Oleh/By : DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue : THE NIKKO HOTEL, KUALA LUMPUR
Tarikh/Date : 03-09-2001
Tajuk/Title : THE MALAYSIAN CAPITAL MARKET
SUMMIT 2001
Versi : ENGLISH
Penyampai : PM
" RESUSCITATING THE MALAYSIAN CAPITAL MARKET AND
REGAINING INVESTOR CONFIDENCE "
I would like to take this opportunity to thank the
organisers, the Kuala Lumpur Stock Exchange and ASLI for
inviting me to address the distinguished delegates and
participants in this capital market event of the year. I
join the organisers to bid a warm welcome to all the
delegates, especially foreign investors and fund
managers, to the Malaysian Capital Market Summit 2001.
2. This Summit is timely and significant as it will
provide a platform to disseminate correct and accurate
information on the many policies and measures undertaken
by the Malaysian Government and market regulators to
build a resilient, efficient and competitive capital
market. In this way, misconceptions and distortions
about the Malaysian capital market can be addressed. I
trust that the many foreign fund managers present here
will find the Summit beneficial and informative. I hope
they will take this opportunity to discuss and
deliberate on the critical issues and strategic
challenges facing the Malaysian capital market today and
to objectively assess the directions and opportunities
in the market independent of rumours and biased
predictions.
3. Malaysia's remarkable economic recovery from the
devastating Asian crisis has now catapulted the nation
onto a platform for revival and sustained growth once
again. The recovery was made possible by policy measures
to strengthen the nation's external reserves position,
financial system and the corporate sector. The Malaysian
economy rebounded to register a growth of 5.8 per cent
in 1999 and GDP growth last year was a heartening 8.5
per cent. This was higher than the growth recorded by
many other countries in the region including Japan,
Taiwan, Indonesia and Thailand. We are, nevertheless,
expecting GDP growth this year to moderate given the
less favourable global economic conditions precipitated
by a slowdown in the economy of the United States and
the inability of Japan to recover.
4. The performance of the Malaysian economy last year
belied the predictions of the many sceptics who had long
prophesied doom for the Malaysian economy since the days
of the crisis. While growth was supported by external
demand, it was rising private consumption and the strong
revival in domestic investment that had contributed
significantly to economic growth. Despite higher oil
prices, lower excess capacity, strong demand and
employment conditions, inflation was contained below two
per cent. Labour market conditions also improved
significantly with unemployment rate declining to 3.1
per cent. Non-performing loans were being kept at
manageable levels, far from their heights during the
crisis. On the trade front, the external balance
remained strong as the large surplus in the current
account and sustained long-term capital inflows provided
a buffer to outflows for the repayment of debt and
foreign investment by Malaysians.
5. Having said that, I must admit that we are, like
many countries in the world, we are also affected by the
slowdown in the economy of the United States and the
bearish global economy as a whole. Fortunately, there
is enough resilience in the Malaysian economy to
mitigate the adverse impact of the United States
economic slowdown. The Government has drawn up various
strategies and measures to weather the economic storm
that is now blowing. These measures are directed at
stimulating domestic demand and can be expected to
compensate for the slower external demand without
creating new risks. The fiscal expenditure is aimed at
industries with strong domestic linkages and with
minimum import content so as to maintain the favourable
current account position in the balance of payments. In
the immediate term, the stimulus programme will benefit
the construction and services sectors particularly.
Increased allocations are also directed at projects and
programmes that would lead to a strengthening of long-
term productivity. The monetary policy stance will
continue to remain accommodative to support growth.
6. With the prospect of low domestic inflation, the
strong financial position of the Government and low
levels of foreign indebtedness, the current pegged
exchange rate at 3.80 Ringgit per U.S. Dollar remains
sustainable and is consistent with our economic
fundamentals. This is despite the call from certain
quarters to devalue the Ringgit in order to make exports
more competitive and to hike up export growth. In
effect, there would probably be minimal impact from any
devaluation because regional exports are dropping
drastically. Lack of demand in export markets lies
behind the listless global absorption of export goods
and services, and this can be primarily attributed to
the sluggish economy of the United States, formerly the
world's most lucrative market for exports. The United
States downturn has also affected all the trading
partners of that country, which also happens to be
Malaysia's market.
7. In this regard, may I also take this opportunity to
correct myths concerning Malaysia's competitiveness.
Apart from currency parity, factors like productivity of
labour, political and social stability and the
efficiency of the underlying infrastructure are equally
important determinants of competitiveness. Thus, it is
wrong to assess a country's competitiveness exclusively
on the basis of the currency's value against the
currencies of competing countries. When all the other
factors, which contribute to productivity are taken into
consideration, the claim that Malaysia's competitiveness
is fast eroding does not really hold water. Given
Malaysia's many positive attributes, the idea that
devaluing the Ringgit would make the country's products
competitive does seem to reflect rather casual and
shallow thinking. In the management of a country's
economy there is no one single factor, which can be
manipulated in order to effect a positive turnaround.
