KLSE Executive Chairman Mohd Azlan Hashim said the approval by the Ministry of Finance to proceed with the demutualisation of KLSE is a major step forward for the Malaysian capital market in achieving the objectives of the Capital Market Masterplan for a more resilient, competitive, attractive and efficient capital market and securities industry in Malaysia.
"Demutualisation is a key achievement in the on-going progress and development of KLSE for the year ahead.
"Demutualisation will pave the way for further enhancements in the Malaysian capital market - leading to a more competitive market, with greater volume and wider range of products.
"At the same time, with a strong public interest framework in place, a demutualised KLSE will continue to meet and even enhance its role in fulfilling its regulatory and industry development obligations," Mohd Azlan said.
Mohd Azlan said the demutualisation of KLSE is in line with the expansion in the role of exchanges worldwide . Exchanges have met this expanded role by aligning their corporate strategies with business potential, investing in infrastructure and training, enhancing operations with new technology, providing opportunities for risk management through derivatives investment and enhancing cross border investment and trading.
"As the business of exchanges expands to increasingly reflect the nation's socio-economic development, it is only logical for exchanges to be managed as dynamic businesses in their own right," he said.
Commenting on the recent Extraordinary General Meeting (EGM) of KLSE to pass the resolutions to change the financial year end for KLSE from 30 June to 31 December, Mohd Azlan said the change in the financial year end for KLSE would streamline the exchange's financial year end with that of other regulators in Malaysia, including the Securities Commission and Bank Negara Malaysia.
"It would also facilitate comparison and benchmarking of KLSE internationally by investors, shareholders and market participants. A number of exchanges worldwide have a 31 December financial year end," Mohd Azlan said.
The resolution pertaining to the resignation of Arthur Andersen and appointment of Ernst & Young as auditors was also tabled in the EGM. Present auditors of the KLSE, Arthur Andersen will over time cease to exist, following their recent merger with Ernst & Young. Hence, it is in KLSE's interest to consider the resignation of Arthur Andersen and in its place, nominate Ernst & Young as the auditors for KLSE and its group of companies.
With the approved change in the financial year end, KLSE will convene its Annual General Meeting in the first half of 2003.
The KLSE is also pleased to announce that members of KLSE Committee effective 1 January 2003, are as follows:
- Dato' Mohd Azlan Hashim - Executive Chairman
- Datuk Mohaiyani Shamsuddin - Deputy Chairman
- Mr. Tan Kim Leong, JP
- Encik Abdul Kadir Hj. Md Kassim
- Encik Abdul Jabbar Abdul Majid
- Datin Mariam Yusof
- Encik Abdul Rauf Ramli
- Encik Yusli Mohamed Yusoff
- Mr. Peter Leong Tuck Leng
Mohd Azlan further commented on significant developments for KLSE with respect to the following areas:-
- Capital Raising
- Regulations & Enforcement
- Market Infrastructure Development
- Market Institutions
- Market Promotions
- International Relations
- Yayasan Bursa Saham Kuala Lumpur
Capital raising at KLSE continue to reflect the role of the exchange as a source of capital for the private and public sectors.
From the period 1 July 2001 to 30 June 2002, KLSE has facilitated capital raising totalling RM4.69 billion, compared to RM4.05 billion raised between 1 July 2000 to 30 June 2001. Out of the total RM4.69 billion raised, RM0.72 billion was raised through Initial Public Offerings (IPO). The balance of RM2.93 billion was raised through secondary issues with RM1.04 billion raised through loans.
