Markets to remain open

Socio-economic Research Centre executive director Lee Heng Guie told StarBiz any suspension of the stock market would cause a real damage to investment in Bursa in the short-and long-run.

PETALING JAYA: The Securities Commission (SC), Bursa Malaysia and the Malaysian Association of Asset Managers (MAAM) have come out strongly against a proposal by the Association of Stockbroking Companies of Malaysia (ASCM) to suspend trading of stocks on the Bursa Malaysia.

The SC and Bursa Malaysia in a joint statement said it is important for the markets to remain open, as closing the markets would neither mitigate nor address the underlying causes of market volatility. The regulators said they will maintain continuous trading and market operation, to facilitate investors to manage their risks and opportunities during this period.

Socio-economic Research Centre executive director Lee Heng Guie told StarBiz any suspension of the stock market would cause a real damage to investment in Bursa in the short-and long-run as it can give out a wrong signal that the Malaysian market is not free from the government’s intervention and obstructs in market trading.

“Bear in mind that investors would continue to trade even when markets are in volatile mode. The suspension for capricious reasons is akin to a form of ‘capital controls’ and rekindles investors’ stigma on Malaysia’s unorthodox selective capital controls during the 1997-98 Asian Financial Crisis, to stem the falling ringgit and stock market, ” Lee said.

He suggested instead in an effort to contain the extreme market volatility due to fears and panic, the regulators could consider suspending intra-day short selling for all stocks and also recalibrate the levels for limit-down before the circuit breaker kicks in.

The regulators in their joint statement said a closure of the markets would instead create greater uncertainty and adverse market sentiment by denying investors’ access to their investments.

“Malaysia has a resilient domestic market and capital market ecosystem. Our market continues to be supported by deep domestic liquidity among our large institutions. During challenging market conditions, investors need certainty and continuity, ” the regulators added.

The SC and Bursa said they have business continuity measures in place, including backup sites, recovery facilities and alternative communications channels to operate the market in a pandemic situation.

Similarly, it said all market intermediaries have in place business continuity frameworks to ensure continuity of their business.

“Market management measures (e.g. circuit breakers, static and dynamic price limit) are in place and known to participants to manage excessive volatility. Robust clearing funds, margins and deposits are also in place to ensure clearing and settlement risks are managed, ” the SC and Bursa said.

The regulators said that they would continue to monitor the ongoing developments to proactively manage risks in the marketplace and will introduce additional precautionary measures as appropriate.

The statement by the regulators was in response to a ASCM statement yesterday morning that quoted its chairman Datuk Azman Manaf as saying that the stock market should be suspended for the time being as a defensive measure to protect it from suffering severe damage that could take almost a decade to heal.

“The Malaysian stock market has experienced a 23% drop in market capitalisation from RM1.04 trillion on Dec 31 2019 to RM804.63bil on March 18,2020, ” he said in a statement.

Later in the afternoon, the ASCM’s Secretariat Office issued another statement to deny the comments by its chairman.

“The association categorically has not proposed the suspension of trading in the FBM KLCI in any shape or form.

“The statements by Azman is the personal view done in his private capacity. It is not the view of the association, ” it said.

The ASCM said it had always been working with the government, the regulators and other relevant stakeholders to implement capital-market related measures to enhance the development, fair and orderliness of the markets.

The statements rebutting suggestions to suspend the market was also issued by The Malaysian Association of Asset Managers (MAAM) which did not agree with calls to suspend trading of Bursa Malaysia.

MAAM said it represents most of the country’s large asset management companies in an industry with total assets under management of approximately RM800bil.

“We believe in the fair and orderly functioning of the business change without interference which can be construed as a form of capital control in such a tense global situation, ” the MAAM said.

“In 1997, the Hong Kong Stock Exchange suspended trading at the height of the Asian Financial Crisis and upon reopening four days later fell 33%. Similarly, closer to home, the Philippines Stock Exchange was suspended for a day yesterday and opened 24% lower on opening today, ” MAAM added.

It said any moves to suspend trading does not address the underlying issues facing the country and the stock market and will exacerbate unnecessary volatility and feed the current uncertainty.

“Hence, the MAAM strongly opposes the motion by certain industry players to suspend trading in Bursa Malaysia, ” it said.

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