Lack of focus on capital market
Budget 2020 has many positives.
It is aimed at creating more jobs, raising income levels, reducing the gaps between the regions in the country and the narrowing of inequality between groups of people.
A number of key industries are also being boosted, with ample funding being provided.
But one segment that has been markedly left out is the capital market.
Malaysia’s capital market is going through a challenging phase, partly also due to global issues.
Foreign investors continue to shun our equities market, although a number have been buying our bonds. The latter could be the result of lower interest rates elsewhere.
So the question is, should Budget 2020 have done more to boost the local capital market?
To be fair, it is understandable that Budget 2020 has focused on uplifting the lower income groups.
By extension, it is conceded that this group does not have much direct exposure to the capital market.
On the flipside though, a lot of the wealth of the general public lies in government investment funds ranging from Permodalan Nasional Bhd (PNB) to the Employees Provident Fund (EPF).
These funds have very large exposures to the local equity market.
If Bursa Malaysia has a good year, then these funds are in a better position to raise their dividend payouts.
The capital market plays an important role in the funding growth of companies in the country. As such, there is justification for efforts from the government to do things within their means to boost the local market.
What was expected was at least the planned listing of Petronas Carigali, the upstream arm of Petroliam Nasional Bhd (Petronas).
After all, Prime Minister Tun Dr Mahathir Mohamad recently said that this was a possibility. Other incentives could have taken the form of tax waivers for dividend income from the stock market, say for the next few years. Or tax reliefs could also be given to encourage more retail participation in the market.
Strange happenings at SMTrack
A rather perplexing boardroom battle is taking shape at loss-making SMTrack Bhd. The company that is principally involved in the provision of RFID solutions, received a notice from two shareholders requisitioning for an extraordinary general meeting (EGM) calling for changes in the board composition.
The two shareholders are Chung Kah Haur and Queck Han Tiong who claimed to hold more than 10% of the company’s shares. SMTrack received the notice on September 30.
On Oct 9, the company announced that after verification, the aggregate shareholding of both the shareholders did not exceed the required 10% to call for the EGM. SMTrack also stated that it would institute legal action on Chung and Queck.
On Oct 10, an interesting twist took place, The company announced that it had filed legal action against the duo preventing them from calling for an EGM. On the same day, Chung emerged as a substantial shareholder with 5.86% after having purchased 9.6 million SMTrack shares from the open market.
The developments clearly point to a boardroom battle taking place for the company that states its products are highly in demand due to its uniqueness and operation in an environment without much competition.
The company wants to move into other segments of the technology solutions market and hopes to increase its staff strength to diversify its income base. It wants to be a regional RFID solutions provider.
SMTrack may possibly have the potential to grow into a regional technology player.
However it is loss-making and obviously all is not well with its shareholders.
While the company has already taken legal action to stop the two shareholders or their agents from calling for an EGM, it is highly doubtful that this would be the end of the entire episode.
Surely there is more to come.