Capital markets in need of a lift


  • Business
  • Monday, 01 Apr 2019

The former finance minister and chairman of the Council of Eminent Persons said new GLC listings, more velocity of trading and structural enhancements and leveraging on technological advancements are needed to lift the performance of the capital markets. (Picture shows Daim(left) during the interview with The Star.)

PETALING JAYA: What Tun Daim Zainuddin (pic) has to say about the stock market certainly perks up the ears of investors, traders and regulators, and he is now suggesting a combination of short-term and medium-term measures that can lift the interest and vibrancy of Malaysia’s capital markets.

The former finance minister and chairman of the Council of Eminent Persons said new GLC listings, more velocity of trading and structural enhancements and leveraging on technological advancements are needed to lift the performance of the capital markets.

Daim also had a warning for the newly-appointed heads of government-linked companies. Perform or face the boot.

In his written replies to StarBiz, Daim said capital markets in the short term will benefit from the listings of mature GLCs to enhance the competitiveness of Malaysia’s market capitalisation and increase the vibrancy, liquidity and diversity of the capital market.

“Furthermore, a greater free float allocation to the public from such GLC listings would promote greater shared prosperity.

“In addition, measures to encourage intraday trading and high frequency trading can spur trading activity. Importantly, transaction costs should be kept low through the offering of tax incentives or lowering of stamp duty,” he said.

In the medium term, Daim said the market should adjust and cater to the financing needs of innovative, high growth companies.

“The government can consider more facilitative admission criteria for the listing of new economy companies as well as look into providing listing grants, listing fee rebates, co-funding and/or listing tax incentives to promote growth in the strategic sectors identified by the government.

“Ultimately, increasing market access to a broad spectrum of investors and issuers and having a diversity of good quality companies will make our stock market the investment destination of choice,” he said.

Stocks on Bursa Malaysia have been in a funk for some time with the benchmark FBM KLCI falling by 5.9% last year. It was also the worst performing index in Asia this year when all other major markets are in positive territory.

Not helping matters has been the slump in corporate earnings. The growth of profits by companies on Bursa Malaysia keep falling and that has not been helpful in terms of sentiment among investors. With market valuations still high and profit growth heading in the opposite direction, Bursa Malaysia also saw the change of guard at the top of many listed government-linked companies.

Some argue those changes were political in nature given the change in government. Others suggest it was meant as a shakeup in the direction headed and the action taken by those companies.

Daim said it was best that investors and Malaysians give the new bosses of GLCs a reasonable time to perform and get their act together. But they should act fast.

“I think the best gauge would be their next financial results. If they do not perform, they should be shown the door,” he said.

Daim said the government needs to focus on areas to ensure investors have strong faith and confidence in the government’s pledges to be an effective facilitator to businesses and not overly burdened with bureaucracy and unnecessary regulatory and compliance costs.

To do just that, he suggested that focus should be paid on building strategic communication, sending the right message and the government be receptive to workable ideas.

“The government and policy-makers can foster the environment of certainty and stability that businesses and investors crave by making and executing right market-friendly policies with sufficient engagements and consultations with the industry players,” he said.

Daim also advised the Pakatan Harapan government to not fall into the trap of following the narrative set by the opposition.

“It should be setting its own narrative and at this point in time, that narrative definitely has to be about improving the economy and the rakyat’s wellbeing. Good governing and fast decision-making process are important because dysfunctional and inefficient agencies and institutions would sap confidence, threaten growth, undermine opportunities and create policy risks and missteps,” he said.having a diversity of good quality companies will make our stock market the investment destination of choice,” he said.

Stocks on Bursa Malaysia have been in a funk for some time with the benchmark FBM KLCI falling by 5.9% last year. It was also the worst performing index in Asia this year when all other major markets are in positive territory.

Not helping matters has been the slump in corporate earnings. The growth of profits by companies on Bursa Malaysia keep falling and that has not been helpful in terms of sentiment among investors. With market valuations still high and profit growth heading in the opposite direction, Bursa Malaysia also saw the change of guard at the top of many listed government-linked companies.

Some argue those changes were political in nature given the change in government. Others suggest it was meant as a shakeup in the direction headed and the action taken by those companies.

Daim said it was best that investors and Malaysians give the new bosses of GLCs a reasonable time to perform and get their act together. But they should act fast.

“I think the best gauge would be their next financial results. If they do not perform, they should be shown the door,” he said.

Daim said the government needs to focus on areas to ensure investors have strong faith and confidence in the government’s pledges to be an effective facilitator to businesses and not overly burdened with bureaucracy and unnecessary regulatory and compliance costs.

To do just that, he suggested that focus should be paid on building strategic communication, sending the right message and the government be receptive to workable ideas.

“The government and policy-makers can foster the environment of certainty and stability that businesses and investors crave by making and executing right market-friendly policies with sufficient engagements and consultations with the industry players,” he said.

Daim also advised the Pakatan Harapan government to not fall into the trap of following the narrative set by the opposition.

“It should be setting its own narrative and at this point in time, that narrative definitely has to be about improving the economy and the rakyat’s wellbeing. Good governing and fast decision-making process are important because dysfunctional and inefficient agencies and institutions would sap confidence, threaten growth, undermine opportunities and create policy risks and missteps,” he said.


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