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Speaking on the CMDF-Bursa Research Scheme at the launch of the CMDF at the Securities Commission (SC) this morning, Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia said that relatively low levels of liquidity in smaller capitalised stocks have been an issue for many stock exchanges.
"All markets thrive on information. Study after study has shown that greater transparency leads to greater trading volume, lower bid-offer spreads and better investment decisions by both retail and institutional investors. Basically, consistent and timely information leads to better-informed investment decisions, facilitates greater investor understanding of listed companies and raises the profile of listed companies. It is clear that information begets liquidity."
"The CMDF-Bursa Research Scheme is aimed to accelerate the maturation of the bourse through wider research coverage. The scheme which will ensure continuous and consistent coverage on stocks will enhance publicity and media coverage for the smaller capitalised stocks," Yusli said.
The CMDF-Bursa Research Scheme is an incentivised scheme and the pilot programme covers a period of two years. The scheme is open to all Bursa listed companies and to all licensed investment advisers. Under the scheme, participating listed companies will pay RM30,000 per year for research coverage by at least 2 research firms whilst research firms will be paid RM15,000 to cover each stock, per year.
Research firms are required to produce one initiation of coverage report, 4 results reports corresponding to the quarterly and full year results announcements and update reports.
Yusli said that all research reports under the scheme will be made available to the public free of charge.
"Bursa as administrator of the scheme will allocate participating companies to research houses, through an independent committee. In doing this, sectoral expertise of the research firms will be considered before allocation.
"The funding incentive from the RM7.5 million grant from the CMDF for the 2-year pilot project is proposed as a ringgit for ringgit matching subsidy. This means listed companies only need to pay RM15,000 per year for consistent research coverage.
"We have positive indications of interest from 17 research houses, foreign and local, to participate in this scheme. Almost all broker backed research houses have indicated interest to participate along with a few independent research houses which among others include Standard & Poor’s, Citigroup, ABN-AMRO, CSFB and Macquarie.
"Malaysia is currently experiencing a vicious cycle where less research reinforces the perception that the markets have become less transparent. The CMDF-Bursa Research Scheme is needed to counter this perception.
"Listed companies should take advantage of this scheme to promote wider research coverage and ensure that many more Malaysian stocks are on the radar screens of fund managers and retail investors alike," Yusli said.
