Measures lauded but will they benefit Malaysian stock market?

PETALING JAYA: The stamp duty waiver on trading of shares of mid and small-cap companies listed on Bursa Malaysia and the establishment of a stock market trading link between Bursa Malaysia and Singapore Exchange (SGX) by year-end have been lauded by industry players as positive measures, but the benefits to the local stock exchange may be somewhat insignificant.
Inter-Pacific Research head of research Pong Teng Siew expects the stock market trading link to provide a “very small” benefit to the local exchange in the short term, saying he believes Singaporean investors have little interest in Malaysian equities, given that they are well connected globally and prefer to look at shares elsewhere in the world, and that the measure will not significantly help to stimulate interest in Malaysian shares among investors across the Causeway.

“Since the Asian crisis, I’m afraid most of the Singapore investors have sworn off Malaysian shares. Obviously, the authorities would want to do anything that can possibly help to stimulate interest in Malaysian shares. But I can say there is very little interest among Singapore investors for Malaysian shares,” he told SunBiz.
Conversely, Pong said, Malaysian investors are more interested in Singapore shares, due to the strong Singapore dollar.
“They might be tempted to buy Singapore shares so that their wealth could be better preserved since it is denominated in Singapore dollar, which is a more stable currency than the ringgit. But anything is possible in the long term,” he added, noting the direct link might open up the avenues for more securities for investors to choose from.
MIDF Amanah Investment Bank Bhd director of corporate investment banking Sherilyn Foong said the link will definitely help increase market liquidity and velocity and, to an extent, help cushion the lack of foreign institutional funds in the Malaysian market.
“It’s a win-win situation for all parties, especially the exchanges that will benefit the most,” she told SunBiz, noting the cross participation from the retail sector is currently pretty much insignificant for both markets.
Affin Hwang Asset Management senior portfolio manager Chow Kar Tzen expects the Malaysia-Singapore trading link to spur further retail participation and liberalise access to markets.
“Nonetheless, retail investors can already trade both markets. The proposed trading link comes with a slew of other announcements including relaxation of margin financing rules and to also allow intra-day short-selling which will be positive for asset managers such as ourselves to trade the market more actively,” Chow told SunBiz.
CIMB group chief executive Tengku Datuk Seri Zafrul Aziz said the Malaysia-Singapore Connect share trading initiative will not only attract more new players to participate in the wealth-creation of a total of 1,600 listed companies across both markets, but also encourage financial product creation and diversification.
The Securities Commission Malaysia (SC) and the Monetary Authority of Singapore (MAS) today announced that they will work together to facilitate the trading link between Bursa Malaysia and the Singapore Exchange (SGX). The trading link would allow investors to trade and settle shares listed on each other’s stock market in a more convenient and cost-efficient manner.
RHB Research raised its assumption for 2018 securities average daily traded value to RM2.7 billion, from RM2.58 billion previously. Correspondingly, the research house raised its 2018 net profit forecast for Bursa Malaysia by 4%.
Pong said the stamp duty waiver will help to encourage increased interest and participation in the small to mid cap segment.
“To some extent, it might help to reduce the cost of transactions and opportunity for making profits and certainly, it is a welcome move in this difficult trading environment,” he added.
RHB analyst Lee Seng Choon believes the exemption of stamp duty on shares of mid- and small-cap companies traded on Bursa Malaysia is a positive for trading volume.
The stamp duty chargeable on transactions on the stock market of Bursa Malaysia is RM1 for RM1,000 or fractional part of value of securities effective March 17, 2003. The maximum charge for the stamp duty is RM200.