High transaction cost results in low liquidity in Bursa

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KUALA LUMPUR: High transaction cost is one of the causes that has resulted in low liquidity in the local exchange, said Macquarie Capital Securities (Singapore) Pte Ltd SEA division director Barnaby Matthews.

If an exchange wants to boost trading activity, the transaction cost or brokerage fee has to be trimmed, he told reporters yesterday after the listing ceremony of Macquarie Securities’ structured warrants on Bursa Malaysia.

He noted that transaction cost in Malaysia is 40 basis points for every amount invested, while Singapore brokerage firms normally impose 25 basis points.

“Transaction cost [in Malaysia] is higher than most exchanges. Most transaction costs have been coming down in other markets. If you really want to boost activity on Bursa, you have to drop the transaction cost. High frequency just doesn’t happen if you have high transaction cost,” he said.

He also said the recent drop of the FBM KLCI is not a concern and that he is optimistic on Asean stock markets, moving forward.

Australia-based Macquarie Group plans to list 32 structured warrants in four tranches on Bursa in the coming fortnight, with tenures ranging from six to seven months. It listed eight call warrants yesterday: AirAsia X Bhd, Berjaya Corp Bhd, DRB-Hicom Bhd, Hong Leong Industries Bhd, Inari Amerton Bhd, KNM Group Bhd and My EG Services Bhd (2).

It plans to list four FBM KLCI structured warrants in the second tranche, and four for Hang Seng Index’s in the fourth tranche.

Macquarie Singapore is a member of the Macquarie Group, which owns Macquarie Capital Securities (Malaysia) Sdn Bhd.

“Depending on investors’ demand and the activity in the market, we will expect to issue more [warrants] on a regular basis,” said Matthews, adding that “the potential here is very high but it [local stock market] needs more education and promotion”.

He also noted that Malaysia was one of the top performers in the Asean market with the FBM KLCI index rising 52.86% since Sept 2009, adding that there was a huge working age population in Malaysia, which could potentially turn into an investor-based society.

He also noted that the amount of warrants here is comparable to Singapore or Thailand, but the liquidity is not as high as other markets.

Meanwhile, Bursa chief executive officer Datuk Tajuddin Atan, who was also present at the listing, said with Macquarie Group’s 32 structured warrants, the total structured warrants listed on the exchange would reach 463.

This article first appeared in The Edge Financial Daily, on October 17, 2014.