Is There Anything Wrong With KLSE?
Though the SC and Bursa have done well over the last couple of months when it comes to being more stringent and vigilant with syndicates and meaningless IPO applications that cannot stand on its legs. That's the regulatory part. What irks many foreign investors, local funds and investment pros in Asia is that the country, Bursa, EPU and Finance Minister seem to be clueless as to the real problems affecting Malaysian listed stocks - the really sad thing is that most of them do not even think that there are significant problems affecting Malaysian stocks. Let's consider the tell-tale signs:
Singapore has surged way past Malaysia. Of course, to be fair, KL cannot compete as a financial center with HK and Singapore - how to compete, I mean to simplify rules, regulations, application procedures, turnaround times, tax codes... all are very "difficult" right??!! What is most galling is that Singapore exchange has surpassed in market cap for oil and gas stocks - and the country does not even have a drop of oil or gas to speak of!!?? Very soon, Singapore will surpass market cap for plantations even... can you believe that??!! The authorities concerned always manage by "reacting" and not being proactive enough, we do not anticipate problems or have a solid hold on the bigger picture ... now they know of the problems ... will it be too late to addresss the problems??
5 years ago, KLSE was still the top dog when compared to stock markets of Thailand, Indonesia and the Philippines. Yes, we are still top in market cap when compared to the 3, but if anyone were to match up the monthly trading volume/value activity, Malaysia comes in LAST - that is not coincidental, its a big symptom of something inherently wrong with the markets and authorities. Are we willing to acknowledge that?!! If we do not think there are grave problems to begin with, we won't be able to address the real issues.
Market velocity is low, talking about it, going on road show won't help. Everyone knows where Malaysia is, everyone knows the top 30 stocks, no point going to London or New York to blab about the South Johor miracle in the making or the reinvention of GLCs via KPIs - that is not addressing the real problems. Want to address the real problems:
a) be more flexible with minimum bumiputra participation
b) be more upfront, consistent and professional with treatment of foreign investors (e.g. DIGI), minority shareholders (e.g. no more mandatory G.O. waivers in the name of national interest) and regulations
c) force state funds and GLCs to lower their shareholdings, anything more than 40% is way too much, to encourage better participation rate in stock market, GLCs need only hold 33% - you will see an enormous rerating if the government comes up with this gradual policy over a 2 year period, will go a long way to improve market velocity
d) take on best practices in global standards, e.g. REITs, make the dividends tax free
e) liberalise as many sectors as possible, where we cannot compete, let them perish in the name of capitalism, nonned to protect any sector, if they cannot compete globally, we should not be operating/producing in that sector (e.g. auto, if we cannot produce good cars competitively, let it perish, we then buy cars from better producers and at a cheaper rate, why be stubborn over mistakes). In the present days of globalisation, there is no longer a need to makes sure critical industries are a must have in every country - trade barriers are way down, we can buy anything and everything in a near tariff free environemnt, why do we need to have the auto sector, heck we can even dismantle the cement and steel sectors if they are unable to compete - the more we keep subsidising to protect them, we are just keeping them alive at our own cost, it does not add to our overall productivity. This way, we eliminate what we cannot produce efficiently, and we compete in areas we can compete well
f) ensuring all GLCs, government bodies, semi govenment vehicles such as MIMOS, MTDC, Mavcap, etc... to have accountability, deliverables, regular management audit, execution ability, KPIs (yes that too is a start) ... and actual "punishment" when they fail and not park them somewhere less visible
g) use professional managers, do not favour entrepreneurs with big projects, unless they have proven themselves - e.g. with the Proton situation, for heaven's sake, give it to Sime Darby, at least we will be assured that they will put professional managers to turn it around, instead of hoping an entrepreneur will be able to do the job
A deeper analysis would be needed to answer why volume is so much higher in Bangkok, Jakarta and surprisingly Manila. I have some ideas but let's see if we are willing to look at our own selves first, instead of looking to others. But, does anyone has the political will to effect the changes, many reading this in higher places will nod but think I do not appreciate the "political suicide" and the vested interests involved which makes the task quite insurmountable. So, are we going to leave it at that? Malaysia is like in between the Philippines (too liberal) and Singapore (too strict) when it comes to politics. Not doing anything owing to hands being tied reminds me of being very much like Japan's bureaucracy, it took them 13 years to come out of the prolonged recession because their hands were tied, too much vested interests causing nothing concrete can be done. We are lucky in that we have tons of natural resources, we are rich in that sense and that can cover a multitude of sins and transgressions .... oh, but we could be so much more, so much better.
btw ..... the Budget... its OK, talk of pumping up the economy.. I want to laugh la... do you really want to see economic activity perk up, just do ONE thing... GET ALL GOVERNMENT DEPTS TO PAY ALL BILLS THAT ARE MORE THAN 3 MONTHS OVERDUE ... then you can see a mini economic miracle ... all the construction firms, odd jobs/utilities companies, services contractors would be nodding their heads gleefully. Talk about trickle-down effect... When a government dept delays payments for 9 months or a year that basically wipes 5-8 percentage points from the margins, so if a contractor or services operator works on 10% or 15% margin, its almost like they work for nothing??? Be fair, be professional, don't eat into business' margins. Manage your cash flow well, after all its a BUDGET right, then budget la...