LETTER | Transforming the capital market?

LETTER | A bull is an adult uncastrated male bovine. At Bursa Malaysia, a bull market is a condition in which share prices are rising or are expected to rise whilst a bear market is when prices decline, like now.

Among other things like inflation, foreign funds outflow, and weakened ringgit it is mainly due to uncertainty created by the imminent state elections. Many counters now are relatively cheap, undervalued and at “screaming buy” positions. 

It puzzles me on why the government has to reduce stamp duty at this point in time as the impact is minimal and we are at the bottom of the cycle that will move up if the economic numbers including positive forecasts by the government are considered and trusted. 

The justification to increase investor interest and increase market liquidity to attract more domestic and foreign funds do not hold water as there are restrictions.

That said, let’s look at the ecosystem or some capital market participants in the share market.

Bursa targeted 39 initial public offerings (IPOs) with RM10 billion market capitalisation in 2023 (2022: 35 listings with RM11.5 billion capitalisation). It was to allow growing small and medium-sized companies to enter the market, especially the ACE Market (sponsor-driven) for business expansion.

On average, there should be about three offerings monthly but it has been erratic with some months six or seven and some nothing and this is not a case of investors being spoiled with choices. ACE Market does not attract the jerung and small players do not have deep pockets to roll their money. 

If one of the reasons is to follow the reasoning for the stamp duty reduction, ie to expedite the process for IPO and reduce time-to-market to ensure competitiveness and attractiveness, please exercise caution. 

Whilst we want to attract “angel investors”, there are also many “devils” flirting around. 

It is a given that Bursa is also listed and had forecast a daily trading value of RM2.3-RM2.4 billion in 2023. However, it was RM1.65 billion per day last week. Even the past 100-day average daily trading of RM1.9 billion is way below the forecast.

Hopefully, Bursa will focus on its ongoing Public Listed Companies Transformation Programme to help create a more attractive market with quality offerings for the betterment of all stakeholders in line with the bourse’s mission of “Creating Opportunities, Growing Value”.

The Malaysian market is relatively small and some IPOs have been over-valued, causing big losses to small investors. The warning signs were there when applications through Investment, Trade and Industry Ministry (Miti) were under-subscribed. 

It seems Miti stopped disclosing “over” or “under-subscription”. Hope Miti can be more transparent and assist potential investors in making calculated decisions. If there are under-subscription, preferably it should be returned to the placement agent or issuer to make necessary adjustments.     

The six months “moratorium” restriction on Miti applicants who failed to subscribe to the allocation approved does not help either.

There are also issuers justifying rich price-earnings ratio (PER) valuation as compared to listed peers. The principal adviser should be made accountable in such cases.

Granted, the Securities Commission is not liable for the merits of the share issuance but changes are sorely needed in order for the capital market to achieve greater efficiency and be internationally competitive. Maybe it is time to review the Malaysian Code on Corporate Governance (MCCG) to create more value for a wider spectrum of stakeholders and help educate potential investors.

True, shares are purchased at their own risk or TAYOR (trade-at-your-own-risk) but regulators have a duty to ensure an orderly market. Have a look at some “penny stocks” that have substantially dropped in price for some time and monitor new offerings to ensure the objective(s) are met, eg for business expansion and not for promoters to cash in.

We need to be fit as a mallee bull and take the bull by the horns on any issues affecting the capital market and not be busy as a hibernating bear as there are many investors who are cross like a bear with a sore head.

What say you…

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.