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Malaysia : Bond Market Development

This paper pertains to the bond market
development in Malaysia, and provides an overview of the
market scenario in the country. Malaysia has been successful
in developing the capital markets, particularly bond
markets, in the recent past. Now, it faces the challenge of
how to improve broader access and efficiency of the bond
market. A high degree of investor concentration, dominated
by government pension funds, plays a significant role in
impeding the growth of higher-yield bond market. The role of
the government in stimulating the growth of the bond markets
should be now shifted toward encouraging more diversity. In
order to promote risk diversity, significant measures should
be taken to increase competition on the demand side. Another
important challenge for the bond markets going forward is
improving transparency to make them more attractive to a
broader constituency. To improve liquidity and transparency,
the authorities should encourage the establishment of open,
independent electronic platforms that integrate price
search, negotiation, and trading of bonds. It is felt that
while Malaysia has seen success in the bond markets, there
is scope for further improvement.

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