AN AMBITIOUS plan to attract foreign funds to the KLSE, with the government or government-linked institutions matching ringgit for ringgit all investments by foreign fund managers in the capital market, could be rolled out within the next six months.
Securities Commission (SC) chairman Datuk Ali Abdul Kadir said yesterday details of this plan were currently under discussion between the SC and the government.
If implemented, the plan would provide an impetus for greater participation of foreign fund managers some of whom have been absent from the local scene for a while on the KLSE.
The plan would involve the matching of foreign funds invested with an equivalent amount from government-linked institutions to be placed with, and managed by, the fund managers, Ali said. This was one of a number of incentives being studied to boost the local market, he added.
Ali said such incentives were necessary to kick-start interest in Malaysian stocks by foreign funds as the country enters the second phase of its Capital Market Masterplan next year. He said he was convinced that once these investors returned to the Malaysian market, they would be able to see how much things had improved.
Obviously we want foreign fund managers to come in because they can then see how the Malaysian capital market is doing, and get to know the market better.
As such, we would like to persuade the authorities to attract them by offering an equivalent amount for them to manage, he said.
Ali declined to name the local institutions that might be involved in the plan, but said there are many institutions in Malaysia with excess money to invest.
Many government-linked institutions already outsource the management of their funds to external fund or portfolio managers.
For instance, the Employees Provident Fund which outsources about 10% of its funds for equity investment, amounting to RM5bil has indicated that this would likely increase in the future.
Ali said the SC was also studying the relaxed Foreign Investment Committee (FIC) guidelines announced last month by the government in its economic package to determine how these could be used to promote greater investment on the KLSE by multinational corporations (MNCs) resident in Malaysia.
We have had meetings with the FIC to explore how we should implement these relaxed guidelines to encourage foreign MNCs to come into the capital market, he said.
Ali, who earlier delivered a keynote address at the 2003 RHB Investor Forum in Putrajaya, said the SC was adopting a multi-pronged approach to reduce volatility in the capital market. He said one way to reduce the level of speculation was by promoting professional investment management.
Our investment management industry has been growing quite well and, currently, funds under management account for 13% of the capital market, he said.
Another strategy adopted by the SC was boosting liquidity in the market. Large cap companies were being encouraged to list on the basis of a one-year profit track record, he said.
Ali also called on companies to improve their risk management practices, and to disclose these practices voluntarily.
If they wish to generate a following for their shares, maybe they should even (make such disclosures) together with their financial statements every year, he said.