Speechs in the year
Tarikh/Date 	: 	02/10/90 

 Encik Nik Mohamed Din,
     Executive Chairman of the KLSE;
Distinguished guests;
Ladies and gentlemen.
    I  would  like  to thank the management of the KLSE and
Business Times for inviting me  to  address  this  "Malaysia
Capital  Growth  Opportunities  Convention  and Exposition".
This Convention and Exposition is a major milestone  in  the
efforts  towards  creating a better understanding and a more
accurate perception of the Malaysian capital market and  the
immense opportunities that it offers.  I am confident deleg-
ates  to the Convention, and the participating companies and
visitors to the Exposition will benefit from this Convention
and Exposition.
Ladies and gentlemen,
2.   A developing economy, if it is to progress,   needs   a
fast  expanding  capital market.  Such a market which offers
longer-term financial assets including securities, corporate
stocks  and shares, plays an essential role in the financial
and economic sophistication of a country, without which only
limited growth is possible.  Malaysia realises this and  to-
wards  this  end the local capital market has been developed
progressively.  The other segments of our financial  system,
especially  the  banking sector, have also developed tremen-
dously.  Hence Malaysia is set to  be  one  of  the  fastest
growing  investment centres in the region, equipped with the
required financial infrastructures.
3.   The capital market in Malaysia serves two  main  objec-
tives.    It  assists  generally the process of economic de-
velopment by mobilising long-term funds from  the  investing
public  to  finance public development programme and private
investments.  Secondly, the capital market promotes  private
enterprise  by providing a convenient means of raising capi-
tal for corporate investment and expansion.  Over the  years
the  Government  has  been moving towards the creation of an
effective capital market which will supplement the financial
system required to  support  our  economic  development  and
4.   Historically,  the capital market for longer-term funds
had, in the early years of independence, been  dominated  by
the  issue  of government securities.  All the funds  raised
had been channelled to development projects.    However  the
market  for  the  issue  and trading of corporate stocks and
shares has been progressively expanding.  The steady  growth
of the economy and the rapid expansion of the private sector
have  led  to  an  increasing  need for long-term investment
funds.  At the same time, the financing of corporate invest-
ments in Malaysia, which had traditionally been financed  by
entrepreneurs'  own  capital through family-owned companies,
had experienced a shift  towards  public  limited  companies
which  involve listing in the stock exchange.  With this the
general public, the institutions, both domestic and foreign,
can participate in ownership and control and  of  course  in
active  share trading.  Altogether this trend is healthy and
certainly  it  will enable more capital to be mobilised  for
ever  bigger enterprises.  In addition to this, foreign com-
panies operating  in  Malaysia,  once  exclusively  foreign-
owned,  are more and more seeking listing on the local stock
exchange thus providing new and attractive counters for  the
5.   The growth of the capital market, especially the corpo-
rate securities industry in Malaysia became even more vigor-
ous in the 1980s.  Larger numbers of bumiputeras, who in the
past  were  mere  bystanders where stocks and shares trading
were concerned, became able to participate with  the  estab-
lishment  of  the Amanah Saham Nasional Berhad, the national
unit trust company.  The size of the funds available to  the
ASN make bumiputera participation quite meaningful.
6.   The  momentum  of  growth was set at a faster pace with
the introduction of a new Securities Industry Act  in  1983.
This new Act prohibits the use of manipulative and deceptive
devices  in  dealing  with securities and sets out in detail
the authority and functions of the Capital Issues  Committee
or the CIC.
7.   Further  development was targeted at stockbroking firms
to prepare them to face new challenges in the  capital  mar-
ket.  They have been encouraged to be corporatised in an ef-
fort   to   increase  their  expertise  and  capitalisation.
Another step to upgrade the financial and  management  capa-
bility  of  stockbroking firms was to issue new stockbroking
licences to  major  local  banks and this had  improved  the
credibility  of  the industry.   Then came a private concern
which introduced the Malaysia Fund abroad thus providing the
local market a wider exposure to foreign investment.
