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Kuala Lumpur Stock Exchange: Market Liquidity And Investor Confidence Key To Managing Emerging Markets

Date 16/12/2002

Exchanges in emerging markets need to manage issues of market liquidity and investor confidence to attract investor capital.

Executive Chairman of Kuala Lumpur Stock Exchange (KLSE) Dato' Mohd Azlan Hashim said whether in emerging or developed economies, managing exchanges is essentially managing competition for the uncertainty of investor capital.

"Markets know this - investor capital is highly mobile. Investor capital crosses boundaries, time zones, jurisdictions - empowered by information and communications technology.

"In fact, it is without doubt that every exchange will do what it takes, to maintain, even enhance top of mind awareness amongst investors and market participants for investor capital.

"After all, no exchange can afford to be marginalised," Mohd Azlan said.

He was speaking at the opening of the Forum on Managing Exchanges in Emerging Economies organised by the World Federation of Exchanges (WFE) and hosted by KLSE. The forum is attended by representatives from over 20 exchanges and 15 organisations worldwide - covering a wide range of issues from growing market liquidity, developing infrastructure, best practices, implementing standards, enforcing rules, demutualisation of exchanges and strategies for the future in attracting international investors.

Mohd Azlan said similar to other exchanges in emerging economies, KLSE is actively assessing measures and initiatives to enhance market liquidity and attract greater participation from both domestic and international investors.

"KLSE has taken the view that as an exchange in an emerging economy, it does not mean that KLSE has to settle for emerging economy standards. "KLSE has found it useful to monitor international trends, developments and standards. KLSE has also benchmarked its development efforts and standards against jurisdictions in developed economies," Mohd Azlan added.

He said key initiatives by KLSE in moving forward include consolidating all Malaysian exchanges, using technology as an enabler, pursuing demutualisation and eventual listing of the exchange and seeking out co-operation and alliances with other exchanges.

"Lest we forget, markets are not islands. Exchanges are not fortresses. "Investor capital is like the sea, with exchanges as the ports of call - each with the infrastructure, facilities and investment opportunities. It is therefore best for exchanges to be ready for the ebb and flow in the tide of investor capital.

"Thus, it is in learning from being part of a global operation, sharing knowledge, experiences, understanding local requirements and the constant desire to learn to do things better and to learn from each other that will prove to be of tremendous advantage for exchanges," Mohd Azlan said.

Mohd Azlan added the WFE forum is a unique opportunity to hear different experiences, approaches and strategies on managing exchanges for the present and for the future from regulators, practitioners, economists and researches from various markets and jurisdictions.