The Malaysian stock exchange or Bursa Malaysia provides a full integration of transactions, offering a wide range of currency exchange and related services including trading, settlement, clearing and savings services. The bourse is jointly regulated by Bursa Malaysia Berhad with the Securities Commission of Malaysia overseeing the workings of the capital market through its facilities, and upholding the duty to manage and maintain order in the trading of stocks, bonds and derivatives.
Today, the Malaysia Bourse has been seen to encounter a defensive approach, asset allocation wise, and a balanced approach with regard to sector positioning. Kenanga Investment Bank, in its recent July 2023 Market Review and Outlook stated that while domestic fundamentals remain supportive and valuations are cheap, markets are still concerned about weakening exports and are monitoring the upcoming state elections.
Kenanga presently prefers a bottom-up approach, selecting companies with earnings resiliency regardless of sector. They adopt a buy on weakness stance for the tech/manufacturing sector as the key beneficiary of long-term growth trends such as AI, EVs and supply chain relocation.
The Malaysian equities extended their negative trajectory with the FBM KLCI, FBM 100, and FBM Shariah recording MoM declines of -0.8%, -1.1%, and -1.8% respectively, with the exception of FBM Small Cap, which increased marginally by 0.1% MoM.
On a year-to-date (YTD) basis, the FBM KLCI has declined by -7.9%. The drop was primarily attributed to foreign selling, driven by concerns over the global economy’s slowdown, political uncertainties surrounding the six state elections, and the weakness of the Ringgit. Net foreign selling increased by 85% MoM to RM1,348m in June, bringing YTD net outflows to RM4.2bn.
In June, the government made an announcement to cut the stamp duty rate from 0.15% to 0.10% in order to reduce the cost of securities transactions and make the Malaysian stock market more competitive. On currency, the Ringgit further weakened by 1.2% to RM4.67.
How did this approach come about? BusinessToday spoke exclusively to Malacca Securities Sdn Bhd (Malacca Securities) Group Managing Director, Lim Chia Wei (pic) in an attempt to understand the evolution of Bursa Malaysia and the role the 60-plus-year-old stockbroking house played within the industry.
Lim said the establishment of the Kuala Lumpur Stock Exchange (KLSE) was the start of organised securities trading in Malaysia. Malacca Securities was one of the early stockbrokers in Malaysia and has been part of this journey. Adapting to the new formal trading environment required robust systems and compliant operations, and they succeeded in establishing their mark early on.
As a global leader in Islamic finance, Malaysia blazed a trail with the introduction of the Kuala Lumpur Syariah Index in 1999. This pioneer index was designed to monitor the performance of Shariah-compliant shares, paving the way for a new era of Islamic investing.
“Recognising the significance of this development, Malacca Securities seized the opportunity to expand our range of products and services. Our goal was to offer comprehensive trading and investment solutions tailored to investors committed to Islamic principles. Today, we are proud to share that a significant proportion of our customer base comprising Bumiputera investors. This underscores our ongoing commitment to inclusivity and the importance we place on providing diverse investment opportunities for all Malaysians.”
The advent of electronic trading in the early 21st century was a game-changer. Understanding the importance of this digital revolution, Malacca Securities was among the early adopters of technology in Malaysia’s stock broking industry. They saw it as an opportunity to offer a new generation of investors more efficient, accessible and diverse trading options in the Malaysia stock market through the launch of their first digital platform, M+ Online, in 2012 and currently have a network of 16 branches in Malaysia.
Witnessing the recent upsurge in retail investing, particularly during and post-COVID-19, the firm launched M+ Global subsequently in May 2023 to cater to this new generation of digital-savvy investors who seek to diversify their portfolios in the global landscape.
Lim said it all began in 1963. Malacca Securities journey started as a small broking firm known as Malacca Traders based in Melaka. Through the years, they grew and evolved, re-establishing themselves as Malacca Securities Sdn Bhd in 1992. From the start, their vision has been to become the go-to broker for Malaysians seeking to achieve their financial goals.
