BURSA Malaysia, which is expected to see lower trading volume on higher stamp duty rates and the Cukai Makmur, will develop other products to make up for any loss in income.
With the new proposed stamp duty fee structure, it will be more cost efficient to gain exposure to shares listed on Bursa Malaysia via an exchange-traded fund (ETF) rather than buying shares directly.
This would potentially make ETFs more appealing for those who prefer to buy a basket of securities, given the difference in trading costs. “The ETF segment could end up seeing greater investor interest over the next few years,’’ said Bursa Malaysia.
Two proposals under Budget 2022, said CGS-CIMB Research, are expected to have a negative impact on Bursa Malaysia – the increase in stamp duty for contract notes from 0.1% to 0.15% and the abolishment of the limit for stamp duty of RM200 per contract note.
This can reduce equity average daily trading volume for Bursa Malaysia due to higher trading costs for investors.
Potentially increasing tax expenses for Bursa Malaysia is the introduction of a one-off special tax called Cukai Makmur in 2022, at a tax rate of 33% from 24% currently, for pre-tax profit in excess of RM100mil.
ETFs are currently exempt from stamp duty; stamp duty exemption on ETF sale and purchase transactions was announced in last year’s budget, and is currently in effect until Dec 31, 2025.
Asset managers may consider listing more ETFs on Bursa Malaysia to appeal to investors who seek lower overall investment costs. This new tax regime could also lead to an increase in passive investing.
There are currently six ETFs that invest in companies on Bursa Malaysia with one-year returns ranging from 15.74% to minus 14.05%. They are the FTSE BURSA MALAYSIA KLCI ETF (9.86%), TradePlus DWA Malaysia Momentum Tracker (13.02%), MyETF Dow Jones Islamic Market Malaysia Titan 25 (minus 14.05%), MyETF MSCI MALAYSIA ISLAMIC DIVIDEND (minus 4.23%), Kenanga KLCI Daily 2x Leveraged ETF (15.74%), and Kenanga KLCI Daily (minus 1x) Inverse ETF (minus 9.02%).
Bursa Malaysia also plans to focus on products that cater to syariah and socially responsible investors.
More than 75% of listed stocks and 40% of ETFs are syariah-compliant, and there are plans to expand Bursa Suq Al-Sila, the global syariah-compliant community trading platform into new regions.
Bursa Malaysia is currently working with the Securities Commission (SC) on a waqf-featured fund framework, to offer products such as waqf ETFs or waqf real estate investments trusts.
The exchange is looking to strengthen global accessibility and broaden its products and services, to make its offerings more relevant to traders. The recent addition of the East Malaysian Palm Oil Futures (FEPO) strengthens the offerings of Bursa Malaysia Derivative’s palm oil complex.
Since its launch on Oct 4, 2021, till Nov 9, 2021, the FEPO contract had a total of 893 contracts traded, with positive engagement with the palm oil industry and market participants. “Over the next few months, we anticipate to see the FEPO contract gain greater trading participation from the industry and market.
“The next step is to revamp the existing Gold Futures contract, where we hope to revitalise the trading of gold by domestic and international market participants,’’ said Bursa Malaysia.
This is particularly with the upcoming launch of the T+1 night trading, as gold is actively traded during Asian night hours.
Bursa Malaysia also plans to expand its derivatives business by diversifying into other commodities such as soybean oil futures and introducing new financial/equity derivatives.
It is also working towards increasing liquidity and accessibility in the Malaysian financial market through physical delivery of the three-year Malaysian Government Securities (MGS) futures contract, and the ten-year (MGS) futures contract.
Ecosystem initiatives include:
> The discretionary trading framework for securities traded on the exchange which took effect from June 30, 2021, enabling its participating organisations to serve investors in new ways,
> The first market-making programme for stocks in Malaysia which was launched earlier this year aims to increase the liquidity and price efficiency of selected mid-to-large cap stocks, and
> Bursa Malaysia has received approval-in-principle from the SC to conduct night trading sessions for the derivatives market, targeting to commence Dec 1, 2021, and greater vibrancy is expected in the Malaysian derivatives market.
The exchange is also building its data analytics business through the introduction of new products and services to enhance its data offerings/solutions. “Over the long term, we want to explore and offer opportunities beyond our core products; this could include tokenised assets, new data solutions and novel products based on syariah principles.”
Brimming with new ideas, it is forging ahead to create additional income and opportunities.
Yap Leng Kuen is a former StarBiz editor. The views expressed here are her own.