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Malaysia’s Kenanga partners with Yuanta

Kuala Lumpur-based Kenanga Investors has entered into a strategic partnership with Taipei-based Yuanta Securities Investment Trust to develop exchange-trade funds in Malaysia.

Under the partnership, the two firms expect to launch new types of strategies in Malaysia “in the near future”, according to a statement from the Malaysian firm. They will include leveraged and inverse ETFs.

Kenanga Investors offers around 26 conventional and Islamic mutual funds in Malaysia, but it has not yet  launched any ETF products in the country. The firm’s AUM is around RM 7.8bn ($1.96bn), according to the firm’s website. The firm’s wholly-owned subsidiary, Kenanga Islamic Investors, which is responsible for shariah-compliant products, manages RM 2.2bn.

In May last year, the Securities Commission (SC) of Malaysia announced that it will facilitate the introduction of L&I products to investors, but has not made any further announcements since.

FSA sought more information from Kenanga Investors, but the firm did not provide details of what kind of ETFs it will be launching.

Datuk Chay Wai Leong, group managing director at Kenanga Investment Bank, Kenanga Investors’ parent, noted Yuanta Securities’ role in developing the ETF market in Asia. “Over the last decade, they have played an instrumental role in the launch of ETFs regionally, including Thailand, Korea, Hong Kong and China,” he said.

Yuanta Securities, the biggest asset manager in Taiwan managing locally-domiciled funds, has also previously established partnerships with other asset management firms in the region. For example, it partnered with E Fund Management Hong Kong to launch a leveraged ETF tracking the Hang Seng Index in August last year. The firm also signed a memorandum of understanding with Seoul-based Mirae Asset Global Investments in 2015 to cooperate in the ETF space.

“This strategic partnership [between Kenanga Investors and Yuanta Securities] is a constructive step towards improving the liquidity and vibrancy of the industry, and we look forward to greater innovation and expansion of the market through similar initiatives,” Seri Tajuddin Atan, CEO of Bursa Malaysia, said in the statement.

Malaysia’s ETF market remains small. There are only 10 ETFs listed on the local bourse, according to data from Bursa Malaysia. They are managed by four firms: Affin Hwang Asset Management, AmFunds Management, CIMB Principal Asset Management and I-VCap.

Nevertheless, the market is growing. ETF assets in Malaysia have grown 55% between the end of 2013 and the end of 2017, Kianhong Tan, Singapore-based senior analyst at research firm Cerulli Associates, said previously.

ETF assets in Malaysia (AUM in $1m)

Source: Morningstar

“On the retail front, both the SC and Bursa Malaysia are trying to increase retail investors’ awareness of ETFs, and this will take time,” Tan said.

The SC launched initiatives last year to develop a more vibrant ETF market. They include recommending a lower minimum capital requirement for ETF issuers and broadening of ETF distribution channels by permitting financial institutions, online platforms and financial planners to offer ETFs to clients via stock brokerage firms.

Firms are also trying to further diversify the market with new products. This year, the country saw the first ETF that invests in US companies.

Part of the Bonhill Group.