt markets.

For the equity market, focus should be on how returns can be enhanced in order to improve its vibrancy and attractiveness, particularly to global investors. This requires total market returns to be enhanced through better domestic corporate performance and greater focus on the listing of larger-scale enterprises involved in growth sectors.

“This also requires a ‘whole of nation’ approach, mobilising regulators, the bourse, institutional investors and the corporate sector to drive improvement of total shareholder returns, hold companies accountable for performance and aggressively marketing the benefits of Malaysian equity listing to players involved in the export-based growth sectors,” says PNB.

Moreover, the role of GLICs should continue evolving and be repositioned as part of the solution.

“GLICs have an important responsibility to act as catalytic stewards, driving stronger performance by holding boards accountable, supporting the development of quality IPOs and helping promising private companies transition into the public market.

“GLICs can also leverage their size to act as lead investors for new innovative debt and global sukuk products. When done well, this approach not only strengthens Malaysian corporates and benefits minority shareholders, but also enhances the overall attractiveness of Malaysian companies to foreign and global investors over time,” it adds.

The cooling of trading activity has revived concerns over weak retail participation. There is irony in this — the CMP1 sought to move the market away from its casino-like image, yet over the past 25 years, retail investors have never really returned in a big way, save for the brief trading boom during the Covid-19 pandemic when movement was restricted.

With overseas markets now easily accessible via stockbroking firms as well as trading applications, the CMP4 faces the challenge of boosting retail participation on Bursa Malaysia.

Minority Shareholders Watch Group (MSWG) CEO Ismet Yusoff observes that the post-pandemic cooling was impacted by both cyclical and structural issues. He says the slowdown reflects a cyclical normalisation from exceptionally high retail trading and extraordinary liquidity.

Retail trading rose sharply in 2020-2021 due to various stimuli, including the movement lockdowns and low global interest rates. This was boosted by the convenience of online broking.

There was a spike in total Central Depository System accounts to 2.8 million in 2020 and three million in 2021, from around 2.5 million between 2015 and 2019.

Total average daily trading volume increased from three billion in 2022 to 4.3 billion in 2024, compared with 7.48 billion in 2020 and 5.85 billion in 2021. Total trading volume increased from 729 billion shares in 2022 to 1.06 trillion in 2024, compared with 1.86 trillion in 2020 and 1.43 trillion in 2021.

Retail participation is, however, muted, with its share declining to 21% in 2024 from 27.5% in 2023, despite an increase in average daily trading value to RM660 million in 2024, compared with RM565.8 million in 2023.

“The local equity market is competing with other asset classes for young retail investors, who are spoilt for choice. With ease of accessibility, many prefer overseas markets that offer greater liquidity and growth narratives that fit the technology-driven future, while having the perennial perception that Bursa Malaysia is slow-moving, boring, traditional and dividend-centric,” Ismet analyses.

He points out, however, that 44 of the record 60 IPOs on Bursa Malaysia last year were ACE Market listings.

“The popularity of the ACE Market has drawn massive retail interest vis-à-vis larger-market-cap, Main Market new listings. We concur with the Ministry of Finance’s call to prioritise larger-capitalised IPOs in 2026 and beyond to deepen the Main Market’s depth and international appeal, as large funds are bound by their investing criteria such as investing in companies above a certain market cap and segment.”

Unfortunately, Ismet says, Bursa Malaysia is held back by market perception that IPOs are “cash-out” exercises for promoters and major shareholders, while retail investors bet on the IPOs’ price performance to make quick gains.

“We should do away with the mentality of prioritising short-term trading gains over long-term fundamentals,” he urges.

CGS International Securities Malaysia CEO Khairi Shahrin Arief Baki says the opening up of trading platforms to allow Malaysians to access foreign markets has provided retail investors with a greater choice of investments, resulting to some extent in weak retail participation on Bursa Malaysia.

“We should strive to bring more interesting and diversified companies to the local bourse to spur market participants to invest locally. The muted retail participation is likely a cyclical trend returning to pre-pandemic levels, influenced by economic factors and risk aversion, rather than a permanent structural shift in investor behaviour,” he reasons.