On the other hand the mishandling of a major economic
factor can bring about a real disaster. Thus the
devaluing of the currency can cause economic collapse.
8. Malaysia does not depend on fiddling with the
interest rates or exchange rate or pump priming on their
own in order to grow the economy. We study and correct
every segment of the economy in order to keep it on the
right track.
9. Clearly Malaysia's approach has paid off.
Malaysia's fundamentals remain strong and full recovery
in the face of adversities is much more likely.
10. The Malaysian capital market continues to provide
excellent investment opportunities for people who can
see through the political bias and agenda of certain
parties. We have gone through many changes and trials
over the years. In the final decade of the last century,
some 85 billion Ringgit was raised through the equity
market, from just under 20 billion Ringgit in the ten
years prior. Over the same period, about 133 billion
Ringgit was raised in the form of private debt
securities, compared to only seven billion Ringgit
between 1981 to 1990. I understand that projections by
the Securities Commission suggest that total investment
spending for the next ten years may double to 1.5
trillion Ringgit. These are heady figures but they are
real and credible.
11. The Malaysian capital market had certainly taken a
beating when in September 1998 the KLSE Composite Index
sank to a humiliating low of 262.7 points -- a mere
shadow of the mighty heights it had scaled in the years
prior to the crisis. We, and subsequently also the rest
of the world, have learnt that herd-like movements of
hot money or short-term capital flows can be potentially
devastating. A relentless attack on the Ringgit and a
mass exodus of short-term portfolio funds when there was
seemingly no indication of fundamental macroeconomic
weaknesses had left the Malaysian capital market in a
limbo.
12. We have come a long way since then. On the one
hand, we have seen our selective capital and exchange
controls bearing fruit and insulating our economy from
external threats beyond our control, especially the
unscrupulous activities of rogue speculators. On the
other, we have carefully examined our own weaknesses and
have taken various measures to correct our past
mistakes. Just as much as the world is vindicating
Malaysia on the justification of our so-called
unorthodox controls, we are also beginning to see our
efforts in enhancing corporate governance and
transparency, restructuring and cleaning up poor
performing companies, and reducing extensive exposure to
risks bearing fruit. All these efforts are aimed at
regaining investor confidence in our capital market and
local corporations.
13. The KLSE Composite Index is today back at
relatively more accurate and sustainable levels,
although it must be noted that there are still some
companies whose stocks are still trading below their
fair value. By and large, investors who truly know
Malaysia and understand the fundamentals of our economy
do not doubt the attractiveness and potential of the
Malaysian capital market today. It is good to see
investor confidence returning. The recent twice over
subscription of the one billion U.S. Dollar, Malaysian
ten year sovereign bond issue gave a direct indication
that there was good demand for Malaysian sovereign debt
abroad and has also indirectly lent credence to the fact
that investor confidence has, indeed, not waned.
14. When Morgan Stanley Capital International (MSCI)
released details regarding its new free float
methodology back in May, some investment pundits were
quick to prophesy a fatal blow to the Malaysian stock
market. They had predicted the MSCI move to adjust its
benchmark indices to take into account the free-float of
constituent securities will lead to an exodus of
billions of Ringgit by foreign portfolio funds in line
with Malaysia's reduced weighting in the revised
indices. The proposed move was certainly not cheery news
for Malaysia, but the predictions of the detractors
proved unfounded. A growing number of experts now
believe Malaysia will not only be minimally affected,
but might very well see a net inflow of foreign
portfolio funds. In fact H.P. Morgan's comment on the
health of the Malaysian market in comparison to other
Southeast Asian markets is typical of this view.
15. The Malaysian Government takes seriously the
efforts to create a capital market that is resilient,
efficient and competitive. We believe our efforts should
lead to our regaining and increasing investor confidence
in our capital market.
16. The unveiling of the Capital Market Masterplan in
February this year has further underscored the
seriousness and aspirations of the Malaysian Government
to propel the Malaysian capital market towards greater
resilience, efficiency and competitiveness. The
Masterplan is also aimed at equipping and positioning
the capital market strategically towards gradual
liberalisation and towards meeting the challenges of
globalisation. During the crisis years, we were
virtually fire-fighting. That was primarily because
there was no single integrated strategic plan for the
capital market -- one that would chart the course of
development of the capital market to become more
resilient in the midst of global challenges. Without a
Masterplan, there would be chaos and ad hoc formulation
of excessive regulations that treat just the symptoms
during a crisis. But with the Masterplan in place now,
we have a sense of direction as to where our capital
market should be heading. Besides, the Masterplan also
gives clarity of vision to all stakeholders in the
capital market -- the issuers, intermediaries and
investors. This, we earnestly hope, will further
increase the confidence of investors in our capital
market.
