What's Ailing The Local Equities Market

So, whats ailing the local bourse. The Dow keeps chugging along together with most other markets receive got been doing relatively good for the longest time. Our local markets receive got been inwards the doldrums since nosotros changed government. Is it that nosotros are all the same on the clean-up phase owing to the many mismanagement at enough of GLCs? Is our debt burden together with so insurmountable? Is the belongings overhang causing a shrinkage inwards liquidity?

Or has it to produce amongst the Malaysian bonds' future?

Stock marketplace seat indices provider FTSE Russell’s decision to retain Malaysian bonds on its FTSE World Government Bond Index (WGBI) scout listing is negative to the market, AmBank Research says.

“The adjacent review volition exclusively last due inwards March 2020. This is negative to the marketplace seat every bit it agency the overhanging concern on potential US$8bil (RM33.6bil) unusual outflows from the Malaysian bond marketplace seat inwards the effect of a downgrade volition non at nowadays expire away, ” the enquiry occupation solid said on Friday.

“Apart from Malaysian bonds, a downgrade would wound the ringgit, together with inwards turn, the appetite for Malaysian equities every bit well, ” it said inwards a enquiry note.

A downgrade of Malaysia’s bond would receive got excluded them from the WGBI. Malaysia's bond marketplace seat is the most foreign-owned inwards Asia, together with the status-quo could weigh on the ringgit on Friday, Reuters reported.

FTSE Russell volition render some other update after an interim review inwards March, which would give the Malaysian fundamental banking concern fourth dimension to potentially explore to a greater extent than measures to heighten liquidity, the agency added.

Read to a greater extent than at https://www.thestar.com.my/business/business-news/2019/09/27/foreign-bond-outflow-concerns-remain-after-ftse-russell-decision-ambank-research-says#dLllyE8SVCbcguQX.99


For me, all the cited reasons inwards a higher house produce non occupation organisation human relationship for the mind reasons why local equities receive got been shunned.

1) Participation Rate - As a developing economy, it is natural that the markets volition run into a large participation past times private investors vis-a-vis institutional. In bullish markets, retail investors may occupation organisation human relationship for 40-60% of book traded. Things receive got been evolving for the past times 10 years. Can anyone gauge how many broking accounts in that location are inwards Malaysia: answer, it is 1-2 million, mayhap fifty-fifty more. 

Now, gauge how many accounts TRADE AT LEAST ONCE Influenza A virus subtype H5N1 YEAR ... (you tin learn the actual figures from Bursa if they allow you) ... some 200,000 accounts. So forget almost the 2 million, most are dormant or replications. 

Now, gauge how many private accounts merchandise at to the lowest degree ONCE Influenza A virus subtype H5N1 MONTH. Its around 60,000 only. Does that telephone whatever alert bells? How did nosotros learn to this lamentable state?


2) Lacklustre IPOs - Need I say more. For the past times 10 years, you lot tin tabulate all the IPOs together with run into how they perform. Are in that location no interesting prospects left? I would fence that overly stringent rules together with regulations receive got been hampering decent companies. Many receive got opted to expire overseas for listings. Some cannot learn the valuations they want.

Bursa/SC receive got to last forrard thinking inwards bringing upwards skillful prospects to listing on Bursa fifty-fifty though it mightiness receive got to curvature rules a bit. Our regulations are also tight together with leave of absence no room to manoeuvre. Then in that location are are the overly inquisitive on their sources of majuscule - it is upwards for debate; in that location are already rules past times Bank Negara to "capture questionable funds", why does this autumn nether Bursa/SC again?

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The reality is, EVEN WITH THE TIGHT REGULATIONS nosotros are coming upwards amongst really mediocre IPOs, together with so the rules are non doing their jobs no affair how you lot argue.

Why can't you lot assist listing IPay88 (want higher valuation, together with so last it, it is the future), or 99Speedmart, KK Group or PappaRich .... merely scan these decent companies: AbbVie Sdn Bhd, Elken Sdn Bhd, arvato Systems Sdn Bhd, Continental Tyre PJ Sdn Bhd, Jakel Trading Sdn Bhd, Matrix Global teaching Sdn Bhd, Harta Maintenance Sdn Bhd, KDEB Waste Management Sdn Bhd, OFO Tech Sdn Bhd, Swingvy Sdn Bhd, Zenxin Organic Food Sdn Bhd ... Of course, non all of them are quite gear upwards to list, but many are if nosotros are merely to a greater extent than "amenable to the requirements".

