They attributed the weakness in the Malaysian equities market to several factors, from low profitability of local businesses to domestic and regional uncertainties.
For instance, Penjana Capital CEO Taufiq Iskandar told FMT Business, Bursa’s performance this year has been driven by the prospect of flattish investment returns.
Prime Minister Anwar Ibrahim announced yesterday that the stamp duty on transaction of equities on Bursa will revert to 0.1% in July from 0.15% currently to make the local market more attractive.
“I am confident this step will stimulate the market and enhance its attractiveness, and that it will increase market liquidity and attract more domestic and foreign funds into the Malaysian stock market,” he said.
However Anwar, who is also finance minister, said the reduction would be subject to a cap of RM1,000.
The stamp duty was raised from 0.1% to 0.15% on Dec 30, 2021.
While he did not elaborate, it is understood that given the cap, the new rate would apply only to transactions of RM1 million and below.
Taufiq conceded that the reduction would improve market operations and revive intra-day trading but only in the short term.
He told FMT Business that as a result of inflation and increases in interest rates, the yields from cash and bonds compared with equities “are not significantly different”, thereby discouraging investors from taking risks on the equities market.
Taufiq said government-linked companies (GLCs) would have to ensure their returns on equity and capital investments improved to revive the capital markets.
“Hence, we have to revive the capital markets … to develop alternative fund-raising options such as private equity and venture capital so that our private companies can scale up (to get listed),” he added.
He said this could ultimately enrich Bursa’s offerings and make it more attractive.
Taufiq said GLCs listed on Bursa should undertake restructuring to improve their profitability and future-proof their business operations as they were key constituents of the local market.
Profitability more important than transaction cost
Bank Islam Malaysia Bhd chief economist Firdaos Rosli expects the impact, if any, to be muted.
He said the factors that were pulling the market back were centred around the near-term profitability of listed companies rather than cost of equities trading.
“Bursa may be attractive again if investors believe that other bourses will perform badly versus our market,” Firdaos said, adding that he doesn’t see it happening yet so long as the US policy rate remains high.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) has retreated from 1,495.49 points on the last trading day of 2022 to 1,387.33 points yesterday, a sign of the declining attractiveness of the local market.
Malaysia University of Science and Technology (MUST) economics professor Geoffrey Williams said a cut in stamp duty would not stop the decline in companies listed on Bursa.
“It will have very little impact so long as structural problems persist,” he told FMT Business. “The problem is that companies on Bursa Malaysia are not attractive.”
Bursa-listed companies are performing poorly compared with their counterparts in other countries, liquidity is low and there are few opportunities for investors to get a good position.
Williams cited several factors that make Bursa not as attractive as its counterparts in other countries.
He pointed out that its listed companies are under-performing, there are few opportunities for investors to get a good position and that the dominance of the GLICs are compensating for the lack of other investors.
“Lastly, corporate governance and environmental, social and governance (ESG) risks are too high for many overseas investors and the exposure to companies that might be involved in corporate scandals, human rights violations and other reputation risks is too high,” Williams added.