When it comes to investment in Malaysia, normally we are talking about physical asset investment. Real estate investment is a major investment decision that Malaysian always consider. As this physical asset is in real life form instead of fluctuating like a stock market. Further to that, physical asset investment is favourable to the largest race in Malaysia, Bumiputera.
Generally, real estate investment tend be the most sought after asset among all. According to SC, typically there are 2 mechanisms that give rise to accumulation of fortunes related to asset prices.
- Asset portfolios are different among the income and wealth groups
- Asset portfolios are more diversified and holdings of equities in total portfolios are much higher in this at the top of the wealth distribution. On the other hand, the main portfolio items for the lower segments of the wealth distribution are real estate and deposits.
- Differences in access to credit
- Given differed collateral requirements and leverage. Also, give rise to differentiated levels of indebtedness and portfolios between the rich and the others. Leverage is much lower for the top of the wealth distribution. Whereas the lower segments of the wealth distribution are usually indebted for their real estate purchases.
Real estate and equity, which are usually owned by the top segment of the wealth distribution, have the highest rate of return over the course of modern history. Since the main financial asset of the poor, other than real estate, is deposits and and this deposit rates do not much converge from bonds. There is a clear rate of return heterogeneity among the different segments of the wealth distribution .
As Malaysia’s population is made up of M40 population and majority of them is Bumiputera, therefore real estate ownership particularly residential is the biggest portfolio in their investment.
Is residential investment is a good option?
As you may see from Malaysia Housing Price Index: Point and Annual Changes by Type 2010-2021 , it is clear that annual changes is peaking at 2012. Starting in 2018 it is already saturated. Declining still on going consistently year on year. I am expecting this trend to continue further as income among Malaysians are not growing.
Factor that affecting declining prices of residential is residential overhang. As of 2021, there is 36,863 residential overhang. Residential overhang is a definition for residential real estate whereby its supply is more than its demand. Residential overhang is alarming high in high rise segment. The country that affected dearly is Selangor and Johor.
Therefore, the days of real estate investment particularly in Malaysian context is already in history case. This is true at least for high rise real estate. We may not expecting this segment to grow in price as long as there is overhang and it is not recovering to meet the demand.
Currently capital market in Malaysia is worth at RM 3.5 trillion. Which consist of RM 1.8 trillion by equity and RM 1.7 trillion by debt. This market size is very small if you are comparing to US which is currently hovering around USD 44 trillion. Ultimately making our market very small, only 0.01% to the US market.
Capital market investment
There are quite a number of investment tools, Malaysian may consider in capital market. Particularly in this area:
- Unit Trust Fund
- Wholesale Fund
- Exchange Traded Fund, ETF
- Private Retirement Scheme, PRS
- Private Mandate
- Peer to Peer, P2P
- Equity Crowdfunding
- Venture Capital
- Private Equity
Investing in capital market is good for Malaysia as well as Malaysian. Let says, every Malaysians tend to invest in capital market, this in turn will make our market size getting bigger. Due to this, lots of new company may grow locally. Thus promoting employment opportunities within Malaysia. This is something we should empower every Malaysia to invest locally with the help of Financial Planner.
As of 2021, net buy in stock market was led by retail investor by RM 12.2 billion. Retail investor is growing at 52.12% from 165,000 (2020) accounts to 251,000 (2021) accounts. With millennial investors comprised the majority of the clientele base.
Retail investors Average Daily Value stood at RM 1.41 billion (2021) as compared to RM 2.752 billion in 2020 
By looking at previous Central Depository System, CDS account in 2019, they were 1.9 million account. An increase of 416,000 accounts represent an increase of 21.9%. If the percentage of Bumiputera remain the same, this translates to merely 613,000 accounts.
Fund Management Industry
- Unit trust – RM 526.89 billion vs RM 128.34 islamic (24.35% to conventional)
- Private Retirement Scheme – RM 5.63 billion vs RM 1.90 islamic (33.74% to conventional)
- Wholesale Fund – RM 79.45 billion vs RM 11.74 islamic (14.77% to conventional)
- Exchange Traded Fund – RM 2.16 billion vs RM 0.42 islamic (19.44% to conventional)
- Private Mandate – RM 21.54 billion vs RM 1.13 islamic (5.24% to conventional)
Peer 2 Peer & Equity Crowdfunding
Peer to peer, P2P financing is another innovative form of financing that allows entrepreneurs and small businesses to unlock capital in small amounts from a pool of individual lenders. P2P enables businesses to borrow and investors to lend capital through online platforms registered with the Securities Commission, SC.
Unlike P2P, Equity crowdfunding, ECF is an innovative form of alternative fundraising that allows small businesses to raise capital from the public, using online platforms registered with the Securities Commission, SC. Under ECF, investor may grab a piece of equities/shares from the business.
Bumiputera may invest in into shariah compliant P2P and ECF as follows:
However, not so many of Malaysian is financially literate . We are still in favour of non-capital market for investment. Generally non-capital market do not benefit economy as a whole. It is personally for individual gain. Non-capital market product such as:
- Tabung Haji
- Fixed Deposit
- Real Estate
- Foreign Currencies
Insurance and takaful particularly is not an investment tool. But many of us were misled by the Insurance and Takaful Consultant about investment and saving in Insurance and Takaful respectively. This was echoed by BNM on 5th of April 2017.
- Bursa Malaysia