THE increasing number of Malaysian companies listed on foreign bourses is not expected to adversely affect the country’s economy and the local bourse, said industry experts.
RAM Consultancy Services Sdn Bhd managing director and chief economist Dr Yeah Kim Leng said: “The impact of the outflow on the domestic economy and the stock market will be benign, especially if there's no shortage of quality companies being listed locally.”
Yeah believes that with the recent rally, Malaysia's stock market valuation and premium had improved significantly.
“Given ample liquidity and investible funds in the country, investors' appetite for good quality new listings remains undiminished.
“Although the authorities are now more stringent on companies seeking listing approvals, well-run and good quality companies in growth industries should have no problem raising funds in the domestic market,” he told StarBiz.
It has been noted that a number of Malaysian companies have been looking further afield – listing their units on foreign bourses like London Stock Exchange's Alternative Investment Market (AIM) as well as the Hong Kong and Singapore stock exchanges.
Ranhill Bhd expects to float its energy unit, Ranhill Energy Sdn Bhd, on London’s AIM. Ireka Corp Bhd plans to list its property development portfolio there as well.
UMW HOLDINGS BHD is proposing to list its China oil and gas pipe-making unit, Wuxi Seamless Oil Pipe Co Ltd, on the Hong Kong Stock Exchange.
Mayban Securities head of research, Vincent Khoo, expects more initial public offerings on Bursa Malaysia next year in light of the significantly improved market valuations and liquidity. “In the past, some issuers could get better premium listing on other bourses as the local bourse lacked the trading liquidity needed to attract institutional and retail following,” he added.
Nevertheless, more Malaysian companies are expected to seek listings outside the country, particularly for their overseas subsidiaries.
Khoo sees this as a natural progression as Malaysian companies expand their businesses overseas.
“It would be natural for these companies to list their overseas units to raise funds for further expansion. The growth outlook and potential in other countries – for example, China and India – are better than Malaysia.
“The positive outlook for these countries is due to many factors, like the large size of their economies, lower cost of production and regulatory incentives,” he said.
RAM’s Yeah concurred.
He said the expected increase in cross-border transactions and mergers and acquisitions (M&As) could be attributed to increasing trade, investment and financing flows in the region as firms sought growth opportunities and staked out a strategic position in a regional market that was slowly but steadily becoming a reality under the Asean Free Trade Area, various bilateral Free Trade Agreements and the Asean Economic Community.
“Listing overseas will naturally follow investments there, particularly in countries where the business and regulatory cost of capital is lower. This is seen positively as it adds pressure to the domestic stock exchange to improve its efficiency and competitiveness,” he added.
BURSA MALAYSIA BHD chief executive officer Datuk Yusli Mohamed Yusoff said the local authorities were committed to ensuring that the quality of public listed companies (PLCs) was more important than quantity.
“In this respect, the assessment on the quality of companies eligible for listing has been made more stringent. Hence the choice to list overseas by Malaysian companies may be due to some companies not being able to meet the minimum standard for listing in Malaysia,” he said.
Yusli said Bursa Malaysia was stepping up efforts to make the local bourse the “exchange of choice” for local and foreign companies.
“We are focused on ensuring that the facilities and environment offered by the exchange are efficient and conducive. We believe that having this in place would be a key factor to be at par with or more competitive than other exchanges,” he added.
Yusli stressed that the regulatory environment in Malaysia was under constant review by the relevant authorities to ensure that the country remained competitive without having to compromise on the responsibility to uphold a fair and orderly market.
“This is evidenced by changes and improvements to rules and regulations adopted from time to time to keep pace with the changing market environment.
“Bursa Malaysia is trying to build a quality market and, recognising that there are still areas for improvement, we will continuously work with PLCs, market participants and authorities to ensure that we become more competitive in light of a more global capital market. We believe we offer a proven track record of listing some very high quality PLCs and these companies enjoy the support of the cream of the world's investors today on our market,” he said.
Bursa Malaysia has already embarked on many initiatives to make the local bourse more active, such as better research coverage for small-cap stocks, organising international roadshows and encouraging the issuance of call warrants.
The most recent initiative was the legalisation of selected short selling.
On the proposed de-listing of large companies – for example, PPB Oil Palms Bhd (acquired by Singapore-based Wilmar International Ltd) and Road Builder (M) Holdings Bhd (acquired by IJM Corp Bhd) – Khoo expects the M&A activities to reduce the trading volume on the local bourse.
“However, we do not foresee many more such high profile cases to materialise,” he added.
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