Mid and Small Cap Research Scheme to cover 300 companies eventually

KUALA LUMPUR: The two-year Mid and Small Cap (MidS) Research Scheme, which was launched yesterday to spur the vibrancy of the local stock market, is expected to cover 300 listed companies eventually, an expansion from 100 in the initial stage, said Bursa Malaysia CEO Datuk Seri Tajuddin Atan.
A total of 100 companies with a market capitalisation of between RM200 million and RM2 billion have been chosen for the first phase of the scheme. Besides market capitalisation, the selection of the companies is based on stock liquidity and free float requirement of at least 15%.
Each eligible company will be covered by two research houses for two years, whereby one initiation report and at least four financial results reports will be issued to investors. The scheme involves 22 research houses.
The list of eligible stocks, which will be reviewed twice a year, is available at www.bursamids.com.
The research scheme is a culmination of the collaborative efforts of the SC, Bursa Malaysia, Kumpulan Wang Persaraan, the Malaysian Investment Banking Association and the Association of Stockbroking Companies in Malaysia.
In conjunction with the launch, two indices – the FTSE Bursa Malaysia MidS Cap Index and the FTSE Bursa Malaysia MidS Cap Shariah Index – have been introduced to track the performance of the mid and small-cap stocks. The indices consist of 169 and 136 stocks each, respectively.
The cost of research is to be funded by the Capital Market Development Fund, the size of which Tajuddin did not reveal. It was reported earlier that the initial funding is RM75 million.
The research scheme will, among others, increase the visibility and exposure of under-researched listed companies, lift trading liquidity and enhance investors’ interest in mid- and small-cap stocks.
Citing the attractiveness of mid- and small-cap stocks, Bursa Malaysia chairman Tan Sri Amirsham A. Aziz said the FTSE Small-Cap Index and the FTSE Mid-Cap Index registered gains of 16% and 11.6% respectively in the first quarter of the year.
“This proves that mid- and small-cap stocks can offer attractive return to investors. More importantly, it can offer a good alternative investment and enduring diversification strategy for all investors,” he said at the launch.
Amirsham expressed his appreciation for the allocation of a special fund of up to RM3 billion for fund managers to invest in potential mid- and small-cap companies.
SC chairman Tan Sri Ranjit Ajit Singh said the research scheme will benefit from the involvement of government-linked investment companies (GLICs) in driving the initial investment traction through the commitment of additional funds.
"It is also foreseen that the GLICs' participation, directly and via fund managers, as well as the greater recognition of the segment's potential for growth and portfolio diversification will encourage interest from private sector institutions," he said.