Cover Story: Making Bursa a marketplace for all

TheEdge Thu, Jun 27, 2019 03:00pm - 4 years View Original


DATUK Muhamad Umar Swift assumed the role of CEO of Bursa Malaysia, taking over from Datuk Seri Tajuddin Atan, at an interesting time domestically and externally.

The Pakatan Harapan government has been in power for just over a year. Understandably, its reform initiatives will take time to materialise. Amid the changes, the country’s business and consumer sentiment has weakened, dampened further by the escalating US-China trade war. Meanwhile, the local benchmark FBM KLCI is the worst performer in the region year to date.

While some factors are beyond any organisation’s control, is there anything that the stock exchange can do to make Malaysian equities more attractive and the bourse vibrant again?

In his first exclusive interview, Umar says his main task at Bursa is to build stronger bridges for all market participants and stakeholders, be they investors or investees, locals or foreigners.

“I am a change agent. I am an outsider coming in with an open mind. I understand some of the frustrations on both sides of the fence. What we want to do is to build a stronger capital market, but I believe everyone has to play a role,” he tells The Edge.

Umar, 54, was officially appointed CEO and executive director of Bursa on Feb 11.

Four months on, the chartered accountant with three decades of experience in banking and financial services seems to have adjusted to his new job. “I am very clear about some of the initiatives that we are undertaking. We want to be more efficient through digitisation, collaboration and modernisation,” he says.

Umar, who is an Australian national as well as a permanent resident of Malaysia, was the managing director and CEO of MAA Group Bhd. He had held the posts from September 2006.

According to Umar, Tajuddin has left a strong team at Bursa, and his job now is to build on its inherent strengths.

“We do things very well, we settle trades, we have a depositary, we have a marketplace, we have a very deep investor base. I don’t see us building trading platforms and selling them to the world, like what Nasdaq and London Stock Exchange did. What we will be doing instead, is to look at our data and see what we can do with it,” he says.

Umar envisages a digital world where the first-time investor can open an account and begin trading the next day, something that can be achieved once the entire ecosystem is digitised.

“Imagine we can actually look at investors’ profiles, know their risk appetite and develop meaningful and powerful tools or services that benefit them. We can create the need, anticipate the need and fulfil the need for new solutions to be adopted,” he says.
 

A marketplace for everything

The capital market is generally viewed as a place where investors seek to maximise gains, but it is also where companies raise money to build their businesses.

Umar says Bursa aims to bring choices to all investors and companies while making the market more approachable to participants.

“I am open-minded. I would love to see Bursa become a marketplace for everything. We are not going to be a Lazada, but we want to have all the asset classes, not just equities,” he says, half in jest.

Umar highlights that Bursa, being the operator of the Malaysian stock exchange and a marketplace, is continuously looking to expand its services and offerings.

“We already have derivatives. Next, we want to bring in more thematic and innovative exchange-traded funds (ETFs). I also like retail bonds. I would love to see retail bonds available here,” he says.

He, however, points out that Bursa is a market facilitator, not a product manufacturer.

“We hope to see people having real choices. They wake up in the morning, they trade online, they trade through brokers, they establish new relationships, they complete the trades, they have information to make informed decisions, they are eager to learn. That’s what I want to see,” he says.

“Bursa is a marketplace, we are essentially a service provider. We want to know what the investors need — transparency and certainty. As for investees, the clear way that they can raise money to fulfil their capital needs.”

Interestingly, many people often forget that Bursa also operates the Labuan International Financial Exchange (LFX), an offshore exchange that was launched in November 2000.

According to Bursa’s 2018 annual report, LFX is the home of 19 bond listings and 11 sukuk listings, whose combined market capitalisation stood at about US$24.3 billion.

Being Asean’s sole offshore exchange with a robust and facilitative regulatory framework, LFX is seen by Umar as the gateway to new, innovative offerings. It is also a stepping stone to developing Bursa as a marketplace of everything.

“One of the discussions we had was on using LFX as a technology sandbox. The beauty of this is that through LFX, we can look for partnerships, initial coin offerings (ICOs) and tokenisation,” Umar says.

He adds that Bursa intends to bring innovation to a controlled environment as it is having conversations with other stock exchanges on areas of connectivity. This could be in the form of thematic ETFs or simply giving investors from different markets access to Bursa’s products.
 

Heyday is gone, but ... 

Older investors often look back at the stock market bull run of the 1990s when money-making opportunities were aplenty on the local bourse. But many got their fingers burnt too when the 1997/98 Asian financial crisis struck.

As a result, many youngsters grew up in an environment where they were taught that it is not worth taking the risk to invest in equities.

