Lukewarm response to stock market measures

  • Business
  • Saturday, 24 Oct 2009

PETALING JAYA: Market breadth of the local bourse was negative yesterday despite the unveiling of Budget 2010, although the benchmark FBM KLCI added 7.08 points, or 0.6%, to 1,267.10.

The lacklustre performance indicated a lack of enthusiasm for measures contained in the budget, analysts said.

Decliners outpaced gainers by 363 to 331 while 280 counters were unchanged and 297 untraded.

Volume for the day remained below one billion shares at 786.98 million.

“What is disappointing is the often talked about new economic model and high-income economy target for Malaysia,” said HwangDBS Investment Management Bhd head of equities Gan Eng Peng. “The measures announced do not seem radical enough to spur the creation of any new economic model in the short to medium term nor is it apparent how a high income society can be formed.”

For the stock market, the following measures were announced.

First, the liberalisation of commission-sharing arrangements between stockbrokers and remisiers, to be implemented in two stages.

The first stage, which takes effect immediately, allows flexible commission sharing at a minimum rate of 40% for remisiers.

The commission sharing will be fully liberalised in the second stage, effective Jan 1, 2011.

Second, there can be 100% foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30% local shareholding.

And third, all publicly listed companies will offer e-Dividend service to their shareholders.

Stockbroking companies will also provide e-Payment options for customers to receive and make payments.

JF Apex Securities Bhd chief operating officer Lim Teck Seng said the commission-sharing arrangement was nothing new, and that it had been practised over the last two years, although not formally because it was not allowed under Bursa Malaysia rules.

He said it would encourage the pinching of remisiers, depending on which broking houses offered better commissions.

UOB Kay Hian (M) Holdings Sdn Bhd head of research Vincent Khoo agrees, saying it is more to encourage remisiers to return to the industry.

“It’s a case of stockbroking houses fighting for market share,” he said.

On the foreign equity participation in corporate finance, JF Apex Securities’ Lim said the impact on the stock market would be indirect.

“With foreigners coming in, it will increase competition, hence forcing big players like CIMB and Maybank to improve their offerings. This is good. We get to see more quality and more sophisticated products being introduced.

“We may see great impact on the small players who are already starving for CF business.

“Furthermore, these foreign players may also bring in companies from their countries to be listed in Malaysia.

“So our stock market may see better quality companies which are operated overseas,” he said.

HwangDBS’ Gan, however, sees no impact.

He said that as it was, corporate finance and advisory work was being done outside Malaysia.

“I don’t think we will see a change in the amount and quality of work. As it is, the JP Morgans and the Credit Suisses are already doing Malaysian deals outside Malaysia,” Gan said.

Meanwhile, Lim sees a minor market correction in the next two to three weeks.

“Over the longer run, with corporate earnings improving and growth coming from a lower base, stocks will be trading at lower price/earnings moving forward,” he said.

Gan noted the finance ministry was looking to privatise some of its entities, which could imply the re-listing of some government holdings, and this could be positive for the market.

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