Retail investors in Malaysia can now look forward to greater participation in the country's corporate bond and sukuk market.

This comes as the Securities Commission Malaysia announced on September 19 the liberalization of its regulatory framework to facilitate greater retail access into the market.

The liberalization is part of the continued efforts by the Securities Commission to further develop this market. The new framework will allow a more efficient issuance process for corporate bonds and sukuk to be offered to retail investors.

Qualified issuers no longer need to make disclosures through a prospectus, and are only required to issue a product highlight sheet. The range of corporate bonds and sukuk that can be offered to retail investors has also been expanded beyond plain vanilla bonds.

In addition, the Securities Commission is introducing a new seasoning framework to enable retail investors to access existing corporate bonds and sukuk that are currently traded by sophisticated investors in the over-the-counter (OTC) market.

Under this framework, corporate bonds and sukuk that are eligible for retail investment must have been in the market for at least 12 months, and have a minimum credit rating of A, among other requirements.

Along with these measures, the distributors of corporate bonds and sukuk in the OTC market are required to observe the sales practices prescribed by the Securities Commission, such as the requirement to undertake the necessary client on-boarding assessment and ensure fair treatment of investors.

The liberalized framework for retail investors is complemented by the centralized online information platform, Bond + Sukuk Information Exchange Malaysia (BIX Malaysia), established by the Securities Commission in November 2017.

BIX Malaysia enables investors to obtain necessary information on ringgit bonds and sukuk to assist in their investment decisions.

The Malaysian bond market is the third largest in Asia – relative to GDP – and the largest sukuk market in the world. The total local currency outstanding bonds amounted to 1.339 trillion ringgit (US$323.43 billion) at the end of March this year, with government bonds accounting for 53% and corporate bonds 47%.

Sukuk dominate the local currency bond issuance with a share of 59.4%, up from 58.9% at the end of December 2017.