Executive Chairman of Kuala Lumpur Stock Exchange Dato' Mohd Azlan Hashim said these market and industry participants include:-
- intermediaries, such as stockbroking companies, fund managers
- industry professionals, including advisers, lawyers, accountants and auditors,
- investors
"Stockbroking companies are clearly one of the most significant intermediaries to the investment process.
"In this respect, there is a continuing need to enhance sophistication of the brokers, in research capability, investment advisory and financial planning. The research capability of brokers should be fully explored and built up, making it a key revenue generator for brokers.
"We believe the infusion of foreign expertise via expanding direct market access by foreign market intermediaries will further spur development in this area. Brokers and dealers alike should also expand the traditional service of pure broking or trade execution into investment advisory and financial planning, offering value added service to investors, hence reducing reliance purely on the vagaries of sentiment and speculation," he said.
Mohd Azlan was speaking at the Malaysian Institute of Certified Public Accountants (MICPA) 45th Anniversary Commemorative Lecture in Kuala Lumpur today. The event was attended by Chairman of Securities Commission, Datuk Ali Abdul Kadir, MICPA President, Beh Tok Koay, council members and members of MICPA.
Commenting on the contribution by industry professionals, Mohd Azlan said they include the very audience that were present at the event.
"Professionals, including accountants, auditors, corporate advisers, legal advisers can and must ensure that the standards for corporate disclosure, transparency and reporting are high and in conformity with those recognised internationally.
"This is of critical importance for greater investor confidence and enhanced market performance. Off course with better market performance, this will enhance the attractiveness for issuers to raise capital here.
"At an operational level, there are also opportunities to streamline processes to ensure that overall turnaround time for corporate exercises are improved. Malaysian corporate advisors and professionals should look to international standards as benchmarks for quality and efficiency and continue to work with regulators to improve this," Mohd Azlan said.
Mohd Azlan also said investors must play a significant role in the process.
"Investors should allocate their savings and investments only to those companies that are more productive and efficient, those that give them their required return - basically, investing on fundamentals and after analysis, and not mere speculation.
"Investors should also develop greater interest and be prepared to take action in protecting their rights and their investments. Whilst regulations and regulators are there, shareholder activism can be very effective as a tool - not only to ensure a higher degree of transparency and accountability, from the boards of listed companies, but in some instances even prevent a wrong instead of a post event action," he said.
In his speech, Mohd Azlan also said the achievements of the capital market in 2003 has set a good foundation for further growth in 2004.
"In 2003, the Kuala Lumpur Composite Index was up 23% year-on-year - a clear indication of a turn-around, from the subdued period of 2001 to 2002. This growth is commendable, even compared to other regional bourses, particularly when returns are weighted against volatility. This steady and healthy performance can be attributed to the larger market capitalisation base and the relatively diverse sectoral representation.
"In 2003 alone, KLSE recorded 58 new listings - the highest number in five years. Total listed companies have now surpassed the 900 mark, with a year-end count of 906, compared to only 285 in 1990. KLSE market capitalisation now stands at RM 659.23 billion (as at close 14.1.04) a 33 % increase from a year ago (as at close 14.1.03 RM - 495.57 billion). To date, we are still the largest bourse in ASEAN in terms of size and number of listed companies.
"Moreover, in terms of the key measure of market depth, the ratio of total market capitalisation to the size of GDP, our ratio of 168 % is among the deepest in the Asia Pacific region, ahead of peer markets such as Singapore, (135%) Taiwan (104%), Korea (41%), Australia (96 %) and Thailand (26%). This is a clear indication of the maturity of Malaysia's capital market.," Mohd Azlan said.
He said in terms of secondary market trading, average daily trading volume is at 504.9 million shares for 2003, a 100% increase year on year and the highest in the last five years. Meanwhile, average daily trading value is at RM838.77 million, up 58% year-on-year. Market Velocity, which is the ratio of annual trading value to total market capitalisation, accelerated to 36%, compared to 25% in 2002 - the highest level since 1997.
