Malaysian exchange courts younger traders

With institutions dominating the market, Bursa Malaysia chief wants to broaden investor base

PUBLISHED : Monday, 21 October, 2013, 3:56am
UPDATED : Monday, 21 October, 2013, 3:56am

Bursa Malaysia, the country's stock exchange operator, plans to raise the investment awareness of young Malaysians with a view to encouraging investment in the domestic stock market and mitigating market volatility.

The move is seen as an important step for the healthy development of the market as both the size of the state-run pension fund, Employees Provident Fund (EPF), and life expectancy rise.

"I would love to have more retail [investment], an area that I want to focus and grow as the head of the exchange," Tajuddin Atan, the chief executive of Bursa Malaysia, said during a recent visit to Hong Kong.

The goal of changing the current market dynamic from one dominated by "big boys" was "not an easy task", he said.

The Malaysian stock market is dominated by a handful of domestic pension funds and foreign institutions, which represent more than 70 per cent of the overall buying in equity trading.

In an effort to even out the state-controlled investor base, the country launched a voluntary private-retirement savings scheme last year, issuing eight licences to foreign players including insurance giant American International Group, ING Funds and Manulife Unit Trust.

Atan, who has run Bursa Malaysia since 2011, said it needed to educate those born in the decade from 1979 to start active investing rather that opting for popular but passive investments such as fee-paying trusts or mutual funds.

However, the foreign fund managers, which represent about 23 per cent of overall stock turnover, seemed to be struggling to lure new contributors to the new scheme, with only 100 million ringgit (HK$246.2 million) having been raised in 30,000 accounts, Securities Commission Malaysia said in a statement in June.

That compares with the EPF, the mandatory pension fund for private-sector workers, which saw its investment assets grow 12 per cent year on year to 554.14 billion ringgit in June.

The reason for the poor start to the private scheme is probably because the EPF, which holds at least a tenth of each of the country's five largest companies, has guaranteed investors a minimum 2.5 per cent annual dividend.

The EPF is seeking to expand its overseas investments in real estate, bonds and equities, with foreign buying representing 18.97 per cent of its entire portfolio in June, up slightly from 17.55 per cent in March.