Shireen: We want to create a more vibrant capital market

Bursa Malaysia Bhd chairman Datuk Shireen Ann Zaharah Muhiudeen

IT IS a known fact that there is a lack of interest in Malaysian stocks.

Something seriously needs to be done, especially when Malaysia is already considered a marginal market.

The Malaysian stock market has fallen since its heady days in the Eighties and Nineties, and by quite a bit at that. Would you believe that Malaysia once had the largest weightage on the MSCI Emerging Markets Index?

When this index first was incepted in 1988, Malaysia was the country with the highest weighting, at 33.8%. Today, Malaysia barely has a 2.5% weightage.

Serious action needs to be taken to address Bursa Malaysia’s problems. Speak to any stockbroker or fund manager who operates in Malaysia, and most have something to say.

“Bursa does not have big enough companies.

“It has poor liquidity and corporate results are also not stellar. Why would foreigners want to come here?” asks one fund manager who declines to be quoted.

“Furthermore, what is Bursa doing to attract bigger listings here? What are the incentives provided? However, even on a more micro level, there are many things Bursa can correct without involving much cost at all, ” adds the fund manager.

He says that Bursa could be less overzealous and over-reactive in releasing its “unusual market activity” query.

“This kills healthy speculation in the market, and some element of that is needed in a vibrant market, ” says the fund manager.

Another stockbroker opines that there is a lack of appropriate, timely and decisive action to protect the public.

He cites the example of Icon Offshore Bhd, which was recently declared a designated counter by Bursa Malaysia. He opines that a suspension could have been imposed instead.

On Jan 24 this year, Bursa said in a statement that it had declared the securities of Icon as a designated counter with effect from Jan 28 until further notice.

With the warning, Icon’s share price fell by a sharp 34% or 27.5 sen to close at 54 sen.

An investment banker adds that the compensation packages for the C-suite level Bursa executives, particularly the CEO, would need to be structured in a way that their compensation is tied to Bursa’s success.

“If they are already being paid extremely high salaries with other generous perks, what does it matter whether or not Bursa does well?” says the investment banker.

Below are excerpts of an interview with Bursa Malaysia chairman Datuk Shireen Ann Zaharah Muhiudeen, where she addresses Bursa’s problems, and the urgency in which she is dealing with them now.

Bursa recently underwent some revamp in its organisational structure. Has this been completed or is it ongoing? What is the reason for the revamp and what is the intended outcome?

Within Bursa, we have some very talented individuals who are passionate and very knowledgeable. And I am pleased to see them speak up and be innovative.

We want to create a more vibrant capital market, and a highly dynamic, liquid and competitive marketplace. We needed to look within and be flexible and agile in our strategy, going forward.

We also have to keep up with the advancements and progress, especially with emerging technology trends, and stay relevant in our approach. We recently hired a director of group technology, as well as set up a technology and cybersecurity committee. We are continuously looking into ways to make Bursa Malaysia a highly effective organisation so we can meet our goals and objectives, as well as our responsibilities to all the stakeholders and shareholders.

How has it been for you since taking over the position of chairman and what is your exact mandate in this position?

March 1 will mark one year of my position here as chairman. My mandate is to create a more vibrant, highly dynamic, liquid and competitive marketplace, as well as to attract international and local investors to invest here by promoting our Malaysian companies globally.

This includes enhancing our corporate governance model, strengthening our capital market ecosystem, raising the bar on corporate sustainability and responding to climate risk. Not to forget ensuring that we maintain a fair and orderly market by upholding public interest.

There has been criticism that Bursa has too many rules that deter it from being a robust stock exchange. Are any of these rules up for review? Could you elaborate?

As an exchange, we continuously look towards improving the way we regulate the market to ensure that Bursa Malaysia remains relevant and attractive to issuers, investors and other market participants.

Bursa Malaysia has put in place a sound framework for corporate governance and investor protection.

We undertake continuous engagement with market participants to gather feedback on the market, including areas that need to be enhanced. In this regard, Bursa is developing initiatives to strengthen its competitiveness, including enhancing the rules to attract the listing of new-economy companies, and facilitating easier access for SMEs to list on Bursa’s Leap Market.

We are also embarking on various initiatives to increase efficiencies in our services review of outdated rules to be in line with changing market maturity.

You are known within the corporate governance space as you often champion the issue and have written extensively on the subject. How do you strike a balance between being Bursa chairman – wanting the exchange to be robust and competitive- and ensuring that corporate governance is kept in check every step of the way?

I think this goes hand-in-hand and is definitely not a balancing act. It is complementing one another. Transparent processes are what create confidence and trust.

In order to ensure orderly and effective discharge of the above functions and responsibilities of the board, the board has in place a governance model for the group, where specific powers are delegated to the relevant board committees.

We have conducted a thorough review of the exchange’s governance model to relook and improve the oversight responsibilities and guidance by the board to further augment its effectiveness.

The improvements include refining the terms of reference for the various board committees.

We have created two new committees and two consultative panels - the Technology and Cybersecurity Committee, the Market and Development Committee, and the Securities Market and Derivatives Market Consultative Panels.

In addition to strengthening the effectiveness of the board, these new committees and consultative panels will raise the overall level of transparency within the organisation and the market, respectively.

What is your view on the stock market for this year?

Our market performance is likely to be impacted by changes in the global and domestic macro environment, as well as shifts in risk sentiment. Further escalation of the Covid-19 outbreak could also pose downside risks to the financial market.

Malaysia today is just above the Philippines in terms of market capitalisation and we have fallen a long way from where we were 20 to 25 years ago. What can Bursa do to improve the performance of the FBM KLCI and the companies within its stable?

The performance of the stock market depends on many factors; whilst some are within Bursa’s control, a lot of them are beyond our control, for example, external factors such as the US-China trade tensions, geopolitical risks, volatility in commodity prices, individual PLC performance, etc.

Nevertheless, Bursa’s management has undertaken various initiatives that will help to improve the competitiveness and vibrancy of the marketplace.

These strategic initiatives can be grouped under the following four business pillars: increasing securities and other product-related offerings; developing and growing a diverse investor base; improving and providing an enabling ecosystem; and regional expansion.

How will infrequent quarterly reporting help companies, and given the needed disclosure by listed companies in Malaysia, will the less frequent reporting periods put investors, especially foreigners, off?

We are engaging the industry on the proposed quarterly framework for Malaysian-listed issuers via a public consultation and will listen to their input and feedback.

What plans do you and the exchange have to draw in younger investors, given the competition for capital and the ease of mobility these days?

In order to reach out to the younger investors, we are providing education programmes on the way to invest in the stock market. These programmes are positioned around the 3E strategy (Engage, Educate, Empower). We are using social media platforms to engage with them.

Is the influence of large domestic funds hampering value discovery for stocks on Bursa Malaysia?

Yes, we are trying to diversify the institutional investor base. So, we have a mix of long and some with shorter base frames, as well as higher retail participation. We are doing this through education.

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