Bursa Malaysia

What do you think of Bursa Malaysia as a listed entity?

As a listed stock, Bursa at the end of the day, has to think of itself as a business and its main priority is that it has a duty towards its shareholders first, which is focusing on how to generate more money and the creation of shareholder value back for its shareholders.

Which understandably is very nice... if you are a shareholder of the stock exchange!

But what if you are not?

How?

What then about its customers? The consumers of the stock market? The market itself. Now this is even more complex since you have the traders and punters, and then you have the investors and the institutional funds (the big customers!).....

To see how complicated it gets, let's side-track and look at the past issue of the IPOs. (See these blog postings IPO Comments and also Messdaq IPOs ).

As a business, Bursa needs to generate cash, the moola... and the more number of ipo(s) are listed, the more revenue it generates. It is simple as that.

Let's take a look at some figures. (Click here) Now here is my counting of the number of shares... hope my eyes and my counting do not deceive!... :P

In 2000, there were 38 new listings.
In 2001, there were 20 new listings.
In 2002, there were 51 new listings.
In 2003, there were 60 new listings.
In 2004, there were 82 new listings.
In 2005, there were 79 new listings.

See how many new listings were being pumped out the last 3 years? And the issue is how could a small country like Malaysia have so many new listings? And how could the market realistically absorb so many new listings? This is an issue which had been questioned many times before. When there are so many new listings, you need the money to buy and hold these new stocks. So where is the money going to come from? Are we going to see a mere shifting of funds, from one stock to another? Or are we going to see fresh new money coming in? Without the new money coming in to buy and hold a share, then where is the support or the bottom of the stock going to come from? Without the support in a share, what's there to stop a share from diving right down to the bottom of the deep blue sea?

Anyhow, it's so evident that everything depends on which side of the fence we are sitting.

For example, from a fund manager like Claire Barnes point of view, she has noted this exuberance on the Asian Market churning out new offerings way back in Jan 2004? She wrote the following... (See http://www.apolloinvestment.com/F040107.htm )

Exuberance is back; Asian entrepreneurs and governments are pumping out securities as fast as the corporate financiers can prepare the offerings (or as fast as the regulatory bureaucrats will approve them, and the constraint is rarely prudence); US financial markets, the sliding US$, and years of excess present unprecedented dangers to the global financial system.

But would all institutional funds have such a holistic view as Ms.Barnes? More new listings simply mean more opportunity for them to make money!

From an investor point of view: With so many new offerings are being pumped out, it is clear that quality of the listings is usually compromised in an effort to make up the numbers. Poor quality listings were listed just for the sake of listing. Example? Litespeed, EB Capital, DVM all reported losses in their first quarterly report since listing. Where was the quality control? How could such poor companies be listed? And what about the marketing process of the listings? Has it all being fair? Another complicated issue. Fair for who? The company seeking listing? The merchant bankers? Mr.Market? Or Bursa? And again it depends on who we are and which side of the fence we are sitting but speaking from an investor point of view, it leaves a very bad taste in my mouth to see new shares being marketed based on extensively optimistic earnings projections, which ultimately means that we, the investors are having new stocks sold to us at a very price since the ipo is priced based on overly optimistic earnings projections. So whose fault is it? The company being listed or the greed of the merchant bankers? With so many questionable issues, how could Bursa Malaysia expect to seduce more IPO investors? Investors who would buy and hold those stocks.

From a trader/punter point of view, more new listings are great because new offerings equates to new hunting ground. More possibility to make money!

From Bursa point of view: More means more! More business and more money. Isn't Bursa doing its duty to deliver to its shareholder? Ahh... but at the expense of the customer... the investor.

Another example. Take the issue of the Messdaq. Yup, what about the poor state of quality in Messdaq? I think Messdaq is simply too shocking and in my opinion this is one value destroyer. How do I define value destroyer?

Take one glaring example. The issue of Karensoft. (See Messdaq IPOs )At its peak of around 96 sen, Karensoft had a market capital of around 65.8 million. The daftest question was how could a company like Karensoft, a company who had not made a single sen of yearly net profit since it was listed in the exchange be worth 65.8 million? We could talk for ages on how come and why and how it happened but end of the day it did happen. At the peak, Karensoft had a staggering market cap worth some 65.8 million! But at its lows of around 0.065 sen, Karensoft market value (market cap) shrank to some 7.475 million. So where did that rm58.35 million go? Where did the money vanish to? Me? I call this the destruction of value.

Well that's my investor point of view... but for the punters? I think not they bother too much as long as there is an opportunity to make money. Messdaq has but being a good hunting for many traders.

For Bursa Malaysia. The existence of the Messdaq market means money. As a listed entity, isn't Bursa's main objective is to make money?

And what about the issue of active trading in speculative stocks? Stocks that could simply fly up, up and awayyyyyyyyy?

From a business persective, would Bursa say no to more business?

From a fund manager and traders point of view, are you crazy? This is a non issue. Speculative trading opportunities must always exist!

From an investor point of view... err.... wassup dude? LOL!!... there is nothing much an investor can say, right? In fact, deep down inside, some investors would wish very much that their beloved stock(s) being speculated to record highs! LOL!!!... :p

Back to the main issue.... with Bursa being a listed company... who is more important? The shareholders? Or its customers? And which of their customers is more important? The institutional funds, the big boys? The traders or the minority investors?

Err... wouldn't it had been much better if Bursa was not listed??

Then perhaps we could see Bursa focusing more on how it could improve and develop the stock exchange... oh... OUR stock market!

Wishful mumblings???

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Oh... I have just been pointed out there is another blog posting (a good one) on Bursa Malaysia .... do enjoy!

Cheers!