Capital Fund Raising for SMEs

On 2 September 2016, Bursa Malaysia released a consultation paper on the proposal to establish a New Market on Bursa Malaysia positioned to provide small and medium sized companies (SMEs) greater access to the capital market.

Under the current capital market, Bursa Malaysia operates two markets for companies to access capital: Main Market for established companies with profit track records and/or sizeable operations; and ACE Market for smaller companies with growth potential.

Typically, smaller SMEs which may not qualify for the ACE Market have relied on traditional sources of funds, such as bank borrowings. There are also SMEs which seek out venture capitalists and angel investors, especially those without tangible assets to pledge as collaterals to banks. The recent approval by the Securities Commission for equity crowd funding has opened up another source of capital although this has yet to catch on with the investing public and businesses.

Recognising the challenges faced by SMEs, Bursa Malaysia has proposed to establish the New Market – an equity market set up to provide smaller SMEs a cost effective and efficient way to raise funds from qualified sophisticated investors. This is actually not completely new as similar markets have been established in other countries, such as South Korea’s Korea New Exchange (KONEX) and China’s Chinese National Equities Exchange and Quotations (NEEQ or Third Board). While both KONEX and NEEQ have enjoyed a measure of success providing start-ups access to capital in their respective markets, they have also encountered some challenges. READ MORE >>>