This article first appeared in The Edge Financial Daily on March 20, 2020

KUALA LUMPUR: Both the Securities Commission Malaysia (SC) and Bursa Malaysia have put their foot down and told the investing public and stockbroking houses that the local stock exchange will not be shut down, although some quarters are calling for it as the current market turmoil has brought the FBM KLCI down to its lowest since October 2009.

“We will maintain continuous trading and market operation, to facilitate investors to manage their risks and opportunities during this period,” said the two regulators in a joint statement yesterday.

“It is important for the markets to remain open, as closing the markets would neither mitigate nor address the underlying causes of market volatility,” they added.

The authorities commented that shutting down the market will create greater uncertainty and adverse market sentiment by denying investors’ access to their investments.

The regulators reiterated that business continuity measures have been put in place, including backup sites, recovery facilities and alternative communication channels, to operate the market amid the Covid-19 outbreak.

Meanwhile, market management measures, such as circuit breakers, static and dynamic price limits are also available to manage excessive volatility, and participants are aware of these tools, the statement said.

“Robust clearing funds, margins and deposits are also in place to ensure clearing and settlement risks are managed,” the statement added.

“The SC and Bursa will continue to monitor the ongoing developments to pro-actively manage risks in the marketplace and will introduce additional precautionary measures as appropriate,” they said.

Their statement was issued shortly after the news that the chairman of the Association of Stockbroking Companies of Malaysia (ASCM) has urged the government to immediately suspend the trading on Bursa.

In a statement yesterday, ASCM chairman Datuk Dr Azman Manaf said the local stock market should be suspended from trading as a defensive measure to protect Bursa from suffering severe damage that could take almost a decade to heal.

He explained that the call to suspend trading activities was in line with the recent movement restriction order imposed by the government.

Nonetheless, the association later clarified that the call for suspension of trading is Azman’s personal view. ASCM said in a separate statement that the association is “in full support of maintaining the stock market to ensure the stability, sustainability and confidence of the investing community”.

It is worth noting that the Philippine Stock Exchange experienced a bloodbath yesterday after the two-day shutdown to curb panic selling.

The PSEi Index plunged as much as 24% before it closed at 4623.42, down 13.3%, or 711.95 points, from the previous closing. The benchmark index has plummeted 40.8% year to date.

Fund managers applauded the regulators’ decision to continue the trading activities in the local market.

When contacted, Fortress Capital Management director Geoffrey Ng said it is a difficult decision to be made for the regulators to decide whether to halt the trading activities during this uncertainty period.

“I think the local regulators have learnt from other exchanges’ experiences, such as China and (the) Philippines, where these markets experienced severe selldown after the suspension. So, it would make more sense for them (local regulators) not halt trading activity,” said Ng.

“Personally, I do not agree on the call to suspend the trading of Bursa Malaysia securities. As long as the banks and capital markets could operate as usual, the trading should continue.

“This is because now the market sentiment is already bad and suspending trading activities will not help, instead it will create more uneasiness among investors [to balance their portfolio or repositioning themselves during the downturn of the market],” a fund manager who spoke to The Edge Financial Daily on the condition of anonymity.

Meanwhile, the Malaysian Investment Banking Association (Miba) and its members support the regulators to continue the trading activity on Bursa. Miba believes it is important for trading on the local market to remain open and investors can access the capital market to trade freely.

Miba said it will continue to work closely with the SC and Bursa to ensure trading and capital market operations can continue efficiently and market integrity is always maintained.