Coupled with the challenging global economic conditions, Umar says, Bursa needs to increase its competitiveness in terms of offerings as well as re-examine its role going forward.

“We talk about the heyday in the 1990s, but it was a very different world with a very different economy we were in. At the time, earnings were more positive — that’s what investors want. Today, Malaysia’s fundamentals are strong, but investors are looking for growth,” he says.

To Umar, it is a wrong perception that young Malaysians do not invest anymore. He, however, admits that Bursa needs to improve their investing experience.

“The millennials are now reaching 35 years old. This is a new group of investors. It is not true that millennials don’t invest in shares. They do, but they invest in many classes of assets and they prefer to transact seamlessly,” Umar says.

He adds that while their absolute investment value may be lower, this is temporary.

“The challenge for us, as a stock exchange, is to reach out to these individuals and improve their investing experience. I would like them to invest more, but we cannot dictate how they trade,” he says.

Umar highlights that some investors like high engagement, while others prefer to trade by themselves. The bottom line is, Bursa needs to make it easier for investors to set up Central Depository System (CDS) accounts.

“We want to get them to trade again. We want them to revisit the stock market. If you are taking a medium-to-long-term view, this is actually the right time to invest in equities,” he says.

The 18 to 35 age group made up 23.2% of active individual CDS accounts last year, compared with 22.5% in 2017.
 

IPO drought 

A lacklustre equity market — which dampened investor sentiment — coupled with other factors, such as the rising number of Malaysian companies seeking listing abroad, has hit Bursa’s initial public offering (IPO) activity hard in recent years.

Between 2015 and 2018, there were fewer than 10 IPOs a year on the Main Market and ACE Market respectively (see Table 1 on Page 67).

Although there were 22 local IPOs last year, the amount raised was significantly lower at RM633.12 million compared with 14 IPOs raising RM7.38 billion in 2017.

This is largely because most of the companies that debuted in 2018 were LEAP Market listings, with 12 below RM10 million.

Commenting on that, Umar insists that Bursa’s IPO pipeline “is strong”, adding that the bourse has large funds with sufficient capacity to absorb demand.

“Again, it is a question of whether companies need the capital, is this the right time to list ... we certainly engage potential issuers all the time,” he says.

Asked whether Bursa plans to attract more foreign companies to list here, Umar reiterates that it has to be firms that make sense. “Malaysia has been a trading nation. We can be used as a platform to reach out to the rest of Asean. We have the unique niche. We have to leverage that. We have strong institutional investors. We have good valuations. We have to reach out to the companies and the investment banks.”

He is not inclined to jump on the bandwagon of naysayers who harp on the trend of companies, especially foreign ones, choosing the Singapore Exchange over Bursa as their preferred listing destination. But what is more important to him is that Bursa has engaged with Securities Commission Malaysia (SC) and Bank Negara Malaysia to address the issues seen as preventing companies from listing here.

“Why do we lose companies to Singapore? What do we need to overcome? Is this perception or is this real? Maybe there is a perceived foreign exchange issue? What can we do to improve the experience? Do we provide clear guidance? The marketplace has so many elements. It is the work of an entire industry, including the policymakers, investors and businesses,” says Umar.

He also reveals that Bursa may consider facilitating new economy assets differently.

“For instance, we may see some new economy companies that consider different measures, such as rapid growth, acquisition of customers and reaching critical mass, rather than more conventional cash flow concerns as critical, so our listing rules may have to accommodate that,” he says.
 

Shaping the future 

Umar stresses that Bursa has to be mindful of what investors and investees are looking for.

“It is a crowded place, and we believe what helps participants navigate that space successfully is transparency and certainty. We want companies to be comfortable with raising money in the market and doing what they need to do,” he says.

With so much on his plate, would Umar’s two-year contract with Bursa give him sufficient time to carry out all his plans?

“It is not appropriate for me to comment [on contract extension]. I am not so arrogant. We will do what we need to do. What’s most important today is engagement with the SC and Bank Negara to work on market vibrancy, chasing for a few large listings and improving investors’ experience. That’s my short-to-medium-term goal ... the piece that I am really focusing at the moment,” he says.

As Bursa is effectively competing not just with peer exchanges but also other investing platforms, Umar says the ultimate aim is to simplify and serve better by providing effective and efficient solutions for issuers and investors. “It’s important to think and imagine, of course, but we must also deliver clear and tangible outcomes. We can’t predict the future, but we can shape it, and shape a place for everyone.”
 

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

BURSA 7.460
MAA 0.355

Comments

John Bin Too
Like · Reply
Umar, aged 54, is young and capable to take Bursa Malaysia to greater heights!

Login to comment.