COMPETITION and the focus on efficiency are catalysts for Bursa Malaysia to step up its game.
No longer will it just be offering Malaysian stocks as regional stocks are made available through wider channels.
This will be possible when Bursa Malaysia signs the Asean link over the next few months with Singapore and Thailand.
But that is just the tip of the iceberg in so far as the plans of Datuk Tajuddin Atan, CEO of Bursa Malaysia, are concerned.
“We used to be the only game in town for investors and issuers. Now, we are grappling with competition from within this particular region.
“We have to step up the game. Market liberalisation requires us to look at things from a different perspective,” he tells StarBizWeek.
“It is quite difficult,” says an industry player. “Look at the volume on Bursa Malaysia compared with some of the regional bourses. Even Thailand is ahead of Singapore in terms of volume. They need to bring in more retail participation''
It is quite common for Tajuddin to get questions such as: “Bursa Malaysia was one of the bigger players. What happened?,” he relates.
Among the host of factors, the landscape has changed while the MSCI composition is also different.
With the rapid growth of the China and Hong Kong stockmarkets, it is hard for markets like Malaysia and Singapore. Technology has changed; an investor or issuer can invest anywhere across borders.
Negative perception is hard to erase although there are pockets of optimism.
“Those who had gone in and got burnt say don't touch.' But those who had followed the evolution of the market say that this (the casino-like nature of the market) is a thing of the past,” says Tajuddin. “What was done over the last decade was due to lack of knowledge.”
Malaysia now ranks fourth in terms of investor protection. Last year, dividend yield on the Bursa was 3.4%.
“Things have moved... companies have changed but the fundamentals are still intact.
“Our top 30 companies are becoming even more transparent; of the top five investment banks in the region, three are Malaysian Maybank, CIMB and OSK,” says Tajuddin.
Some of the issues on the table had surfaced during the last financial crisis.
“Those are matters of the past. We now have to deal with competition, efficiency and effectiveness... how do we upscale market under the current environment especially against the huge China market,” he says.
Tajuddin's aim is to create a facilitative trading environment.
“We need to have a little bit more tolerance for some level of trading... a fundamental kind of trading,” he says. For this, investors need to be trained. information needs to flow and analytics need to be high.
“I am not talking about speculative, penny stocks,” he stresses. “That part, I'm very clear about. If I need to deal with them, I will deal with them as issues of market integrity once damaged cannot be repaired. Or it takes a long time to be repaired.”
Tajuddin is also looking at the offerings from Bursa. Apart from equities, what else can be offered? Bursa is looking at establishing retail bonds. Other offerings may be commodities, exchange traded funds, oil and gas derivatives.
The option in KLCI was launched on May 21 while another option in crude palm oil will be launched next month. For retail bonds, the educational aspect is important especially in understanding risk profile.
“We won't go to the private debt securities yet,” says Tajuddin. “The retail bonds will just be government guaranteed or investment grade.
“Investors must understand risk; how to deal in bonds; then only will we move up the scale,” he says.
Time for change
“We should start changing to allow global access,” says Tajuddin.
“Maybe we should allow the market to dictate what it wants; have faster turnaround time; put in the flavour of the year, be it gold... plantations, the offering should be on the table quickly.”
Awareness and response to the changes in technology and marketplace are vital. At the same time, education is key especially in reaching out to young people.
“Trading on the internet especially by young people can just fly,” says Tajuddin, adding that he looks forward to the forming of an investment culture among Malaysians.
“For 24 years of my career as a banker, I have asked people to place their savings as deposits,” he recalls with a smile.
With excess liquidity, all Malaysians must invest.
“Previously, I used to say that every individual must have savings and current accounts, now I am adding an investment account.
“They should put aside money for savings but should also have some form of investment which will bring higher returns. These could be stocks or other tradeable investments such as exchange traded funds or real estate investment trusts (REITs).
“In the US, people pay their bills and then they go travelling but they never forget to invest. It's a cultural thing,” he says.
Chris Eng, head of research at Etiqa Insurance, basically views the problem from two perspectives; the scenario that Bursa cannot control such as Malaysia as an attractive investment destination.
“With the coming up of jobs under the Economic Transformation Programme (ETP), sectors such as construction as well as oil and gas are expected to register good growth especially towards second half of this year or first half of next year,” says Eng.
Under the scenario that Bursa can control, it can be more innovative and come up with more interesting products such as the upcoming retail bonds.
“Eventually, they can issue these retail bonds against companies such as those in power and infrastructure,” suggests Eng.
Hor Kwok Wai, chief operating officer for global markets, Hong Leong Bank says, in his area that deals mostly with three-month KL Interbank Rate (Klibor) futures and Malaysian Government Securities (MGS) futures, there should be more effort to bring in more foreign and retail participation.
“Currently, only local banks are involved,” says Hor.
“Bursa needs to stimulate volatility in the equity and derivatives markets,” says an analyst with a foreign research house. “An old obstacle is the restriction on short-selling, which needs to be addressed to allow for more active markets in both derivative and equities. A stable market is a boring market, which means low revenues for Bursa and its brokers.”
Danny Wong, CEO of Areca Capital, views size and presence of regional champions to be among the key features that would attract international players.
“We cannot be viewed as peripheral players,” Wong says.
“Currently, they come mainly for dividend stocks. We have to raise some regional champions, for example, in plantations or oil and gas. It may also be worth looking at enlarging the number and size of Syariah approved stocks.
“We should not compete directly with the bigger boys but find ways to make ourselves more attractive and unique,” says Wong.
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