SINGAPORE (Sept 4): Malaysia's stock exchange is looking to loosen the grip of large domestic investors on the market to encourage more trading and attract foreign investors to the best performing bourse in Southeast Asia.

Kuala Lumpur's US$262 billion (RM1.1 trillion) benchmark index of 30 of the largest companies has risen 15% in 2024 and is set for its strongest yearly performance in well over a decade as foreigners tiptoe back to a market buoyed by improving economic growth and a rising currency.

"There is liquidity looking to be deployed now that traditionally would be (flowing to) North Asia or India or Vietnam," Bursa Malaysia (KL:BURSA) chief executive Datuk Muhamad Umar Swift told Reuters in an interview on Wednesday.

"They want technology stocks," he said. "They're looking for a certain liquidity ... and so from the exchange perspective, we will engage institutional shareholders who have these assets to encourage more free float."

He did not give further details, but said this brought a follow-on challenge of finding new places for institutions to invest, which will take time.

Buying and selling in large volumes has been a perennial bugbear for foreign investors in Malaysia, with its pension and sovereign wealth funds sitting on huge blocks of some of the biggest and best-performing companies' shares.

The free float of Malayan Banking Berhad (KL:MAYBANK), for example, the largest stock on the KLSE, is 43%, according to LSEG data, and it is below 60% for the top three stocks.

Foreign money is flowing into Malaysian stock market, whose overall market cap is more than RM2 trillion, but according to Copley Fund Research only 38% of global emerging market funds have any Malaysia exposure at all.

"What we're now seeing is there's still capacity left, and it's looking at Malaysia," said Umar. "I think there is a call to action. Everyone wants to see repeatability. They want to see continued growth."

The rally has also attracted listings, with US$1.3 billion raised in Malaysia so far this year, according to LSEG data, double what had been raised in the same period a year earlier, and Umar said he was looking at a healthy pipeline in to 2026.

Mini-market chain retailer 99 Speed Mart Retail Holdings is due to go public in a US$509 million debut next week — the country's biggest listing in seven years.

So far, investors are tuned in.

Vivian Lin Thurston, portfolio manager for William Blair's emerging markets growth strategy, was the first investment professional from her firm to visit Malaysia in the last decade.

"It's a relatively small equity market which was out of favour for a long time until recently," she said. "Now Malaysia has started to look interesting again."

Uploaded by Magessan Varatharaja