Bursa plan to raise trading velocity in 5 years
Filed Under (Bursa News) by Webmaster on 13-09-2010
Tagged Under : Bursa Malaysia, Datuk Yusli Mohamed Yusoff, trading velocity
Bursa Malaysia Bhd (1818) aims to raise the local stock market’s trading velocity back to 60 per cent within five years, its chief said.
Velocity, or the rate at which shares change hands, indicates the intensity of trading interest in a market.
Bursa’s trading velocity was 34 per cent last year, one of the lowest in the region. It used to come in at 60-65 per cent in the mid-1990s when the market was booming.
It stood at 31 per cent in the first half of this year and could come in at around the “high 30s” level for the full year if the recent uptrend in trading activity continues till the end of the year, chief executive officer Datuk Yusli Mohamed Yusoff said.
He said Bursa hopes to achieve the targeted 60 per cent rate “within three to five years”, but recognises this would be challenging as it also needs listed firms – particularly those that are large in market size – to do their part in raising investors’ interest in their shares.
Yusli expressed his frustration over “some good companies” out there with large market capitalisation (cap) that do not do much to improve trading activity in their shares.
“If we want a more vibrant market, we need everyone to pull their weight. There’s only so much we as an exchange can do.
“We also need companies to go out and promote their stock, especially to foreign investors,” he told Business Times in an interview.
He cited a particular large-cap stock, without disclosing the name, that “doesn’t do investor relations or doesn’t care whether its shares are actually traded or tracked”.
“We urge companies like these (to buck up). Otherwise we’d prefer not to have them on our market as it drags our velocity down,” he remarked.
Yusli reckons that the majority of the exchange’s 960-odd listed companies do not engage in investor relations activities. Many also do not talk to analysts.
He suggested that property companies, many of which are trading at half their net asset value, could do better if they went out and explained their ventures to potential investors so that they become more attractive.
As it stands, fund managers often tell Bursa Malaysia that they do not see enough Malaysian companies out at roadshows, he said.
“They see more Indian, Chinese, Korean and, lately, Indonesian and Thai companies. So I would urge our (top company officials) to get on the road and sell the Malaysian story, or at least the Asean story,” he remarked.
Analysts said the listed companies in the Petronas group, for example, could do better at improving investor relations and marketing their shares overseas. Among its listed companies are Petronas Dagangan Bhd and Petronas Gas Bhd.
They noted that velocity among big-cap companies could also improve if more shares were freed up by the major shareholder for trading.
Velocity, measured by taking the ratio of trading-to-market value, is also important to Bursa Malaysia as it helps determine its earnings.
Bursa Malaysia’s first half net profit of RM55.5 million this year came in below analysts’ expectations, mainly because the market velocity was lower than expected.
