www.thesundaily.com - PETALING JAYA (June 25, 2012): Once considered the third-largest market in Asia after Tokyo and Hong Kong during the 1990s, Bursa Malaysia now needs to do more or risk falling further behind its competitors, analysts warned.
They said it's not enough to pay lip service to the goal of
developing Bursa Malaysia into an attractive and competitive exchange in
the region, but not act on it.
"In the early 1990s, Bursa Malaysia (then known as Kuala Lumpur Stock
Exchange) used to be on par with Singapore's stock exchange (in terms
of vibrancy). Back then, volume in the Singapore stock market was very
much dependent on Malaysia when investors in Singapore were allowed to
trade Malaysian shares on the CLOB (Central Limit Order Book system)
market," said an analyst. (source)
"In fact, when trading on CLOB was halted in September 1998, some had
predicted the demise of the Singapore stock exchange due to its heavy
reliance on Malaysian shares. But over the years, Singapore has managed
to successfully reinvent itself, attract many foreign companies to list
there and even surpassed Malaysia in stock-market capitalisation.
"Taking a look at the history of the stock market back in the 1990s
to now, it's clear Bursa Malaysia has deteriorated in terms of status
and attractiveness. In those days, a foreign fund manager cannot ignore
Malaysia as a market. Today, the Malaysian stock market is being
marginalised," he told SunBiz.
Market capitalisation of Bursa Malaysia stood at US$395 billion as at
end-2011, with market velocity standing at 33%. In comparison, Japan's
stock market capitalisation was US$3.5 trillion as at Dec 31, 2011,
while Hong Kong's was US$2.8 trillion and Singapore's US$464 billion.
"It is relative and arguable whether Bursa Securities is doing enough
or can do better to make Bursa Malaysia attractive, as it depends on
which exchange you are measuring with. Back then, we used to be measured
against Hong Kong and Singapore. If that is so, we are definitely
nowhere near them now.
"Rather, these days, people compare Malaysia with Indonesia, Thailand
and the Philippines. We are down to that league. Of course, if we
compare ourselves to these countries, we are much better in selected
areas. But a question we should ask ourselves is, 'Is it fair to compare
ourselves with these countries when we used to be in a different
league?'" said the analyst.
"What is our niche? Also, Bursa Securities boasts that there are
currently 929 companies listed on the local bourse. Do we emphasise
quantity over quality? How many listed companies that are of decent size
and quality for foreign investors to invest in today? What is the point
of having hundreds of companies, but only a handful are regarded as
investable?" he asked.
The analyst also noted that the government's aim to increase the free
float of listed government-linked companies has been slow in coming.
"And during his speech at Invest Malaysia 2010, Prime Minister Datuk
Seri Najib Razak had said the Employees Provident Fund accounted for up
to 50% of the local equity market's daily trading volume, which is not
healthy. From an efficient market perspective, the stock market must be
liquid enough such that no one single player can control the market," he
In addition, the introduction of new investment products such as
exchange traded funds and regulated short selling facility have seen
little response as seen in their low trading activity.
A research head from a local brokerage said another a sign of Bursa
lacking in vibrancy is the growing number of Malaysian companies seeking
"You don't see a foreign company seeking dual listing in their own market as well as Malaysia," he said.
The research head believes that Bursa Securities can do more to
increase the market's volatility and activity. For one, it could ease
the ratio limit before serving an unusual market activity (UMA) query to
"That's because an UMA query gives a negative sentiment to investors."
"We need to have our foundation/regulatory framework sorted out first
before we move to offer new hybrid investment products. We also have to
increase the number of foreign investor participation in the local
market. There's no point in introducing new products without the market
players," he added.
Another research head sees a need to improve the quality of listings
on Bursa Malaysia to attract both foreign and local investments.
While analysts said Bursa Securities should do more, they said the
government must move hand in hand with the stock exchange operator to
attract more foreign capital to invest here and the local equity market,
as well as big foreign companies to set up here.
"To say whether our market is vibrant or not, sometimes it depends on
not just the stock market operator but also the country's dynamics.
People look to Singapore because it has an established financial
centre," said Etiqa Insurance & Takaful's Investment Management
Division head of research, Chris Eng.
He said Malaysia also has to decide whether it wants to attract more institutional investors or more retail investors.
"If you want to be like Hong Kong and attract more retail investors,
then the rules there appear to be less tight. But if you want to attract
more institutional investors, then you need to allow more asset
management companies to set up here, like in Singapore. However, that is
outside the authority of Bursa Securities and under the Securities
Commission's jurisdiction," he added.
"Thus, there is only so much Bursa Securities can do. You attract
foreign companies to list here, but your own government is not
supportive, then it reflects badly on you and nobody else wants to
come," said Eng.
Source: http://www.thesundaily.my/news/415705 - June 25, 2012