AS the best performing stockmarket among emerging markets in Asean, Bursa Malaysia will create a more facilitative environment, and broaden its offerings to ensure its resilience in all market conditions.
While earnings of most listed companies were adversely affected by Covid-19, those in glove manufacturing and healthcare especially, had been clear beneficiaries.
“Their strong performance had acted as a great catalyst for our market, ’’ said Bursa CEO Datuk Muhamad Umar Swift. (pic below)
Against a divergence in performance across all sectors, three out of 13 sectorial indices recorded growth for the first 11 months.
They are healthcare which gained 220.9%; technology (up 72%) and industrial products and services (up 4.7%).
The FBM KLCI has rebounded from its year low of 1,219.72 in March when the movement control order was announced, to close at 1,641.17 last Thursday.
To boost its competitiveness in the region, Bursa will focus on, among other things, the Islamic equity market where 77% of its listed stocks, and 40% of its exchange traded funds, are syariah-compliant.
“We plan to expand Bursa Suq al-Sila, our global syariah-compliant commodity trading platform, into new regions, ’’ said Umar.
Malaysia’s leadership in the palm oil suite of capital market offerings is, among others, a potentially strong growth catalyst.
Bursa is in discussion with potential strategic partners to further strengthen its global accessibility, especially into greater China.
It is also looking to broaden its products and services to make its offerings more relevant to traders.
“We are looking at strategic partnerships and international collaborations to build upon these value propositions that will help shape Bursa’s future growth and attractiveness, ’’ said Umar.
The pandemic has placed greater focus on environmental, social and governance (ESG) matters.
Bursa plans to organise more ESG-themed seminars such as the co-organised webinars with the Financial Times Stock Exchange (FTSE), focusing on ESG and the FTSE4Good methodology held this year.
On the FTSE4Good Bursa Malaysia index, which takes into account ESG factors, a total of 75 companies have met the qualifying criteria compared with 24 when the index was launched in 2014.
Bursa is exploring the standardisation of the ESG criteria in the capital market, to enhance the quality and comparability of ESG to investors.
As a provider of market data, the exchange is looking at ways to operationalise the collation, aggregation and dissemination of ESG data to its stakeholders.
This ESG data set will complement and enrich the exchange’s data offerings, which is in line with Bursa’s strategic position to expand its auxiliary services to the industry.
Against the commodity price rally worldwide, Bursa conducts real-time surveillance and monitoring of trading activities, which detect patterns and behaviour of irregular trading.
As most jurisdictions have uplifted their suspension on short selling activities, Bursa has taken a balanced and gradual approach to initially uplift the suspension of regulated short selling where investors can sell shares they do not own.
However, it will continue monitoring and assessing market conditions, as it extends the temporary suspension of intraday short selling, that allows investors to sell securities they do not own and buy back on the same day, until February next year.
As concerns over the pandemic continue to linger, Bursa has decided to extend temporary relief measures related to share margin financing until June 30,2021.
As part of these measures, force selling may not be imposed, and other types of collateral, apart from shares, may be accepted.
The exchange will continue to monitor ongoing developments and take a pro-active approach in implementing appropriate measures that support a fair and orderly market.
Bursa expects the current healthy level of share margin financing to be maintained in 2021; as at November, this level was about 2% higher compared with the same period last year.
With a strong foundation and ecosystem for investment, Bursa is able to stimulate long term interest in the markets, under its ongoing efforts to digitalise its services, liberalise the rules framework as well as widen its products and services.
To ensure a fair and orderly market, it emphasises on continuous shareholder engagement, robust market controls and having in place appropriate market management measures.
Within the growth of the derivatives market, are efforts to expand the number of market participants, revamp the participation structure and build on the strategic relationship with CME Group, the world’s largest financial derivatives exchange.
The strategic cooperation agreement involves the exploring of new products and other business opportunities.
In view of the sovereign downgrade by Fitch Ratings and potentially some others, an immediate priority for Malaysia is to work steadfastly to “push our economy back to normalcy.”
This has to be a collective effort to bring down the number of infections; with public sentiment already fragile, any widespread rating downgrades could potentially affect investor confidence and cause market volatility.
Downside risks to the economy include slower-than-anticipated progress on treatments for Covid-19 and weakness in the labour market.
Consumer sentiment is still fragile; the Malaysian Institute for Economic Research (MIER) consumer sentiment index has improved to 91.5 in the third quarter but remains below the threshold of 100.
Business sentiment remains cautious; the MIER business conditions index, at 86.3 in the third quarter, has stayed below the threshold level for seven consecutive quarters.
The surge in Covid-19 cases may see the re-introduction of tight lockdown measures, while domestic political developments may mitigate capital inflows.
The growing weight of China in the international emerging market equity indices may also limit the size of foreign capital allocation into Bursa.
This is against the rising prominence of index-based investing and allocation strategies.
However, Malaysian equities continue to provide unique opportunities especially from specific themes in the healthcare and technology sectors.
Malaysia, as part of South-East Asia, also benefits from any further trade diversion arising from US-China trade talks, as companies relocate their operations here.
The projected economic growth of 6.5% to 7.5% is, in Bursa’s view, potentially achievable, given the low base after the contraction in 2020.
The regional comprehensive economic partnership pact (RCEP) will enable broader market access and fortify regional supply chains.
The expansionary Budget 2021 and various fiscal stimulus will also help mitigate some downside risks posed by Covid-19, as well as possible geopolitical developments and protectionist policies.
As Bursa is expected to be the top performing bourse, again, in Asean next year, it will step up measures to increase its appeal as well as surveillance.
Yap Leng Kuen is the former business editor of StarBiz. Views expressed here are the writer’s own.