8.   Foreign stockbroking companies have been offered larger
participation in the local market by allowing  them  to  in-
crease  their  equity participation from 30% to 49% in local
stockbroking companies.   The government is  confident  that
both the foreign firms and their local partners will benefit
from this.  Smaller companies too have been encouraged to be
listed  so as to broaden further the market.  Hence the sec-
ond board was introduced by the KLSE last year.
9.   These various efforts at strengthening the capital mar-
ket was further boosted by the decision taken to promote the
KLSE as an independent exchange by requiring Malaysian  reg-
istered  companies  to  delist themselves from the Stock Ex-
change of Singapore.  These developments have come fast  and
furious almost, but they have helped to make the market more
mature  and more capable of playing its role in the develop-
ment of Malaysia's economy.
10.  Still the capital  market  in  Malaysia  is  relatively
young compared to those in developed countries.  Accordingly
we  will have to continue to develop it so as to become com-
parable to the more established markets.     With  the   co-
operation   of   all concerned,  the  government  hopes  the
Malaysian  capital  market  will be able to keep up with the
latest development in capital market management and  to  ex-
pand the scope as much as is necessary at any given time.
Ladies and gentlemen,
11.  The  KLSE  introduced  a  semi-automated trading system
called SCORE last year which has done away with  the  tradi-
tional  open  outcry trading system.  The KLSE will also in-
troduce  the  Central  Depository  System,  or   "scripless"
trading next year which will alleviate the many problems re-
lated to share certificates as well as do away with physical
delivery of scrips.
12.  Besides  the  Government and the KLSE, the stockbrokers
too have a crucial role to play in the  development  of  the
capital market, especially in efforts to attract foreign in-
vestors  to  invest  in our local market.   In this respect,
there is a need for the  broking  houses  to  upgrade  their
infrastructure  capabilities,  staff  efficiency and capital
base.  Many broking firms continue to be burdened  with  the
old problems linked with lack of capital and inefficiency as
evidenced by the inability to cope with the surge in trading
activity  earlier  this year.  It is mainly to rectify these
shortcomings that the Government has made it mandatory for a
$20 million ringgit mininum paid-up capital  to  be  met  by
broking  firms  in the Klang Valley by the end of this year,
and for  firms  in  the rest of the country, by the  end  of
next year.  In todays world of ever increasing globalisation
in  securities trading, broking firms must be armed with the
latest technology coupled with professionalism and  interna-
tional  level research capability in order to face the chal-
lenges.  Otherwise, they will be left behind.
13.  In the years ahead, Malaysian broking firms  must  also
contemplate  competing  in  the international market.  To do
this, they must beef up their financial strength as well  as
enhance  their  research  and marketing efforts.  One way to
tap the international market is, of course, to  tie-up  with
some international broking houses.  The government would en-
courage such development.
Ladies and gentlemen,
14.  Although   we   have   made  tremendous  progress,  the
Malaysian securities market is still burdened with a few pe-
culiarities which should be overcome or minimised  in  order
to  ensure  a  firmer  economic growth in future.   With the
present trend towards increased globalisation of the securi-
ties markets, any incident which affects sentiment worldwide
will also affect the local stock market.  For instance,  the
Gulf  crisis  has,  to  some  extent,  put  a  brake  on the
Malaysian stock market although it was on an uptrend  backed
by  strong economic fundamentals and a stable political cli-
15.  Altogether it would seem that our market is unduly  in-
fluenced  by  rumours.    This exposes the market to manipu-
lations by the  unscrupulous  rumour-mongers  out  for  some
quick  profits.  While market rumours exist in all stock ex-
changes, the situation in the Malaysian market appears to be
excessive.  This is very unfortunate because the victims are
usually the small player or the  serious  investor.    Share
prices should at least be related to company performance, if
not  to  actual dividends or profitability.  Otherwise there
will be too much rumour-mongering and unhealthy speculation.