From the period of 1 July 2002 to 31 December 2002, activity increased significantly, with KLSE raising RM4.42 billion. RM2.33 billion was raised through IPOs, while RM2.09 billion was raised through secondary issues and loans.
|
1 July 2000 - 30 June 2001 (RM Billion) |
1 July 2001 - 30 June 2002 (RM Billion) |
1 July 2002 - December 2002 (RM Billion) |
|
|
IPO |
1.60 |
0.72 |
2.33 |
|
Secondary Issues |
2.37 |
2.93 |
2.09
|
|
Loans |
0.08 |
1.04 |
|
|
Total Capital Raised |
4.05 |
4.69 |
4.42 |
|
Volume Traded (Billion) |
34.17 |
78.81 |
22.83 |
|
Value Traded (RM Billion) |
88.90 |
146.99 |
46.22 |
With respect to new listings, during the period 1 July 2001 to 30 June 2002, there were 32 new listings, compared with 36 new listings in the earlier corresponding period. The 32 new listings comprise of 11 listings on the Main Board, 19 on the Second Board and 2 on the MESDAQ Market. However, from 1 July 2002 to 31 December 2002, there were 25 new listings, making a total of 57 listings for the 18 months.
With the merger of MESDAQ with the KLSE on 18 March 2002, issuers and market participants benefited from the wider network, resources and experience of KLSE. Since the merger, 7 companies were listed on MESDAQ Market , raising RM 158.5 million. The number of companies on MESDAQ Market currently totals 12. Liquidity too on MESDAQ market has since increased to an average daily trading volume of 2.91 million units, valued at RM1.45 million. The market capitalisation of MESDAQ Market as at 31 December 2002 is RM770 million.
|
As at 30 June 2001 |
As at 30 June 2002 |
As at 31 December 2002 |
|
|
Main Board |
512 |
545 |
561 |
|
Second Board |
297 |
291 |
292 |
|
Mesdaq |
0 |
7 |
12 |
|
Total Listed Companies |
809 |
843 |
865 |
|
Market Valuation (RM Billion) |
403.49 |
505.89 |
481.62 |
II. Regulations & Enforcement
In enhancing regulations, additional investor protection measures continued to be implemented under the requirements of Practice Note 4 (PN4) and Practice Note 10 (PN10) for public listed companies to at least maintain satisfactory financial condition and adequate level of operations respectively. This is in order to preserve the integrity of the capital market and to maintain KLSE as a premier exchange.
The main objectives of PN4 are to expedite the corporate restructuring of companies and ensure that companies listed on the KLSE are of at least satisfactory financial condition. Companies that do not meet the minimum requirement for financial condition will be released. The expeditious regularisation of the financial condition of PN4 Condition companies will benefit all participants, PN4 Condition companies themselves, investors and the market as a whole.
To enhance corporate conduct and disclosure, KLSE also issued clarifications to its Listing Requirements through Practice Note 13 (PN13) and Practice Note 14 (PN14). PN13 addresses requirements relating to directors and signatory to statutory declaration accompanying annual audited accounts, while PN14 addresses requirements on transactions and related party transactions.
PN13 among others, provides clarification with respect to eligibility requirements of independent directors and will aid listed companies in the appointment of suitable candidates as independent directors. PN14 seeks to clarify assessments of transactions and related party transactions.
On the requirement of training for directors of public listed companies, since the commencement of the Mandatory Training Programme in April 2001, over 5095 directors representing over 90% of the total number of directors of public listed companies have been trained to date under this programme. These training programmes seek to equip directors with knowledge and skills to discharge their duties and to raise awareness of their duties, obligations, responsibilities and rights under the corporate governance framework.
On enforcement action taken for breaches of the KLSE Listing Requirements, between 1 July 2001 and 30 June 2002, KLSE initiated a total of 207 cases against listed companies for various breaches of the listing requirements. Enforcement action was undertaken to ensure investor protection and compliance with regulatory standards and requirements and improving corporate governance. For enforcement action taken for these breaches, refer to Appendix 1.
Fines imposed totalled RM2.54 million, proceeds of which are utilised towards investor education and training programmes for market participants.
The surveillance capacity and capability of KLSE continue to be enhanced to ensure greater compliance by public listed companies. A major part of surveillance is the review of corporate and financial disclosures including annual and quarterly reports of listed companies to improve corporate disclosure.
