Banks blame syndicates for sharp fall on Bursa Malaysia


  • Nation
  • Friday, 03 Jun 2005

BY JAGDEV SINGH SIDHU

KUALA LUMPUR: Several major local banks last night denied they were responsible for the sharp fall of stocks on Bursa Malaysia lately, and instead placed the blame on speculators and stock market syndicates. 

Top executives from the banks said they have not cut credit lines for share margin financing, and would continue to support and expand their share margin financing facilities. 

The bankers present at the media conference were Malayan Banking Bhd deputy president Agil Natt, Public Bank Bhd managing director Datuk Tay Ah Lek, CIMB Bhd group chief executive Datuk Nazir Razak, Bumiputra-Commerce Bank Bhd managing director Datuk Azmi Abdullah and Hong Leong Bank Bhd group managing director Yvonne Chia.  

“We believe in the fundamentals, and the development, of the stock market. Whatever happened in the last few days or weeks does not reflect the fundamentals of the economy or the state of the capital market,” said Chia. 

The stock prices of many non-blue chip stocks or second and third liners have fallen over the past few weeks, and in some cases dramatically, or hit their daily “limit-down” thresholds.  

Under limit-down rules, a stock is allowed to drop by only 30% for shares traded above RM1in either the morning or afternoon session, and by only 30 sen for shares traded below RM1. 

The falls in such counters have sent Bursa Malaysia’s Second Board Index close to a seven-year low, and the KL Composite Index near its lowest level for this year. 

“This is not a share margin financing problem. This is a syndicate problem. I am willing to lend  

to any counter, but it is the question of price based on the analysis of companies,” said Nazir. 

The amount of money lent for the purchase of securities currently in the banking sector totals RM19bil, of which lending to share financing constitutes a small portion. Maybank and Hong Leong Bank have given about RM350mil each in share margin financing.  

Total loans in the banking sector amount to RM522bil. 

The bankers said that having a list of stocks that could or could not be given immediate margin financing was normal. The process of lending money to “non-marginable” stocks was a more tedious and stringent process. 

“The general statement that banks are pulling margin lines is incorrect. Banks will continue to support share financing. There is no liquidity squeeze,” said Tay. 

The bankers did, however, say that they do sell “a little bit” of shares pledged to margin accounts if all effort to get clients to top up their accounts or to finalise on an alternative payment plan fails. 

Bankers said the amount of credit they would give for the purchase of stocks would depend on the quality of the company’s earnings, net tangible assets and the business it was involved in. 

“The methodology is very clear in determining the value of shares,” said Agil. 

Bankers at the media conference, being local, could not say whether foreign banks or brokers had cut or pulled margin financing lines. 

“There are brokers who do share financing, and brokers who do leverage trading using their remisiers. If the foreign banks are cutting lines, come to the local banks. We still have a lot of room for margin financing,” said Nazir.  

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