Asset managers will be permitted to launch a wider range of ETF products in Malaysia under new rules being brought in by the country’s securities regulator.

The easing of restrictions by the local securities regulator is expected to lead to significant product development within Malaysia’s ETF market.

As of 2 January 2019, ETF providers will be permitted to list leveraged & inverse ETFs, synthetic ETFs, physical commodity ETFs, and smart beta ETFs on Bursa Malaysia, the Securities Commission Malaysia said in a statement.

The move is expected to lead to greater participation from retail investors in the country’s ETF sector although investors will need to satisfy pre-qualification criteria before investing in leveraged and inverse products.

According to regulator, “The introduction of an array of ETFs aims to promote competitive growth and facilitate product innovation in the market, providing new investment opportunities and exposure for investors with varying risk appetites. These enhancements to the ETF market are in tandem with global trends, with the Asian ETF market expected to see an annual growth rate in assets of 18% by 2021.”

A wider selection of investment strategies will benefit investors by providing an expanded toolkit with which to diversify portfolios and construct bespoke investment solutions.

Currently, Bursa Malaysia is home to 10 ETFs with a combined market capitalisation of approximately 2.0 billion ringgit ($480 million). This represents just 1% of the exchange’s total listed market cap, as at the end of October.

The existing ETFs include eight equity funds, providing exposure to US and Asian equity markets; a local government bond ETF; and a Shariah-compliant gold tracker.