Towards further enhancing corporate governance practice and awareness, KLSE established a Taskforce on Corporate Disclosure Best Practices, comprising industry representatives, with the objective of providing further guidance for industry participants to develop relevant policies and procedures to promote best practices in corporate disclosure. In a related development, the KLSE and Pricewaterhouse Coopers (PwC) conducted the Corporate Governance Survey 2002, to gauge current perceptions and expectations on the level of corporate governance in Malaysia. This survey is a follow-up from the benchmark survey conducted in 1998. The survey report is expected to be published in early 2003.
III. Market Infrastructure Development
In 2002, the stockbroking industry progressed further in its consolidation efforts. As at 31 December 2002, there are 40 licensed stockbroking companies. In terms of network, stockbroking companies have further expanded market accessibility with the establishment of 52 branches nationwide.
A key enhancement in infrastructure development is the implementation of Circuit Breaker to manage excessive downward movement in the stock market whilst instilling market stability and investor confidence. The Circuit Breaker will have a beneficial impact in times of uncertain influences on the stockmarket whilst providing market participants the opportunity and time for comprehensive and wide dissemination of information.
As part of the continued enhancement to the on-line corporate disclosure system or KLSE LINK, improvements were made to various announcements formats for greater clarity, including to the Quarterly Reporting format in conjunction with the implementation of the Malaysian Accounting Standards Board (MASB) Standard 26 on Interim Financial Reporting. Announcements from public listed companies are made available at no charge on the KLSE website at www.klse.com.my
In line with the objective of establishing a cost effective and competitive marketplace, stockbroking commission rates were made fully negotiable subject to a cap of 0.7 percent. Reductions in trading access fees and clearing fee were also implemented whilst trading fees in derivatives products remain negotiable.
To improve service levels to investors, the Malaysian Central Depository, the operator of Central Depository Systems (CDS) launched the Consolidated CDS Statement of Account (CSA) to facilitate portfolio management for investors. With the CSA, investors with multiple Central Depository System accounts will be able to manage and reconcile their portfolio of securities more effectively.
MCD also introduced enhancements in securities transfers in the CDS to streamline processes. Transfers are now processed and confirmed by ADAs and ADMs, where previously, confirmation was done by MCD. This will further enhance the efficiency of the Capital Market. The changes include the reclassification of the current 10 approved reasons for transfer into two broad categories :
- Transfers that result in no change in beneficial ownership of securities- When the name of the beneficial owner is transparent and identical at both the securities account of the transferor (the person who initiates the transfer) and transferee (the person who receives the transferred securities).
- Transfers that result in change in beneficial ownership of securities - This covers scenarios such as transfers pursuant to General Offer, between family members,arising from pledging of securities, involving Government Authorities and that which requires prior approval of MCD.
In infrastructure development, KLSE continues to meet the requirements of investors, industry and market participants. This is largely reflected in the continued growth in investor interest in the Malaysian securities market.
Growth in Investor Activity
|
July 2000 - |
July 2001 - |
July 2002 - November 2002 |
|
|
Nett No of Accounts Opened |
77,336 |
159,651 |
56,951 |
|
No of New Securities Immobilised into CDS |
16.5 billion |
14.2 billion |
19.4 billion |
|
No of Companies prescribed into CDS |
28 |
44 |
15 |
|
Settlement of Traded Securities |
34.9 billion |
78.5 billion |
20.1 billion |
Public awareness of the need to invest has prompted greater interest in equities and exchange related products supported by improved confidence in the corporate governance practices of the market.
IV. Market Institutions
KLSE has made significant progress in implementing recommendations of the Capital Market Masterplan (CMP).