To make the domestic market more compelling to younger and retail investors, Khairi suggests that key strategies involve continuous efforts to increase financial literacy and introduce appealing products and incentives.

“In fact, in April last year, we launched our UP app, Malaysia’s first Bursa fractional share trading platform, in conjunction with the Asean Investment Conference 2025. UP also offers a regular saving plan that encourages regular investing to build wealth and mitigate timing risk.

“With consistent investment, they are not affected by market fluctuations and will have decent returns in the long run,” he says.

CIMB Securities head of research Ivy Ng Lee Fang thinks the weak retail participation is a cyclical correction. “If we have programmes similar to Value Up in Japan to enhance shareholder value, as well as larger IPOs with strong earnings growth, we believe this could help deepen the pool of liquidity and trading depth.”

She says the muted retail participation is partly due to the availability of alternative asset classes and the ability to access other equity markets that have greater liquidity and deliver stronger returns.

“[GLICs should] enhance [their roles] in the form of taking a more active investor’s role to raise shareholders’ returns.”

Ng adds that most local investors prefer to invest in domestic names.

“For exposure to foreign markets, there are more options by going direct to the destination markets. As such, priority would be to get large-cap Malaysian companies to list on Bursa Malaysia. The current global theme is artificial intelligence, but Malaysia does not have many listed companies with exposure to AI.”

MSWG’s Ismet believes Bursa Malaysia should continue to pursue high-quality IPOs, including foreign listings, but at the same time position itself as a specialised regional market rather than a global mega hub, competing with Hong Kong, Singapore or China.

“We recorded strong IPO volume regionally with 55 IPOs in 2024 and 60 in 2025, raising RM7.42 billion in 2024 and RM5.96 billion in 2025. We are considered a top IPO destination within Asean by the number of IPOs and funds raised. Bursa Malaysia remains a domestic-focused IPO hub with a high listing volume and broad base of small- and-mid cap issuers,” he says.

In the 2010s, attempts to attract foreign listings, such as mainland Chinese “red chips”, delivered poor results. Opinions are divided on whether Malaysia should try to pursue foreign IPOs again.

Ding Su Lynn, partner for corporate finance at Baker Tilly Malaysia, highlights that the success of the country’s capital market should not be measured by IPO numbers alone. Instead, it should aim to be a more investable and more liquid market, with broader participation beyond the largest stocks and a healthier balance between public and private capital.

“Under the CMP4, Bursa should attract regionally scaled Asean companies, transition-related businesses such as energy and industrial efficiency players, and selected high-growth founder-led firms with strong governance. The focus should be quality and scale, not listing volume.”

Ding believes Bursa Malaysia should selectively pursue foreign IPOs, and not go head to head with the stock exchanges of Hong Kong or China.

“Bursa should target companies where it has an edge — Asean businesses, sustainability-linked issuers and firms aligned with Islamic finance. Competing on credibility and governance is more realistic than chasing volume,” she says.

“The CMP4 should respond by making the domestic market more attractive — higher-quality listings, stronger exchange-traded funds (ETFs) and thematic products, and firmer action against manipulation. Retail investors stay when markets feel fair and transparent.”

Datametrics Research and Information Centre managing director Pankaj Kumar agrees that Bursa Malaysia does not seek to compete with developed markets such as Singapore, Hong Kong or China.

“What Malaysia could do is attract large Asean-based companies to have a dual-listing on the local bourse and have our top 30 companies be able to list on their markets, for a start. We should also market the local bourse [as a listing destination], especially to those from the Middle East which could tap Malaysian institutional investment funds that are shariah-based,” he says.

Pankaj adds that the quality of companies should be prioritised as earnings durability and growth seem to be lacking in many smaller listings.

“The CMP4 should enhance the listing requirements to attract start-ups with a potential market capitalisation of below RM500 million and those with no earnings track record. We have seen markets like Singapore and Indonesia host such companies, but Malaysia seems to have fallen behind when it comes to start-ups.”

