Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : THE SHANGRI-LA HOTEL KUALA LUMPUR
Tarikh/Date : 18/07/88
Tajuk/Title : THE OPENING OF THE CONFERENCE OF
THE 10TH ASIAN SECURITIES ANALYSTS
COUNCIL (ASAC) AND OF THE 7TH EAST
ASIAN STOCK EXCHANGES (EASEC)
Encik Nik Mohamed Din,
Chairman of The Organising Comittee;
Honourable Ministers;
Distinguished Guests;
Ladies and Gentlemen;
I am happy to welcome delegates to this 7th East Asian
Stock Exchanges Conference and the 10th Asian Securities
Analysts Council Conference. I understand we have among us
here today representatives not only from our neighbouring
Asian countries but also from other parts of the world. We
are honoured that Kuala Lumpur has been chosen to host this
gathering of distinguished officials of the East Asian Stock
Exchanges, analysts and prominent speakers. This event will
be another important milestone in the efforts towards a
better understanding and a more accurate perception of the
Malaysian capital market and its place in the global capital
market.
Ladies and Gentlemen,
2. The shock of the Pan-Electric affair, which resulted in
an unprecedented three-day closure of the market in Kuala
Lumpur and Singapore, followed by the October '87 Crash
which virtually left no securities market unaffected, has
tested the resilience and underlying strength of the
Malaysian stock market. The combined effect of these two
crises have, in fact, undermine the Malaysian stock market
to an extent that it created serious doubts as to its
ability to recover. Investors confidence was greatly shaken
and foreign institutional investors scampered for cover.
But apparently even this disaster can bring some good.
There is now a greater sense of responsibility and
willingness to self-regulate the securities industry. I am
glad to note that the Kuala Lumpur Stock Exchange or the
KLSE and relevant regulatory authorities had spared no
efforts to strengthen the stockbroking industry and to
protect the interests of the investing public.
3. Despite the Pan-Electric crisis which wiped off 33% of
total market capitalisation in the KLSE in five days and the
recent October Crash which wiped off 36% of total market
capitalisation of the KLSE in 14 days, the year 1987 has
generally reflected a strong build-up of market sentiment.
These improved sentiments started in early 1986 and
continued to be felt in the first 7 months of 1987 except
for a few short bearish periods. During this time, the
buoyant market sentiments were to a large extent supported
by foreign institutional investors. The Malaysian
Government's efforts towards strengthening the securities
market and the relatively cheaper bourse had a positive
influence in encouraging a steady inflow of foreign
institutional funds into this country. It is noted that
interest to invest by both local and foreign investors have
also increased considerably during the first quarter of this
year which reflects the strengthening of confidence among
investors in response to the better economic condition.
4. Underlining this improved investors' confidence is the
turnaround of the Malaysian economy. Since the second half
of 1987, most of the major economic indicators have shown
steady improvements in response to higher commodity prices,
strong external demand as well as a gradual recovery in the
domestic market. These favourable factors have continued to
prevail during the first half of 1988. With the strong
fundamentals already in place, the Malaysian Government is
quite certain that the economy will expand faster to record
a real GDP growth rate of more than 5 per cent in 1988. As
indicated earlier on, our optimism is not without support.
Some economists have expressed the view that growth this
year may even be in the region of 6 to 7 per cent.
5. The current lower interest rates and liquidity in the
market had set the stage for the gradual switching of funds
from fixed-income investments to the stock market. This was
reflected in both the higher volume and value of shares
transacted on the KLSE in 1987. In sharp contrast to 1986,
the volume of shares transacted in 1987 rose by nearly
two-and-a-half times while turnover increased fourfold. The
first six months of this year has seen the Malaysian stock
market staging a remarkable recovery with share prices being
around pre-Crash levels during the same period. The total
market capitalisation of the top 100 listed companies was an
impressive $82.35 billion ringgit which reflected an
increase of 33.8 per cent above the market value of the top
100 listed companies at the end of last year, and 49.8 per
cent over the value at the end of 1986. The KLSE has learnt
well from the major crises faced during the past two years
and has undoubtedly emerged much stronger and more
resilient.
Ladies and Gentlemen,
6. It is Malaysia's earnest desire to develop her capital
market comparable to those of advanced nations. Towards
this end, serious efforts are currently being undertaken to
develop, amongst others, a more active bond market, unit
trust market and property trust. This desire stems from the
realisation that the world of securities today is developing
at an unprecedented rate with globalisation. We cannot
afford to lag behind.
