KENANGA ANNUAL REPORT 2020

15 ANNUAL REPORT 2020 // KENANGA INVESTMENT BANK BERHAD a proposed acquisition of a 19.0% equity stake in Tokenize Technologies (M) Sdn Bhd ( “Tokenize Malaysia” ), which was approved by the Securities Commission Malaysia on 24 March 2021. Tokenize Malaysia is one of three Digital Asset Exchanges ( “DAX” ), licensed by the Securities Commission Malaysia and second largest DAX in the country by traded market share. Operating under the brand Tokenize Xchange, it is an online exchange that allows the trading of cryptocurrencies like Bitcoin and Ethereum. The emergence of digital assets including cryptocurrencies has been gaining acceptance globally in the last few years, with its presence in Malaysia fast gaining traction. Fund raising through the tokenisation of businesses and assets is anticipated to be a significant part of the capital markets in the future and making an inroad in the digital assets sector with domain experts Tokenize Malaysia, positions Kenanga to meet opportunities in this area. Financial Position As at 31 December 2020, our capital adequacy ratios were 24.04% and 24.08% at Group and Company levels respectively. These levels were well above the 10.50% set by Bank Negara Malaysia, including a capital conservation buffer of up to 2.50% if imposed. Liquidity Coverage Ratio was 154%, above the regulatory requirement of 100%, while Net Stable Funding Ratio averaged above 100%, which became a mandatory level in July 2020. The Group maintained A+ and MARC-1 ratings from Malaysian Rating Corporation Berhad ( “MARC” ), which demonstrated once again our strong competitive position, sound capital position, profitability and funding profile despite weakened capital market conditions. We will continue to work towards better ratings through ongoing improvements to our financial performance. At the same time, our subsidiaries KIB and Kenanga Islamic Investors Berhad ( “KIIB” ) maintained MARC’s IMR-2 ratings, reflecting well-established investment process and sound risk management practices. SEGMENTAL REVIEW Stockbroking The Stockbroking division, buoyed by the momentum in the stock market, delivered one of its best performance yet with a PBT of RM86.8 million for FYE2020 against PBT of RM9.5 million for FYE2019. This was mainly due to the higher net brokerage income and higher trading income on the back of the significant increase in Bursa Securities trading volume and market volatility. The COVID-19 pandemic provided a second wind to the stockbroking industry by reigniting retail interest. This segment, which previously represented less than 20% of daily trading volume on the Main Market of Bursa Securities, grew to average of around 50% over the course of the year. As a result, our brokerage and trading incomes rose together with the increased vibrancy of the market, and the Stockbroking division significantly outperformed expectations for the year. Technology investments made in recent years prepared us well for the sudden shift to online trading. It also allowed us to support our remisiers and dealers who were able to service their clients and fulfil surge in volumes remotely. The division clocked a significant 30% growth in its market share to 12.6%, ending the year as the number one retail stockbroker in Malaysia by trading value. Entering its fourth year as Malaysia’s fully online stocktrading platform, our joint venture, Rakuten Trade, was buoyed by hundreds of thousands of traders piling into the stock market, mirroring trends seen in the U.S and other major economies. With all its facilities accessible throughout movement restrictions, Rakuten Trade received record high account opening and trades on its platform, spurring its first profit in April 2020 and has remained profitable ever since. Rakuten Trade currently contributes approximately 20 % of the Group’s market volume on a daily basis and we expect this figure to grow in 2021. As at 31 December 2020, Rakuten Trade has 166,000 trading accounts under its belt, making it the fastest growing stockbroker in the market with a market share of over 2%. Rakumargin, a new margin financing platform was rolled out during the year and customers can look forward to more exciting new value-added products and features on the platform in 2021.