KUALA LUMPUR: The stock market is not merely a trading venue which is only accessible and benefits certain quarters who understand and participate in it, but a platform which is able to provide inclusive growth in wealth distribution and advantages to the overall economy, says Bursa Malaysia Bhd.
Citing the benefits of a bullish capital market for direct investors, the exchange operator said it would provide opportunities for individuals to diversify their income, especially during the current low-interest-rate environment after Bank Negara cut the Overnight Policy Rate to the lowest level of 1.75%.
“More individuals have turned to the equity market to supplement their income and seek better returns from potential capital gains and dividend yields, reflecting investor confidence in the economy, ” it told Bernama via an email recently.
Bursa Malaysia was responding to a current perception by some parties that the stock market is only accessible and benefits the select few who understand and participate in the equity market.
According to Bursa Malaysia, market capitalisation on the local bourse had risen 7% to RM1.7 trillion as at end-July 2020 compared with RM1.59 trillion at end-February 2020.
“The benchmark FBM KLCI rebounded 31% from its decade low of 1,219 points on March 19,2020, and turned out to be the best performing market among emerging markets in Asean (for the year to July 30,2020), with other markets registering declines, ” it said.
As for indirect market participants or individuals, who do not invest in the stock market, the exchange operator said many Malaysians have invested indirectly in the equity market through pension funds such as the Retirement Fund Inc (KWAP) or Employees Provident Fund (EPF) as well as unit trusts and mutual funds like Public Mutual or CIMB Principal Asset Management.
“That also include investments in the country’s largest state-owned fund manager, Permodalan Nasional Bhd (PNB) which has 14 million unit holders, and Lembaga Tabung Haji which has nine million depositors thus far, ” it said.
Other than that, Bursa Malaysia said many individual investors relied on dividends or gains for wealth growth via the government-linked investment companies (GLICs) such as Khazanah Nasional Bhd and the Armed Forces Fund Board (LTAT) that predominantly invest in the local stock market, it said.
“Currently, GLICs hold 25.9% of total market-cap, representing RM440.4bil in assets under management (AUM) on Bursa Malaysia.
“Hence, the bullish performance of the stock market correlates with higher returns by GLICs, which then benefits every unit holder across Malaysia, ” it said.
On benefits for the government, Bursa Malaysia said the heightened trading activity will positively contribute towards government’s income via stamp duty, sales and service tax (SST) collection on brokerage fees, as well as higher corporate income tax from profits of companies that have benefited during the Covid-19 pandemic.
On benefits to companies, the bourse operator said the recent bullish performance had facilitated several successful initial public offerings (IPOs) and secondary fund-raising exercises, providing a funding source for companies to sustain and grow their business, which in turn supports the economy.
“Year-to-end July 2020, RM2.23bil have been raised from 11 IPOs and 158 secondary offerings, ” it said, adding that the 11 IPOs had raised a total fund of RM292mil while the 158 secondary issuances with total funds raised of RM1.94bil in the first seven months period.
“Meanwhile, 10 of the 11 IPOs had seen double to triple-digit growth rates as at end July, 2020, ” it said.
Aside from the benefits, Bursa Malaysia said all investors, issuers and market participants in the capital market, who in turn have higher spending power, would further contribute to economic growth via their higher spending power and boosting domestic consumption.
“The recent bullish performance of the capital market has helped increase the market cap, particularly of some of the blue-chip companies.
“This can potentially increase Malaysia’s overall (shares) weight in the next MSCI Emerging Markets Index rebalancing, which will ultimately bring back more foreign funds who closely watch this key index, ” it added.
The MSCI Emerging Markets Index captures large and mid-cap representation across 26 emerging markets countries and it is reviewed quarterly in February, May, August and November with the objective of reflecting the change in the underlying equity markets in a timely manner, while limiting undue index turnover. — Bernama