Our listing rules are together with so archaic, nosotros all the same favour one-time industries amongst difficult assets, proven profits over three years, listing some 10-15x earnings ... all these rules are meant for industries 25 years ago, nosotros haven't changed.

There is piffling proactive engagement amongst these private companies. There must last a squad to "encourage, facilitate, fifty-fifty mentor" dynamic shortly listable companies. Let's no longer lord it over every bit gatekeepers, you lot come upwards to me together with nosotros run into whether you lot tin pass. Be proactive, engage, last flexible, if IPay88 wanted 28x earnings, I hollo back it is reasonable, I hollo back investors would lead handgrip of it even. Because nosotros are together with so ladened amongst really humdrum IPOs for the past times few years already. 

3) Over-Surveillance - What I meant past times that is surveillance on trading together with possible collusions. We all know Bursa/SC receive got bright systems to rails all our trades. But when it goes overboard, nobody wants to merchandise anymore for fearfulness of getting into trouble. Did you lot know if a com

pany or an investor were to produce a General Offer (usually at a premium to prevailing marketplace seat prices), Bursa/SC tin (and I heard do) trackback all BUYERS of the stock for the past times 12 months. I mean, come upwards on. Who dares to buy? As innocent every bit you lot heard a rumour from a pub, you'd experience you lot mightiness last doing something incorrect already to purchase based on rumour. This is but i representative and remeasures together with traders tin tell you lot enough more.


4) Make Money - You cannot fence that people are shunning stocks because ALL PEOPLE volition expire to where they tin brand money. Take Bitcoins, many didn't fifty-fifty receive got an occupation organisation human relationship or know where to merchandise these buggers, but because its volatile together with trending, people volition respect a way when there's money to last made. People are shunning local stocks because there's non much money to last made...FULL STOP.

5) Going Private - Just hold off at the tabular array above. Why are skillful companies going private inwards droves? Because the marketplace seat is non giving them the valuations they hollo back they deserve. Many volition resurface later on amongst amend valuations inwards other exchanges. Or they produce non hollo back they demand to bring upwards majuscule anymore.

There are slightly less than 1,000 listed companies on Bursa. Around 60% volition run into no trades almost every day. That needs to last addressed. No liquidity for diverse reasons, no to a greater extent than ground to last listed. Something needs to last done here. Unfortunately, I can't assist solve every unmarried problem.


6) Most Important Shift In Paradigm - This would last the most of import shift inwards listing paradigm, which seems to receive got bypassed Bursa/SC completely. Now companies are no longer listing to RAISE CAPITAL for increment similar before. The epitome has shifted to Private Equity/Venture Capital Funds to bring upwards funds.

For example, a fellowship could receive got listed at nowadays for 14x prospective earnings on Bursa, but instead, lead to accept funding of RM150m (even to a greater extent than than what the fellowship could receive got raised past times listing on Bursa) together with rest private. Hence the novel majuscule volition fund increment strategies together with has a skillful run a peril to succeed. Two years later, the same fellowship volition expire for listing but at nowadays cyberspace turn a profit has to a greater extent than than tripled, so listing at 14x prospective would yield a marketplace seat cap of to a greater extent than than 3-4x than listing on Bursa 2 years back.

There's cipher incorrect amongst that except that the fellowship is at nowadays listing to assist PE/VC to function out rather than to bring upwards majuscule together with allow investors to participate inwards the increment of the companies. Hence the valuations learn fuller than say 2 years back, so limiting the upside every bit well. (The delisting together with relisting of Leong Hup has some semblance of that).


These are but merely a few critical factors that the regime has to address to rejuvenate the local bourse. Even if you lot produce nothing, the local bourse volition all the same receive got bull runs when the planets are aligned, but these ups together with downs volition non assist mask deeper underlying problems inwards the long run.

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