16.  Speculation in shares is quite  normal  and,  in  fact,
there must be some element of speculation in any stock  mar-
ket   for   it   to attract the interest of investors.  How-
ever, excessive speculation is unhealthy and the  government
hopes with the increasing maturity of the stock market, this
trend  will  be  progressively  reduced.   Investors instead
should base their decisions largely on fundamentals and to a
reasonable degree insulate the  Malaysian  market  from  the
performance  of  major world markets, markets which are much
more influenced by certain happenings.
17.  There is a need for a more concerted effort in  educat-
ing  the  investing  public on the fundamentals of the stock
market.  Well-informed and knowledgeable investors will cer-
tainly go a long way towards developing a healthy  and  pro-
gressive   stock market.   In  this  respect,  I  hope  this
Convention  and  Exposition will create greater awareness of
the opportunities that abound in the Malaysian capital  mar-
ket.    Malaysians should therefore take this opportunity to
learn more about the Malaysian capital market  and  the  in-
vestment opportunities that it offers.
Ladies and gentlemen,
18.  The  companies listed on the KLSE have the responsibil-
ity to disclose promptly information  about  the  activities
that have bearing on company performance.  Prompt disclosure
of  significant information by the companies can help reduce
the possibilities of insider trading as well as help  create
a mature and credible market that has the confidence of  lo-
cal and international investors.
19.  One obvious way to minimise insider trading is for com-
panies,  their  officers and the relevant people involved in
any significant corporate deals to act in a more responsible
manner.  The authorities, on their part, will  not  hesitate
to  take stern action against any one found to be implicated
in unfair trading practice.  At the same time, the directors
and management of listed companies have to be more responsi-
ble towards the investing public and the minority sharehold-
ers in the discharge of their duties.   When we  read  about
big  names  in business being jailed in other countries,  it
is well to remember that the price  to  be  paid  for  being
greedy  is  very painful.   Always say Ivan Boesky or Milken
whenever you are tempted.
Ladies and Gentlemen,
20.  I regret that many private and family-owned  businesses
are  still  not  coming forward to seek listing on the KLSE.
Although the KLSE's second board was launched last  year  to
enable  viable smaller companies with strong potential to be
listed, todate there are only ten companies listed  on  this
board.  There are many companies which are doing well enough
to  qualify for listing, but are not keen because the owners
of many of these family-owned businesses are    afraid    to
lose  control.   If companies and enterprises are to survive
the founders, they must be turned into public limited compa-
nies and have professional management.   This must  be  done
before  the demise of the founder.  A public company culture
will ensure not only survival but also growth.   The  growth
of  individually founded companies into huge corporations in
Europe, America and Japan is because private  family  compa-
nies  converted  to  public limited companies.   So far only
British founded companies in Malaysia have survived the test
of time.  Chinese family companies  which  prospered  during
the  life  time  of  the founders have all disappeared.  The
same will happen to the present family companies unless they
convert to public limited companies.
Ladies and gentlemen,
21.  It is quite clear that the development of the Malaysian
capital market involves the concerted  efforts  of  everyone
concerned -- the Government, the KLSE, the stockbrokers, the
companies and the investors themselves.  Everyone in the in-
dustry should strive towards developing a healthy stock mar-
ket  that should be able to attract investments both locally
and from abroad.   With positive factors such  as  a  robust
economy, a sound infrastructure, and a stable political cli-
mate,  investment  opportunities in the Malaysian economy in
general and the capital market in particular are immense.
22.  Once again, I wish to thank the organisers of this Con-
vention and Exposition for  inviting  me  to  officiate  the
opening  ceremony.    I wish this gathering every success in
its deliberations.
23.  On this note, I have much pleasure  in  declaring  open
this  Malaysia  Capital  Growth Opportunities Convention and