" Whether viewed from a fundamentals viewpoint or using technical analysis - the year 2003 clearly shows an up-trend, and provides a strong platform for continued performance into 2004," Mohd Azlan added.
On recent developments of KLSE, Mohd Azlan said KLSE has a vision that is reasonable, practical and achievable.
"It is this - by consistently offering internationally competitive products, services and infrastructure, klse will become the premier fund-raising and investment centre for securities, derivatives and offshore financing that appeal to investors world wide.
"En route to its vision, KLSE has achieved a significant milestone on 5th January 2004, when it was successfully demutualised and converted from a company limited by guarantee to a company limited by shares, with some 6000 shareholders - over 5,900 are remisiers.
"Hence, KLSE is now known as Kuala Lumpur Stock Exchange Berhad and acts as the Exchange Holding Company for all market institutions in Malaysia.
Mohd Azlan said demutualisation provides the platform for KLSE to be more agile and flexibile to capture growth opportunities and inculcate a performance-oriented culture in its business and operations. In this respect, demutualisation is viewed as only the catalytic beginning of the overall business transformation and re-engineering of the exchange.
"Thus, moving forward, KLSE will focus on implementing three key strategic thrusts:
"One, boosting market velocity and liquidity through broadening market access, innovating trading models, forming strategic alliances, and proactive marketing to broaden our investor base.
"Two, diversifying revenues through expansion of the products and services portfolio, and
"Three, achieving operational scale and efficiency through consolidating the information technology platforms and systems, streamlining both the corporate and management organisation, and re-aligning regulatory roles and resources vis-à-vis the Securities Commission," he said.
Mohd Azlan said KLSE is not, and should not be left to undertake all these initiatives to respond to global challenges, alone. On the regulatory aspect, the Securities Commission also has to play an important and vital part.
"Towards this end, KLSE also seeks to streamline its regulatory roles and resources with the Securities Commission. A key achievement in conjunction with demutualisation is the signing of a regulatory MOU between Securities Commission and KLSE to establish a framework for co-operation and streamline functions - in short, matching duties with powers.
"Securities Commission will be responsible for matters under the law, such as fit and proper test for licensing, administration of the Code of Mergers and Takeovers, monitoring compliance with approved accounting standards, investor protection and market integrity.
"KLSE will be tasked with duties under its business rules, such as front-line regulation of trading activities, daily real-time surveillance and monitoring financial and systemic risks of market participants.
"This will lead to better regulatory clarity and lower cost of regulatory compliance for participants. In this respect, KLSE will concentrate resources and efforts on a set of focused initiatives to boost performance, in particular in enhancing market velocity and liquidity which are key performance indicators for an exchange," Mohd Azlan said.
Mohd Azlan said a significant development following from the conversion of KLSE is the setting up of a Capital Market Development fund (CMDF). The CMDF has been credited with 30% shares in the demutualised KLSE. These shares will eventually be placed out to raise proceeds to enable CMDF to fund initiatives towards developing the capital market.
"It is envisaged that the CMDF will fund initiatives and activities in the areas of market promotion, domestically and abroad, research and development programmes, training and upgrading of skills, and promoting self regulation by profressioanal associations in the capital market.
"Greater investor education is also clearly an important priority. In this respect, industry participants are encouraged to tap this fund towards undertaking initiatives for the collective benefit of the industry," he said.
In closing his speech, Mohd Azlan made the following analogy,
"Finally, let me provide an analogy between invesment and the auspicious occasion today. The lovely lunch today would probably have cost about RM100 per person. As a comparison, there are some 280 stocks listed on KLSE that are trading at RM1.00 or below [as at 12 January 2004].
"With the smaller board lot of 100 units, you can actually own 100 units of investment in these stocks for about the same cost of today's lunch. As such, before you go out for lunch or dinner the next time, think about the opportunity costs you may incur," Mohd Azlan added.
