Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : THE PUTRA WORLD TRADE CENTRE (PWTC)
Tarikh/Date : 02/10/90
Tajuk/Title : THE OPENING OF THE MALAYSIA CAPITAL
GROWTH OPPORTUNITIES CONVENTION
AND EXPOSITION
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
progress.
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
investors.
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-
mate.
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
Exposition.
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