As Malacca Securities progressed, they recognised the limitations traditional financial structures posed on market accessibility and public participation. This realisation led them to embark on a transformative journey eleven years ago. Committed to dismantling these barriers, the firm pivoted their business towards a digital-first approach, aiming to democratise financial success for all Malaysians.
This led to the question as to how Bursa Malaysia is being challenged is such a manner, with some claiming that it has been the poorest performing bourse in the region this year.
Malacca Securities Sdn Bhd Executive Director / Head of Dealing Fok Chuan Meng opined that the firm realised that the global stock markets are rising on the back of the Artificial Intelligence theme and the technology sector rally following the emergence of the likes of ChatGPT early this year, “but in this region, we are not directly benefiting from this situation. For the performance till end-July-2023 FBMKLCI declined -2.41%, is one of the softer performing markets after Thailand’s SET (-6.75%).”
Several factors could contribute to the lack of performance of local stocks relative to other regional markets, such as:
- domestic economic challenges as the nation is still recuperating from the Covid-19 pandemic;
- fluctuations in the Ringgit’s value; and
- external elements like global economic trends namely heightened inflationary pressure coupled with elevated interest rate environment.
“We are confident in the launch of the Madani Economy framework and the National Energy Transition Roadmap (NETR) by the government as the investors have been scooping up shares after these announcements last week.
“The 5-day average trading value after the announcement was at RM2.1bn as compared to YTD average value of RM1.9bn. Meanwhile, we observed that the recent 15-day foreign net inflow has turned positive with net buying of RM1.67bn.”
Overcoming these challenges requires a multifaceted approach, said Fok, including building investors’ confidence through constant education to increase financial literacy amongst Malaysians, which can lead to more robust domestic participation in the stock market, balancing foreign investors sentiments.
At Malacca Securities, their belief is to continue to offer educational initiatives to increase financial literacy and knowledge among individuals new to investing.
“Through webinars, workshops and educational resources, we share insights, guidance and practical information on investment strategies, risk management and market trends to help Malaysians navigate the local trading environment effectively,” added Fok.
While digitalisation brings numerous advantages, it also carries inherent risks. Malacca Securities considers the rise of online scams and clones in Malaysia, as seen elsewhere, deeply concerning and a clear signal that digital literacy and cybersecurity measures need to be a priority for all businesses.
It is essential that individuals, businesses, and the regulators work together to tackle these challenges through education, infrastructure improvements, and legislation to protect consumers and preserve trust in the financial systems.
“At Malacca Securities, we continuously educate our clients about potential scams and clones and ways to safeguard their personal information and assets. This includes instructions not to share personal login credentials and how to recognise official communications from Malacca Securities,” shared Lim.
MSSB has also implemented robust security measures on their digital trading platforms, including encryption and multi-factor authentication, to ensure the safety of their clients’ data and transactions. They perform regular security audits and continuously update their systems to stay ahead of potential security threats. Apart from that, Malacca Securities actively cooperate with regulatory authorities and law enforcement in spreading awareness and any investigation related to financial scams.
On The Future
MSSB recognises that the trading landscape in Malaysia has become increasingly competitive. This reflects the growing interest and demand from investors in the market.
Lim views the competition as a positive force that encourages innovation, enhances customer choices, improves services and benefits investors.
“We’re always looking ahead, anticipating changes in the financial industry, and investing in technology and innovation. While the financial landscape in Malaysia is prioritising digital solutions, not many notice the limitations of digitising their offers.
“We pride ourselves as a homegrown leading provider of financial services, focused on delivering a comprehensive and reliable experience with our hybrid approach that seamlessly combines the best of both worlds of humans and technology.”
In recognising that every client is unique, with distinct goals and aspirations, Malacca Securities firmly believes in harnessing the power of technology while maintaining the invaluable human touch.
While the technology provides automation, accessibility, efficiency and timely market updates, their dealer representatives and financial planners can provide customised advice and support based on individual needs and goals, delivering a truly personalised and comprehensive experience to Malaysians.