Tradeview Capital Sdn Bhd CEO Ng Zhu Hann points out that the underperformance of the local bourse has drained the confidence of retail participants. Additionally, the issuance of digital brokerage licences to platforms such as Moomoo and Webull has effectively made trading in overseas stocks easy and cheap, resulting in many retail investors looking abroad.

“This measure, while good for bringing down the cost of trading, also disrupted the local brokerage industry and provided a different market opportunity to our local retail investors.”

Nevertheless, he believes there is a wide diversity of stocks on the local bourse, especially in the past two to three years. The biggest challenge, however, is the quality of the companies and the valuation of those seeking a Main Market listing.

“Many good companies that choose to list on the Main Market ask for a ridiculous valuation, regardless of their sector.

“This affects the sustained performance, even to the point where investors feel they are being taken for a ride as it appears more like a cashing out endeavour than fundraising for future growth. The assessment criteria ought to be more stringent,” he opines.

Maybank’s community financial services head of strategy Chris Eng Poh Yoon says the CMP3 broadened the sources and pool of financing available to SMEs and mid-tier companies, as the number of IPOs on Bursa Malaysia surged.

The CMP4 should continue to prioritise the retention of funds in the country by crafting regulations that enable the offering of new and innovative products — such as investment assets denominated in foreign currencies — as well as the development of advisory services, including single family offices, which are currently being established in the Johor-Singapore Special Economic Zone.

While overall trading volume may have moderated, he observes a noticeable shift towards small-cap stocks, where retail investor interest has been significantly stronger.

“In a way, the breadth of available small caps that attracts investor interest has widened significantly, given the 60 IPOs in 2025 — the highest in two decades. This has helped attract local attention back to the bourse, even though the lack of big-cap IPOs has led to lacklustre foreign interest,” Eng elaborates.

He reiterates that the Malaysian bourse has shifted from a focus on large IPOs that typically attract foreign investors, to a greater number of smaller IPOs that generate stronger local interest.

“Given the limited pipeline of large companies capable of delivering sustained post-listing growth, this pivot towards listing smaller players with multiple value propositions is a welcome development. The CMP4 can be tailored to further support and encourage this shift.”

Singular Asset Management founder and chief investment officer Teoh Kok Lin stresses that by 2030, the success of the CMP4 must be defined by Malaysia becoming a “wealth retention hub”, and not just a wealth creation hub.

“We currently face a genuine risk of capital flight. As an active fund manager, I observe a growing trend of family offices and high-net-worth individuals relocating their bases to Singapore and Hong Kong.

“When I engage with global fund managers, the feedback is consistent — Malaysia is still largely pigeonholed as a ‘defensive low beta play’. They look to Vietnam for manufacturing growth or Indonesia for consumption stories,” he says.

This view frustrates him because it ignores a critical reality — Bursa Malaysia hosts one of the region’s largest clusters of listed semiconductor and outsourced semiconductor assembly and test firms.

“We possess genuine ‘tech beta’, but this narrative is currently being drowned out by legacy ‘old economy’ perceptions.”

AHAM Asset Management Bhd founder and managing director Datuk Teng Chee Wai says the muted retail participation may reflect investors’ greater access to global markets, broader product choices and more competitive digital platforms.

As a result, domestic equities now compete directly with global markets and alternative asset classes for retail capital. To reverse this trend, the CMP4 could focus on improving the quality of new listings, especially from new economy sectors, enhancing corporate access and disclosure to retail investors, as well as encouraging the development of new-gen products such as ETFs and thematic indices.

“GLCs and institutional investors play an important role in providing long-term stability to the market, but their role can be made more effective. This can be achieved by taking a more active ownership role, including deeper engagement with portfolio companies on best ESG (environmental, social and governance) practices and value unlocking through long-term business thinking.

“Beyond investment returns, GLCs also play a nation-building role by nurturing promising local companies into global champions tomorrow. Continued focus on professional and independent board appointments would also help strengthen governance, protecting minority interest and thus making the market more attractive to investors,” he concludes. 

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