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Friday March 30, 2012

SC feels more can be done to attract retail investors

KUALA LUMPUR: The Securities Commission (SC) felt that despite market volume last year growing by 31.6% from 2010, more could be done to drive interest of retail investors in the equities market.

SC chairman Tan Sri Zarinah Anwar said increasing participation of retail investors could be achieved by getting more people to trade and one way of achieving that could be by providing more information and education to retail investors.

“Liquidity has always been an issue in our stock market. There are structural issues which I think is not unknown, and our Capital Market Masterplan 2 has outlined various strategies to address this,” she told StarBiz.

Although there is a perceived lack of interest by retail investors, their interest has been translated in the growth of the unit trust industry, which predominantly is funded by individuals.

Zarinah said unit trusts now accounted for almost 20% of the market capitalisation of Bursa Malaysia. The market capitalisation of all equities on Bursa Malaysia yesterday was RM1.399 trillion.

“Retail investors are investing through unit trusts instead of going directly to the market. That said, it doesn't mean we can't do more to attract retail investors into the market,” said Zarinah.

She said at the last count, there were 4.2 million CDS (Central Depository System) accounts in Bursa Malaysia but only 300,000 were active.

The classification of an active account is one where at least a trade is done every three months.

“So, there has to be effort on the part of our intermediaries to try and activate more of these account holders. If they just double that, think how much impact it will have. So, there has to be effort put in to attract retail investors,” she said.

“Retail investors are investing through unit trusts instead of going directly to the market. That said, it doesn’t mean we can’t do more to attract retail investors into the market,” said Zarinah.

Getting retailers into the stock market would also mean promoting the companies on the exchange to that group of investors, and here Zarinah wondered why there had not been enough effort by the intermediaries of the stock market to promote research on the near 300 small and medium cap companies funded by the capital market development fund.

“The attitude of retailers has changed from the old days. They have to be given fundamental information about companies for them to be interested in investing. It is their job to promote companies and educate investors,” she said of the need of market intermediaries to act.

“In Thailand for example, every weekend the stock exchange of Thailand runs investor education programmes. And I was told recently by one of their senior management that it was oversubscribed every weekend. That's certainly something we can do here industry and Bursa working together to promote the equity market to investors.”

Another element of improving retail participation and confidence of such investors is also the quality of companies on the stock market.

“Just as there are companies that are doing well, there are companies that are languishing. They have made losses, their share prices have plunged below the offer price, they have not been paying dividends to shareholders,” she said, understanding why investors were not interested in the poor performing companies.

“That's why governance is key. Directors of companies have got to discharge their stewardship role, which includes delivering on all the promises they made when we approved their going to the market. Hence, they have to ensure the creation of shareholder value, they have to show they are good corporate citizens and they have to provide returns to shareholders.”

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