This article first appeared in The Edge Financial Daily on February 7, 2018

KUALA LUMPUR: Fund managers have reacted positively to measures to stimulate Bursa Malaysia, including liberalising margin financing rules and allowing intraday short selling, but said more needs to be done to boost trading volume.

In his speech at the World Capital Markets Symposium 2018 here yesterday, Prime Minister Datuk Seri Najib Razak announced several measures to make the local stock market more attractive. New investors would also be given a fee waiver of trading and clearing fees for six months to encourage trade, he added.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew is looking forward to the three-year waiver of the stamp duty on mid- and small-cap companies’ shares traded on Bursa beginning next month, as he said small-cap stocks had underperformed in January.

“It’s a tough market this year and the small-cap [stocks] have not been performing very well in January and thus, lowering the transaction costs is definitely good,” he told The Edge Financial Daily.

However, Pong opined that the attempt to connect Bursa and the Singapore Exchange would do little to make the local market more attractive, saying Singaporean investors have gone off Malaysian shares following the closure of the Central Limit Order Book (Clob) in the early 2000s.

Clob was a secondary market in Singapore that traded mainly Malaysian stocks. In its heyday, transactions on the Clob reportedly far exceeded the transaction volumes of Singapore shares listed on the Singapore Stock Exchange’s main board.

Its closure left many Singapore shareholders holding billions in Malaysian shares listed on Clob. They later sold their shares at a discount.

“From my personal experience talking to investors in Singapore, they are not keen on [investing in] Malaysian shares, especially older investors who remember the Clob case.

“Before the Internet was big, Singapore investors did not have the means to invest globally, so they bought a lot of Malaysian shares due to our geographical proximity. It made sense for them to look across the border for Malaysian shares, which were more interesting,” he said.

Nowadays, Pong said, there are more options, aided by the Internet which allows more cross-border linkages with brokers worldwide, so Singaporean investors have alternatives to consider besides the Malaysian market.

“Quite frankly, I think it is an uphill battle to win back Singaporean investors. The [proposed trading] link is a good move, but it’s not enough.”

Areca Capital Sdn Bhd chief executive officer (CEO) Danny Wong said the connection between the two bourses is a step in the right direction, but he is looking forward to the previously proposed Asean platform which has yet to materialise.

“This link is a good first step and if the model works, maybe we could replicate it with the other Asean members.

“What I’m hoping for is a common platform for everyone to participate, with similar pricing, lower fees, common regulation and even better, with some kind of mechanism around the currency tied to the exchanges. This will encourage more liquidity in the Asean region,” he said.

Nevertheless, Wong believes that introducing a new category of traders, known as “trading specialists” who trade using their own accounts, will help boost Bursa’s liquidity. “With this measure, market makers will be allowed to facilitate more trades.”

This in turn will attract more investors, he said, noting that foreign funds have not returned to Malaysia due to liquidity issues.

“I’m not sure if the trading link between Malaysia and Singapore will have a significant impact, but this trading specialist measure may be more effective. I’m really looking forward to this,” Wong added.

Maybank Investment Bank Bhd and Maybank Kim Eng group CEO Datuk John Chong positively views the government’s efforts to boost the trading of mid- and small-cap stocks on Bursa, saying it is pivotal for small and medium enterprises.

“The initiatives announced today (yesterday) offer short-term tactical and long-term structural transformations that will augur well for the stock market and encourage increased market activities,” he said in a statement.

Rakuten Trade Sdn Bhd head of research Kenny Yee believes the measures to be introduced would encourage the market velocity going forward. “The waiver of stamp duty for small- and mid-caps may encourage the participation in such stocks,” he said.