7. The Malaysian Government has, in an effort to
strengthen the equities market, taken positive measures to
boost investors' confidence. A recent major step towards
this was the move to corporatise the stockbroking industry,
with the objective of improving the financial strength of
the industry as well as of allowing corporations to take the
lead in making the KLSE an international stock exchange
through improving technical expertise, professionalism and
widening the network of operations. Initial entry was
regulated, with only selected corporate participants being
allowed to participate in the stockbroking companies. This
was to ensure orderliness and a smooth transitional
development. In an effort to expedite the corporatisation
process, the Government has also issued new licenses to the
three largest domestic banks in late 1987. These banks,
with their capital resources and technical expertise, are
expected to spearhead the corporatisation of the
stockbroking industry. Whilst it is accepted that the banks
are relatively new in this business, we have reason to
believe that in time they will demonstrate their leadership
in the industry.
8. Foreign brokerage houses have also been invited to
participate in the Malaysian stockbroking industry. At
present, the Malaysian market gets by-passed essentially due
to lack of exposure. We hope that through foreign
participation in the Corporatisation Programme, the image of
local stockbroking companies would be enhanced. These
foreign partners have a significant role in promoting and
internationalising Malaysian stocks. The corporatised
stockbroking companies, especially those with significant
foreign participation, are expected to be more aggressive in
projecting their image abroad and hopefully they will
capture a larger share of foreign business and promote the
Malaysian stockbroking industry. In line with this, we have
now taken a decision to allow foreign stockbroking companies
to increase their equity participation from the current
level of 30% to 49% if the foreign stockbroking partner can
demonstrate that it can contribute positively to the
business of the local stockbroking companies.
Ladies and Gentlemen,
9. I wish to stress that we have spared no efforts to
restore confidence and to create a suitable environment for
a healthy development of the capital market. In this
regard, the KLSE has taken serious measures to improve its
systems and procedures, to widen and deepen its market, and
especially to keep pace with developments in their
international stock exchanges. These include, amongst
others, the proposed establishment of the Centralised
Depository System, the Advanced Warning and Surveillance
Unit, and the introduction of the Second Board.
10. It is recognised that the KLSE is now fairly
well-developed. The KLSE has one of the highest market
capitalisations in Asia and has been identified as one of
the five largest emerging markets among developing countries
by the International Finance Corporation. The Exchange
offers a wide and diversified range of equities from various
sectors of the Malaysian economy. It boasts of a good
selection of plantation stocks not commonly available on
other stock exchanges. In addition, the potential
development of our bond market, unit trusts, the property
trust and the Second Board on the KLSE would provide further
avenues for investment opportunities to the investors. It
is notable that, despite the sluggish economic conditions
during the past years, public companies listed on the KLSE
are reasonably profitable. The growth in corporate profits
during these years was reported at 13.2%. It is envisaged
that with the current economic recovery, the corporate
sector would respond even more positively to the turnaround.
With the relatively lower price earnings multiples of
Malaysian equities, the KLSE would be a relatively cheaper
bourse and should be more attractive to foreign portfolio
investors.
11. Taking into consideration the various improvements made
by the Exchange to facilitate trading, the stage is now set
to project the KLSE as a leading Exchange in this part of
the world. Now is the opportune time for investors,
particularly foreign investors, to tap the potential of the
Malaysian stock market. Towards this end, let me assure the
foreign investors that the Government will endeavour to
assist them in any way possible to overcome bureaucratic and
other obstacles. The Government may even consider the
liberalisation of the corporatisation process to further
boost its stockbroking industry.
12. As the stock market is often taken as a barometer of
the economic health of the nation, it is highly desirable
that market performance should reflect the economic
situation with reasonable accuracy. However, it is
unfortunate that the market is highly vulnerable to
speculation and rumours which distort the market. Rumours
are unavoidable but there seems to be some unscrupulous
people who manufacture rumours for speculative purposes.
This is surely an unhealthy state of affairs for all parties
concerned. The nation's economic growth can be adversely
affected resulting in poor market performance. It is hoped
that more responsibility will be shown by those with short
term benefits in mind.
13. You would agree that, in any market, the dissemination
of accurate information is of vital importance. There have
been too many instances in which we have become victims of
inaccurate information which only serves to defeat all
efforts made to develop a healthy capital market. We
believe Malaysia has much to offer the foreign investors, if
only those who are responsible would provide them with good,
reliable information. However, much lies with you, as
advisers and analysts, to promote Malaysian securities
abroad and to provide potential investors with accurate and
reliable information on our Malaysian equities.
14. You are in a strategic position to play a role in
assisting us to promote the KLSE to foreign investors as it
now possesses all the necessary financial infrastructure and
technology required for development into a leading
securities market in this region. In this respect, we ask
you to place before the investing public information about
our market obtained from reliable sources and not from
questionable ones. We would want you to get to know the
various organisations and institutions capable of providing
you with the right information. We would urge you to assist
in building up research and development in the stockbroking
industry which would be able to contribute positively to a
healthy development of investment knowledge and techniques
in the market.
Ladies and Gentlemen,
15. I wish to thank the sponsors of this Conference for
inviting me to officiate the opening ceremony. I wish you
all every success in your deliberations and a pleasant stay
in Malaysia. On this note, I have much pleasure in
declaring open this Conference.
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