Malaysia’s exchange-traded fund market may be at a turning point after years of sluggish growth as regulators and asset managers ramp up efforts to expand product offerings and attract younger investors.
That was the assessment of participants at two panel sessions on ETFs during Asia Asset Management’s 14th Annual Malaysia Roundtable on May 5. They highlighted active ETFs, shariah-compliant products, retirement-linked investments and greater digital adoption as potential catalysts.
According to one panellist, Lim Hui Mei, a vice president at stock market operator Bursa Malaysia, “the stars are aligned” for the local ETF market, an observation agreed by Amardeep Kaur, general manager for investment management development at Securities Commission Malaysia.
“We are seeing retail investors – there’s growth in retail adoption of ETFs. Institutional investors are now more willing to adopt ETFs as tools for market access and asset allocation,” said Lim, vice president, wholesale product coverage, securities market, in Bursa Malaysia’s product and market development division.
She suggested focusing on segments where Malaysia holds advantages. “We have to know our niche. If we get that right, definitely we can succeed,” she said.
Kaur said Malaysia could position itself as a regional hub for Islamic ETFs, noting that regulators are already seeing growing interest from local and foreign issuers. “There’s a large untapped market there…the halal economy.”
She said the regulator and Bursa Malaysia are working to improve market liquidity and investor access through various initiatives.
Beyond passive
Janice Hui, managing director and head of global business strategy at the Hong Kong unit of China’s Fullgoal Asset Management, said the global ETF market has evolved far beyond its traditional role as a low-cost passive investment vehicle.
“ETF is no longer something that’s passive, tracking an index only, and most importantly, low fees,” she said.
According to Hui, active ETFs are now one of the fastest-growing segments globally, with inflows reaching US$250 billion in the first quarter of 2026 alone. She said 89% of ETFs launched worldwide this year are active ETFs.
She said crypto ETFs and structured outcome products such as covered-call ETFs are gaining traction globally, particularly among investors seeking income-generating strategies. “Covered-call ETFs can buffer downside risk while generating income.”
Teh Chi-Cheun, head, investment specialist and research at Malaysian asset management firm AmFunds Management, said ETFs are increasingly being viewed as efficient portfolio-building tools rather than just passive investment products.
“As long as any investment becomes more mainstream, then an ETF is the ideal instrument to structure it with,” he said.
But he said the Malaysian ETF market needs stronger local institutional participation. “The irony is that iShares listed in the US for Malaysia is actually larger than many of our local ETF population.”
Challenges
Despite their generally upbeat assessment, the panellists acknowledged that there are still structural challenges in Malaysia’s ETF market, particularly in attracting retail participation.
Zainal Izlan Zainal Abidin, who is on the investment panel of local pilgrimage fund board Lembaga Tabung Haji, said the number of listed ETFs has dropped from 20 in 2022 to 14 currently, although assets under management have grown.
He called for more product variety to attract investors. “ETFs need to offer something investors cannot easily access directly,” he said.
Umar Alhadad, chief executive officer of Malaysian ETF specialist Eq8 Capital, said investor behaviour is still one of the biggest hurdles.
“How do we convince someone who has never opened a trading account? That is the major friction,” he said. “The growth of ETFs will predominantly be driven by behavioural change coupled with financial literacy.”
