How to make Bursa Malaysia the choice of investor and capital market?

Sslee

Publish date: Sat, 27 Apr 2019, 10:07 PM

Dear all,

Below are two very good articles on different view of Bursa Malaysia Stock Market. Everyone is welcome to give their view on how to make Bursa Malaysia the choice of investor and capital market?

https://klse.i3investor.com/blogs/koonyewyinblog/203188.jsp

The Stock Market is the Fastest Way to Stimulate Our Economy - Koon Yew Yin

Today, people don't even dream about stock market. Our entrepreneurs are no longer aspired to raise funds from stock market, nor do the men in the street wish to participate in the opportunity that offered by our best and brightest entrepreneurs. Stock market has become a boring place.

It is not that our entrepreneurs lost their shine. They just shunned our stock market. Entrepreneurs do not see stock market as the channel to raise funds. They can issue bond, get bank financing or dispose assets. Investors do not see stock market as a path to build their wealth. They invest in property, bonds and fixed deposits. The last thing that comes to everyone mind is the stock market.

How hard things have fallen. I see great companies trading at a depressive valued. And there is no light at the end of the tunnel. I see people giving up on stock market; there isn't any gold mine to dream of. After many years, the journey been lonely and only some of us survived, scraping by each day. Not exactly a great sight.

About 25 years ago when I co-founded IJM Corporation Bhd, its market capitalisation was below Rm 1 billion and very quickly it expanded to have a market capitalisation exceeding Rm 10 billion.

I believe the fastest way to stimulate our economy is for the PH government to encourage entrepreneurs and investors to list their companies in the stock exchange to raise more funds to expand their businesses.

I wish to suggest the PH government instruct the officers from Bursa and Securities Commission to wake up and start working. Listen to your direct customers. Years after years the investment community is not widening, but shrinking.

The very basic thought is to get back people into stock investing. Start launching initiative and creating program that worked. Get out of the building, go to the universities and colleges. Engaging real people and get feedback that can be built upon. It's been a long time since we see anyone championing stock investment at the universities and colleges where the young and bright gather. Instead of waiting at office worrying and analysing the number, hear what people want to say. Find influencer and engage them instead of penalise them. Showcase the best listed companies instead of letting them lying low. Have an aggressive mindset. It's been ages since we had a good time and hurrah listening to the captain of industry.

https://klse.i3investor.com/blogs/kianweiaritcles/203333.jsp

Why ordinary investors are shunning Bursa Malaysia - TK Chua

Let’s be realistic, I think for speculative play and gambling, ordinary investors stand no chance against corporate bigwigs and insiders.

May I ask how many percent of the listed companies in Bursa Malaysia today are of investment grade? My estimate is not even exceeding 20 percent.

These companies raised money from the market, but do they really care for returns to shareholders? How many companies have provided decent dividends, if at all declared any dividend, to shareholders?

To me, many of these companies with listed status are nothing more than “conduit” for them to print money. They exist mainly for the sole benefits of those who are in control of the companies.

The management and the controlling shareholders are being lavishly rewarded while shareholders who provided the funding are given pittance or nothing.

If we want to make Bursa Malaysia an investment destination of choice, the strategy is not to allow every Tom, Dick and Harry to list their companies. I have seen too much abuse on this. On the contrary, we must be more selective to allow companies to list.

I understand caveat emptor must be the basic guiding principle of investing. However, if the market is ineffectively regulated and infested with poor governance, I think it is difficult for ordinary investors to make choices.

We can’t blame them for shunning the stock market if their experiences have been less than encouraging.

Instead of encouraging more people to invest in the stock market blindly, the focus should be on making the market more efficient and transparent. The authorities must monitor the listed companies to prevent them from indulging excessive corporate abuse for the benefits of controlling shareholders.