17. One of the groundbreaking strategies to create a
stronger capital market is the envisioned consolidation
of all existing exchanges by 2002 to establish a single
Malaysian exchange. This will enable securities and
futures markets to better align their respective
business development strategies and to facilitate
efforts to enhance their overall strategic positioning.
The creation of a single bourse would allow for a more
coordinated approach to product development, investor
education and market promotion. From the viewpoint of
international competitiveness, a single exchange would
be able to pursue strategic alliances and other
international business strategies from a position of
strength, compared to individual efforts of separate
exchanges. The breadth of listings in the Malaysian
equity market would also be gradually widened to include
listings of foreign companies. Ultimately, the envisaged
demutualisation of the single exchange by 2003 will
undoubtedly be a milestone in the history of capital
market development in Malaysia.
18. We have already embarked upon the consolidation of
our banking system, which has seen the emergence of ten
anchor banks and the process is now in its concluding
stages. The restructuring of the financial sector was
achieved at a lower than expected cost of seven per cent
of GDP last year. As a result of the exercise, the
banking sector has emerged stronger with a higher level
of capitalisation and profitability, and improved
portfolio quality.
19. Now we are looking at strengthening the stock
broking industry by forming a group of well-capitalised
domestic stock broking companies, known as universal
brokers, which can provide efficient and cost-effective
intermediation for investors. Further to our efforts in
gradually liberalising the industry, and subject to the
state of readiness of stock broking companies, the doors
will be opened to foreign equity participation in
domestic stock broking industry in two phases beginning
2003. As part of the liberalisation process, we are also
committed to lowering transaction costs.
20. The Corporate Debt Restructuring Committee (CDRC)
has so far helped to restructure 37 ailing companies by
resolving debts amounting to 28.5 billion Ringgit. To
benefit and strengthen the economy in the long run, the
CDRC also played a pivotal role in driving the
restructuring of the public transportation industry, for
which the debt restructuring scheme has been finalised
and will be implemented in the near term.
21. The Asian crisis had revealed the need for
unhealthy corporate practices to be eradicated and
companies to be more transparent in order to gain
investor confidence. I can assure the investors present
here today that we are fully committed to enhancing
transparency and a high standard of corporate
governance. Higher levels of corporate governance will
certainly help reassure investors and also contribute
towards a healthier and stronger capital market.
22. We must also seriously consider expanding
electronic trading. Information and communications
technology (ICT) clearly waits for no one. If we fail to
tap into opportunities arising from the application of
ICT in our capital market, we may well lose our
competitive edge. The web today is not merely for buying
stocks. Small investors in the United States are
shedding their traditional brokers and, in some cases,
making as much as 20 per cent of their bond purchases
online. For instance, currently about one-fifth of all
fixed income trades at Charles Schwab are done through
its web site. Traders in London put the figure of the
electronically traded bond market at 70 per cent to 80
per cent -- a gargantuan increase considering most deals
were done over the telephone less than five years ago.
Many are increasingly keen on e-trading as it helps
enhance liquidity. We too must seriously broaden our
trading activities online to keep up with the new
economy.
23. Last, but certainly not least, I wish to remind
market participants and investors alike to view the
stock market as a platform for constructive and
strategic investments. The stock market should not be
considered as a playground for quick bucks without due
consideration for the potential destructive
repercussions of irresponsible actions. The stock market
is certainly not a barometer for political speculations
nor is it a gauge for economic rumours. Investors,
therefore, should not make rash decisions based on
fleeting sentiments and herd instincts. Instead, I urge
investors to carefully examine the fundamentals and
prospects of listed companies and the soundness of the
economy before deciding whether to park or repatriate
their funds. As we have realised, herd behaviour that
has its roots in instincts and mindlessness can be so
damaging that the economies of many nations can be
reduced to rubble overnight.
24. With special regard to Malaysia, may I once again
remind investors that the Malaysian stock market is one
for serious investors with strategic outlook and sincere
intention to make profitable long-term investments. Do
not gamble on the stock market simply because rumours
may be circling freely. For those who have short
memory, recent history has proven that most of these
rumours were blatantly untrue. We are striving hard to
build a capital market that will be reflective of the
strong form of the efficient market hypothesis, where
the prices of stocks in the market fully reflect all
available information and where there will not be any
trading based on rumours.
25. The Malaysian capital market is heading towards a
destiny carefully and strategically mapped out by the
Capital Market Masterplan. But in our arduous journey to
that goal, we will undoubtedly face a number of
challenges in this era of globalisation and
liberalisation. Therefore, we must earnestly and
zealously push through with the reforms marked out in
the Masterplan, learn the lessons from the crisis, and
change the way we invest and conduct businesses.
26. Capital markets in Southeast Asia may have gone
through dark days. But today the Malaysian capital
market remains an attractive investment destination for
those who are serious and discerning. I hope that this
Summit will dispel the remaining doubts concerning
putting your money in Malaysia.
27. On that note, I have great pleasure in declaring
open the Malaysian Capital Market Summit 2001.
Sumber : Pejabat Perdana Menteri
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