With the establishment of the MESDAQ Market at KLSE, a single Malaysian exchange under the KLSE Group was established. The KLSE Group now provides opportunities for investments in equities from large to mid-size and high growth companies, opportunities in commodities, financial and equity related futures and opportunities in offshore financial instruments. The Malaysia Derivatives Exchange (MDEX) continues to be active in offering new products and services including the Five-Year Malaysian Government Securities Futures, launched in March this year. With the launching of the Single Stock Futures targeted for first quarter 2003, MDEX will have a total of 6 types of products listed on the exchange.
The Labuan International Financial Exchange (LFX) has since increased its number of listings to 10. Two are primary listings whilst eight are secondary listings by Labuan incorporated and international issuers. The instruments, based on conventional and syariah principles, range from debt securities to open ended investment funds. LFX continues to generate interest with 7 listing sponsors and 6 trading agents.
With the completion of the consolidation of exchanges, the KLSE Group continues to make progress in the consolidation of clearing and settlement institutions leading to the move towards establishing a single trading platform. These measures will provide market intermediaries and participants an even more efficient, cost effective and secure investment environment and infrastructure.
V. Market Promotion
KLSE significantly enhanced its domestic market promotion efforts by organising a series of smart investing roadshows held at its information centres, Balai Maklumat BSKL, in Johor, Kuantan, Penang and Kuching. These events attracted over 5,000 participants comprising investors, market participants, professionals, academics and students.
The series of regional roadshows culminated in the KLSE Investors' Week 2002 held in Kuala Lumpur which attracted an overwhelming 19,000 visitors. Programmes for Investors' Week 2002, was expanded to include all aspects of investments from equities, derivatives to syariah investments.
KLSE'S international market promotion efforts continue to engage the international investment community through roadshows and meetings with foreign investors and fund managers held in several investment capitals in the United States, United Kingdom, Hong Kong, Singapore and the Middle East. Securities Commission and Bank Negara Malaysia also significantly contributed to the effort to update the international investment community on latest developments and to address any concerns on the capital market and securities industry in Malaysia.
VI. International Relations
KLSE continued to be actively involved in the various activities of international organisations such as World Federation of Exchanges (WFE), East Asian and Oceanian Stock Exchange Federation (EAOSEF), International Organisation of Securities Commissions (IOSCO), Commonwealth Association of Corporate Governance (CACG), Asia Pacific Central Securities Depositories Group (ACG) and Asian Securities Analysts Federation (ASAF).
KLSE's active participation in these organisations contributes significantly to the progress and development of the KLSE Group in respect of exchange operations, market development and regulatory functions.
VII. Yayasan Bursa Saham Kuala Lumpur
Apart from fulfilling its operational and regulatory requirements, as a responsible corporate citizen, KLSE through its community foundation Yayasan Bursa Saham Kuala Lumpur (Yayasan BSKL), undertook various community development activities and made numerous charitable donations. Since its inception in 1998, Yayasan BSKL has provided assistance, support and financial aid for community and educational activities, projects and programmes with the objective of improving the standard of living, skills and professionalism of Malaysians. To date, Yayasan BSKL has worked with over 400 community organisations from every state in Malaysia and contributed close to RM5 million to needy organisations and individuals.
In enhancing its contribution to educational development, Yayasan BSKL offers study loans for qualified undergraduates at local public universities, which can be converted to full scholarships upon graduation. The foundation has also initiated a nationwide tutoring programme for children of community homes since the year 2000. This year, Yayasan BSKL has also begun sponsoring Book Prizes for undergraduates at local public universities in recognition of their academic excellence.
VIII. Moving forward
Commenting on KLSE in 2003, Mohd Azlan said KLSE will continue to focus on its twin role as front line regulator and market operator.
"The KLSE will continue to balance commercial objectives of the exchange with public interest responsibilities.
"Enhancements in infrastructure, both physical and regulatory will form part of our effort to further promote the development of the capital market and the securities industry," Mohd Azlan said.
Corporate strategies of the KLSE will be aligned with national economic policies. "We will continue to promote the national economy through assisting effectively in the mobilisation of savings and investments for investors whilst facilitating public companies in the raising of capital," Mohd Azlan said.
