.jpg)
Addressing participants of the National CEO Summit this morning, Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia said that the tremendous growth in the Malaysian Capital Market over the past few years brings with it great challenges. His speech on 'Industry Challenges & Corporate Strategies Ahead - Malaysia Capital Market : Outlook and Challenges' was read by Md Nor Ahmad, Chief Regulatory Officer of Bursa Malaysia at the summit.
"All those who have a stake in the market and benefit from increased market activity should work together and come up with ideas to enhance market activity and develop the market."The three key challenges that need immediate attention and need to be immediately addressed are boosting market liquidity, enhancing quality of listed companies and enhancing the profile of the Malaysian market internationally."
In terms of market velocity, which basically measures the trading turnover and liquidity of a particular market, Bursa Malaysia has achieved a high of 69% in 1997 before the Asian financial crisis. Velocity dipped to a low of 19% in 2001 and as at end October 2004, the market velocity was recorded at 33%. This puts Bursa Malaysia in the second lowest position amongst other peer regional markets, just one position above the Philippines market.
"This is a critical challenge for the market and all it participants to address. Trading activity needs to be increased to maintain the competitiveness of our market to attract more investors and capital.
"Large public companies need to consider increasing their free-float shares as this will enhance liquidity in the market. "Expanding access to our market can also enhance trading activity. Bursa Malaysia and Singapore Exchange (SGX) propose to implement a trading linkage which should contribute towards enhancing liquidity of both the Malaysian and Singaporean markets, thus, benefiting intermediaries and investors from both sides," Yusli said.
In addressing the second challenge of enhancing quality of listed companies, Yusli said that Listing Requirements of Bursa Malaysia and the Securities Commission’s guidelines and requirements on issuance of securities along with other statutory requirements imposed is aimed at ensuring that quality and standards are met. Additionally, upon listing, companies are required to comply with the post-listing obligations set out in the Listing Requirements.
"Adherence and compliance with these requirements would ensure that the companies listed are up to the standards set by the exchange and authorities. This initiative protects the investors and shareholders, particularly minority shareholders.
"In maintaining standards of quality, training for directors which is prescribed by the exchange under the Mandatory Accreditation Programme contribute towards enhancing professionalism of directors and effectiveness in discharging their duties and responsibilities."
Bursa Malaysia has seen a tremendous growth of 30% in the number of new listed companies over the past 6 years, from 1998 to November 2004. MESDAQ Market listings grew from 4 in 2001 when the market merged with Bursa Malaysia to 56 companies as at end November 2004. The Main and Second Boards of Bursa have also seen good growth in number of listed companies. This year, there have been 14 new listings on the Main Board, 25 new listings on the Second Board, and 24 new listings on the MESDAQ Market as at end of November this year.
The third challenge for the capital market which bears significant impact on the attractiveness of the Malaysian market is enhancing the profile of the Malaysian market internationally.
"In terms of investors’ trading activity and profile, Bursa Malaysia market is dominated by local players. Foreign investors constitute only approximately 30%. Other internationally more competitive and attractive markets enjoy higher foreign participation. We need to increase foreign participation in our market to make it more internationally acceptable and attractive.
To address this, we need to increase international endorsement of our market and one of the ways is to increase weightage of Malaysia in internationally benchmarked and followed indices like the MSCI. The exchange, local institutional investors and related organisations and authorities need to work together effectively to increase the weighting of Malaysian listed companies in these global indices. Increase weighting should translate into increase foreign participation in Malaysian stocks," Yusli said.
The recent 2005 Budget contains proposals which is intended to increase the competitiveness and attractiveness of the capital market. The recommendations pertaining to capital market development will serve as further catalyst to improve liquidity and internationally position the Malaysian market.