My view:

https://www.investopedia.com/terms/c/caveat.asp

Caveat emptor is a neo-Latin phrase meaning "let the buyer beware." It is a principle of contract law in many jurisdictions that places the onus on the buyer to perform due diligence before making a purchase. As oppose to:

Caveat venditor a neo-Latin phrase meaning "let the seller beware." It is a principle of contract law in many jurisdictions that places the onus on the seller to perform due diligence before making a sale.

In stocks market investing, the caveat emptor concept of contract law was forced onto ordinary investors that places the onus on the ordinary investors to perform due diligence before making transactions knowing very well that ordinary investor are subjected to information asymmetry hazard. (Poor quality of disclosure provided by the listed company and poor due diligence by Investment banker)

This asymmetry creates an imbalance of power in transactions, which can sometimes causes the transactions to go awry, a kind of market failure in the worst case involve insider fraud, accounting fraud, insider trading, IPO/RI promoter/underwriter (Investment bank failure in their due diligence), pump and dump and etc.

In Malaysia, Bursa Malaysia is mandated to operate the stock exchange as a commercially driven, public-listed entity. It is also mandated by Listing/Regulation/Disclosure Act as the front-line market regulator policing public-listed companies and market intermediaries. Perhaps these two mandate clash and give rise to conflict of interest as many of Bursa’s decisions on approval, suspension, delisting and waive seem indulging in excessive corporate abuse for the benefits of controlling shareholders.

On the other hand, SC is mandated under CAPITAL MARKETS AND SERVICES ACT 2007 to initiate investigation and prosecute offender under the Act are normally will act only if investing public make complaint with some initial evident of offenses committed by the offenders..

In order to make Bursa Malaysia the choice of investor and capital market something needs to be done by Bursa and SC to ensure high level of trust and integrity among their public-listed companies and to be seen in going after those who break the rules with the full force of the law. Only then the confidence and the crowd will return. As investors, what we can do now while waiting for the confidence to return is to attend the AGM and demand good governance and transparency from the BOD.

Thank you.

P/S: https://www.sc.com.my/news/media-releases-and-announcements/sc-reprimands-three-china-based-companies-and-says-retention-of-four-directors-prejudicial-to-public-interest

In view of seriousness of offends/frauds committed by the fraudsters and their total disregard/contempt shown against authorities of SC and BURSA with no respect for Malaysia Law. Hence it is my hope that SC should now make an extradition request with China government to extradite these China citizens to stand trial in Malaysia Court.

CMSA 2007 section 358. (1) The Commission may, if it considers that it is in the public interest to do so, recover on behalf of a person who suffers loss or damage by reason of, or by relying on, the conduct of another person who has contravened any provision of Part VI or any regulations made under this Act, the amount of the loss or damage by instituting civil proceedings against the other person whether or not that other person has been charged with an offence in respect of the contravention or whether or not a contravention has been proved in a prosecution

It is also my hope that SC can initiate a civil class action against those red chip companies IPO/RI underwriter/promoter (Caveat venditor) in gross negligence in promoting and listing these dubious red chip companies in Bursa as what U.S. (SEC) done as per below.

Mortgage-Backed Securities

Among the factors that fueled the 2008 market crisis was the widespread sale of securities that were backed by pools of mortgages that were bundled and sold by investment banks. The securities were backed by multiple tranches of residential mortgages of differing credit quality, and the securities were known to include sub-prime mortgages. Many of the securities quickly became worthless as the housing market collapsed.

The U.S. Securities and Exchange Commission (SEC) and the Department of Justice have charged many of the country's largest financial institutions with defrauding investors because they lied about the quality of the underlying mortgages. They have had only limited success in criminal prosecutions but have reached civil settlements in the billions of dollars with Goldman Sachs, Citigroup, Bank of America and JPMorgan Chase.

The packaging of the securities, which were given investment-grade ratings by the credit rating agencies, was done under the caveat emptor concept. The concept was central to the business model as the purchasers of the securities were considered sophisticated investors who should be able to evaluate their worth. While that has made successful criminal prosecutions difficult, it has not been a protection against civil charges.