This article first appeared in The Edge Malaysia Weekly on November 24, 2025 - November 30, 2025

THE Securities Commission Malaysia (SC) has issued a consultation paper seeking industry feedback to revamp listing requirements for the Main and ACE Markets. The revision forms part of its commitment to foster a competitive and vibrant capital market that drives economic growth. The regulator is reviewing the effectiveness of Bursa Malaysia’s public market segments.

The last reform was in 2009, and SC says “the recent observations underscore the need for a timely reassessment of our current public market”. The proposals include raising the net profit threshold for Main Market admissions, allowing some flexibility in assessing listing candidates’ operating cash flow and strengthening sponsor-driven oversight of the ACE Market, among other measures.

Under the proposal,  the minimum requirement for the most recent annual profit-after-tax (PAT)  will be raised to RM15 million from RM6 million currently, while the three-year aggregate PAT will be increased to RM30 million from RM20 million.

Malaysia’s new PAT requirement for a Main Market listing would remain lower than Singapore’s but higher than Thailand and Indonesia’s. SC says in the public consultation paper that the move aims, among other things, to “preserve the Main Market’s status” and raise the quality of listings. It notes that between 2018 and 2024, Main Market applicants typically reported annual profits above the current RM6 million annual PAT requirement.

CIMB Investment Bank Bhd CEO Nor Masliza Sulaiman says the proposals reflect the evolving capital market, as companies seeking Main Market listings have generally grown larger and reported profits well above current thresholds. She adds that the changes aim to create a clearer distinction between the Main Market and the ACE Market, noting that the former is for larger, more profitable corporations, while the latter remains accessible to smaller, less established companies.

“The proposed increase in the minimum requirement for entry into the Main Market is not only an alignment but also to provide a more distinct segmentation,” she tells The Edge.

Datametrics Research and Information Centre head Pankaj Kumar says SC’s proposed changes aim to raise the floor and attract higher quality listings, rather than maintain a low bar that is easily met. He describes the revision as “a step in the right direction”, noting that the current framework is outdated and that raising the bar could draw better quality companies without necessarily narrowing the pool of eligible listings.

He suggests, however, that SC should adopt a different framework for start-up companies seeking a listing on Bursa Malaysia.

On the Main Market, companies can list through three routes. The first is the profit test, which traditionally requires a proven profit track record over three to five full financial years prior to submission. Apart from raising the PAT requirement, SC proposes shortening the profit track record to three financial years and removing the need for “uninterrupted” profits, provided the financial statements carry no modified or qualified audit opinions.

The second route is the market capitalisation test, which requires at least RM500 million upon listing. The third is the infrastructure project corporation (IPC) test, designed for infrastructure companies with project costs of at least RM500 million and a concession or licence period that has at least 15 years remaining.

According to the consultation paper, initial public offering (IPO) applications for the Main Market from 2018 to 2024 show that 56% were via the profit test, 42% via the market capitalisation test, and 2% via the IPC test.

Companies must also meet an additional requirement to qualify for listing, demonstrating a healthy financial position, including sufficient working capital for more than a year, positive cash flow from operating activities and no accumulated losses. Under the proposal, SC is considering relaxing the positive operating cash flow requirement to encourage “high-growth and new economy-type corporations” to enter the market.

“This approach aims to strike the right balance: preserving robust listing standards that protect investors while ensuring the framework remains inclusive and adaptable to evolving business models,” SC says.

It is unclear what SC means by “high-growth and new economy-type corporations”. Still, market observers believe the move is probably aimed at attracting start-ups, technology firms and renewable energy players to the local market.

“Malaysia’s market is mainly dominated by financials and old-economy sectors like plantations and oil and gas, which struggle to stand out amid a global shift towards growth and tech-driven assets,” says Astramina Advisory Sdn Bhd founder and managing director Datin Wong Muh Rong.

She notes that SC recognises that with the rise of technology-based businesses, positive operating cash flow is no longer a realistic benchmark for many high-growth companies. The proposal to remove this requirement, she says, is meant to open the door for more tech players — including unicorns — to pursue listings on Bursa Malaysia.

This shift could draw larger tech companies with solid business models but without positive cash flows, particularly those seeking working capital. “It positions the exchange as a potential platform for future unicorn listings,” Muh Rong says.

She adds that markets such as the US Nasdaq and the London Stock Exchange already allow companies to list despite not having positive operating cash flows.

In 2021, Grab Holdings Ltd, which began as MyTeksi with early backing from the government-backed Cradle Fund, became Southeast Asia’s first decacorn in a deal valued at nearly US$40 billion when it made its Nasdaq debut via a backdoor listing. At the time, many saw the move as a loss for the Malaysian capital market, given Bursa Malaysia’s track record in handling large IPOs.

The proposed relaxation, says CIMB ’s Nor Masliza, is positive insofar as it recognises that a negative operating cash flow position “is not necessarily a reflection of the poor financial position or lack of financial fundamentals of an issuer”. She stresses, however, that this does not remove the need to holistically assess a company’s financial position.

Meanwhile, Astramina’s Muh Rong points out that many highly successful companies, including members of the “Magnificent 7” such as Alphabet Inc and Amazon.com Inc, did not generate positive operating cash flow in their early years, yet continued to draw strong investor interest because their business models were sound, scalable and deeply consumer-focused.

