Analysts positive on govt’s new capital market measures


The government’s moves to introduce market-friendly measures to boost trading activities in the equity market could enhance sentiment and enhance the country’s bourse, said analysts.

The stamp duty waiver on trading of shares of mid- and small-cap companies, the liberalisation of financing rules and the establishment of a stock market trading link between Bursa Malaysia and Singapore Exchange (SGX) are lauded by market participants.

The moves, which would increase the depth and breadth of the capital market, would enhance the local stock exchange. MIDF Research is positive on the outlook, supported by Bursa Malaysia Bhd’s consistent earnings generation and the robust demand of local trading activities.

The encouraging earnings growth for financial year 2017 (FY17) will enhance investors’ sentiment, MIDF Research said in a report.

While the expectations of bigger initial public offerings in FY18 are on the rise, the research firm said the existing economic structure provides greater support to higher trading activities.

“Our view on the stock market trading link is positive as the development will boost Bursa’s functions as the local stock exchange.

“Notably, the establishment of the trading link between SGX and Bursa will open doors for investors to access both stock markets, to trade and settle shares in a more convenient and cost-efficient manner,” it said.

The linking of both stock market trades is planned to take off by the end of the year, which will connect markets with about 1,600 listed companies.

MIDF Research believes around 57% of the combined listed entities are currently traded on Bursa.

AmInvestment Bank Bhd said the proposed trading link will encourage higher cross-border trading of local and Singapore’s equities, and facilitate a more efficient clearing and settlement of the stocks traded.

The stamp duty waiver will spur more interest among investors to trade shares in this segment and support the improvement in trade velocity, the investment bank said.

The firm said the interest in smalland mid-cap stocks has beein rising.

“Average daily volume went up by 52% from 1.6 billion shares a day in 2016 to 2.5 billion shares a day in 2017 compared to a 28% increase in value to RM2.3 billion a day (2016: RM1.8 billion),” it said.

AmInvestment Bank said the move to waive the stamp duty would support the exchange’s other initiatives, such as the Mid and Small Cap Research Scheme and the Leading Entrepreneur Accelerator Platform Market.

The present stamp duty is minimal at 0.1% value of equity trade subject to a maximum charge of RM200 and Goods and Services Tax charges.

“We view this as an extension to the waiver of stamp duty for exchangetraded funds and structured warrants to increase the vibrancy of the capital market ,which was announced earlier in Budget 2018,” it said.

The investment firm is positive the new measures will improve trading activities and volumes in the local equity market.

“We maintain our forecast as our FY18 earnings have already factored in a higher assumption for daily average trading value on an on-market trade basis of RM2.5 billion for equities versus an actual RM2.3 billion achieved in FY17,” AmInvestment Bank said in a report.

MIDF Research also said the regulated short selling that has been amended to allow all investors to conduct intraday short selling will increase the trading participants of the proprietary trading category “Notably, intraday short selling is only permitted for licensed proprietary day traders on Bursa, but the firm has yet to ascertain the impact on Bursa’s bottom line as the requirements for ‘trading specialists’ has yet to be announced,” MIDF Research said.