“These are exactly the types of companies Bursa Malaysia should also aim to attract — enterprises with solid fundamentals and compelling growth trajectories,” she says.

Under such a framework, she adds, investors should pay closer attention to metrics such as revenue growth, how essential a product is to its customers, gross margins, customer acquisition costs and lifetime value, total addressable market, scalability and the strength of both the business model and the management team.

Having said that, this also begs the question of whether Malaysian investors, be it institutional funds or retail, have the risk appetite for this new breed of companies. 

Malaysia is widely seen as no longer producing as many large companies as it once did, a trend shaped by several factors. Market sources say there have even been discussions with foreign companies, including banks that have operated in Malaysia for decades, to encourage them to list locally.

While some argue that it makes sense for multinationals with substantial operations here to tap the local equity market, the authorities in their home country often take a different view.

Bursa Malaysia is experiencing one of its busiest IPO cycles in years; yet, the market does not feel much larger. The FBM KLCI has fallen 7.6% over the past decade and closed lower almost every year since 2015, except in 2024, 2020 and 2017.

Still, IPO activity has surged. The number of new listings rose from 32 in 2023 to 50 in 2024, and as many as 60 companies are expected to debut this year. So far, 50 companies have listed: seven on the Main Market, 39 on the ACE Market and four on the LEAP Market.

But market capitalisation tells a different story. It has grown only 14%, from RM1.75 trillion to RM1.99 trillion, suggesting that the surge in listings is heavy on quantity but light on scale.

Market observers say this imbalance between listing activity and market depth forms part of the broader backdrop against which SC is considering refinements to the Main and ACE Market frameworks.

SC’s consultation paper also notes that the line between the Main and ACE Markets has blurred, with some companies eligible for the former opting instead to list on the latter. Market observers say this trend has grown in recent years, as many ACE-bound companies now outpace some Main Market applicants in terms of profits, and in certain cases debut with sizeable market capitalisations.

“It is important to refresh the framework and reaffirm the distinctions,” Baker Tilly Malaysia managing partner Datuk Lock Peng Kuan tells The Edge. The Main Market, he adds, should remain the home for established companies with a larger market capitalisation while the ACE Market serves as the growth board for high-potential firms. The LEAP Market should continue functioning as an accessible platform for emerging small and medium enterprises (SMEs).

“Clear segmentation helps ensure that companies list on the board that best reflects their stage of development and investor expectations.”

He adds that the revision is timely, noting that the last major overhaul was in 2009, when the Main Board and Second Board were consolidated into a single board and the Mesdaq Market was transformed into what is now the ACE Market.

“The proposed changes represent a modernisation of our listing framework. These proposals introduce substantial changes to listing eligibility that will help bring greater clarity to both companies and investors,” Lock says.

Meanwhile, SC says although it recognises that the choice of listing venue is ultimately a commercial decision, there is a  need to ensure that the ACE Market remains aligned with its role as a platform for SMEs, while the Main Market remains the premier venue for larger, more established corporations.

Between 2018 and 2024, some 83 companies, or 54% of ACE Market issuers, met either the Main Market’s profit or market capitalisation requirements. Several listed with market capitalisations exceeding RM500 million, with one surpassing RM1 billion at IPO. “This trend blurs the distinction between the two market segments and, thus, creates confusion among investors regarding the investment proposition of each market,” SC says.

In addition, the regulator plans to be granted the power to require ACE Market companies to transfer to the Main Market once they meet certain criteria. It also proposes a minimum three-year sponsorship period for ACE Market-listed companies. Furthermore, companies need to stay on the ACE Market for at least two years after IPO.

While fund managers such as Areca Capital’s Danny Wong believe the proposals will not materially alter day-to-day investment decisions, he thinks the revamp could prompt investors to reassess the Malaysian market.

“Right now, investors see Malaysia as a steady dividend growth market. While it is good, that narrative needs to evolve, as we cannot keep relying on financials or plantations alone. These sectors are solid, but they do little to energise the growth trajectory of our capital market,” Danny explains.

He adds that Malaysia has high-growth, high-value potential sectors — not just tech start-ups but also the tech supply chain, such as fast growing, yet capital-intensive, chip design companies. “To unlock their full value, we need a market structure that supports their scale and ambition,” he says.

This becomes particularly relevant, as foreign investor participation in Malaysia has tapered over the years, while local fund managers increasingly look abroad for high growth investment opportunities.

From a market perspective, BIMB Securities Sdn Bhd director of research Mohd Redza Abdul Rahman says a stronger Main Market could attract more foreign investor interest, raise Malaysia’s profile and increase the country’s weight in major global indices such as the MSCI Emerging Markets Index.

“At the same time, growth-oriented companies would be more suitably channelled to the ACE Market until they genuinely qualify for the Main Market,” he adds.

Redza notes that the proposals serve a dual purpose: modernise the listing landscape while introducing new dynamics that will require stronger disclosure standards and more informed investor participation.

“More early-stage or growth-focused companies may enter the market at IPO. In the absence of a mandatory positive operating cash-flow requirement, investors will bene­fit from paying closer attention to factors such as cash utilisation, related-party financing structures, and the robustness of revenue recognition,” he says.

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