Bursa Malaysia courts young firms and investors in bid to rejuvenate local stock market
Malaysia’s stock exchange wants to list more small and medium-sized enterprises (SMEs) as it takes steps to bring younger companies, as well as a new generation of investors, to the local stock market, a senior executive at the bourse said.
As Malaysia’s economy and the fund-raising outlook improve, Bursa Malaysia is aiming to list 42 companies in 2024, which will be a high compared with the 32 firms that launched initial public offerings (IPOs) on the exchange in 2023 and the 35 that did so in 2022, chief executive Muhamad Umar Swift told The Straits Times recently.
This comes at a time when the IPO markets in Asia, particularly in China, Hong Kong and Singapore, have yet to bounce back after falling to a low in recent years.
In the first quarter of the year, the Asia-Pacific recorded 119 IPO deals that raised US$5.8 billion (S$7.8 billion) in proceeds, compared with 175 deals and US$12.7 billion raised in the same period in 2023, according to EY.
But Mr Umar noted that Malaysia is backed by a growing real economy, and foreign investors have been returning to the market.
Local investor confidence is picking up too. Malaysia’s economy expanded by 4.2 per cent in the first quarter of the year, faster than expected, driven by private spending and a rebound in exports.
The country’s benchmark stock index is up by more than 20 per cent since January, closing at 1,596.68 on May 31. Meanwhile, shares of Bursa Malaysia have jumped by 22 per cent since May.
In fact, Malaysia’s IPO market has been one of the most active in the region, with 19 listings since the start of the year, compared with just one in Singapore.
Mr Umar added that some of the 42 IPOs targeted are in emerging sectors such as those offering medical technology, including in-vitro fertilisation, or IVF, and represent “interesting new areas for the exchange”.
A higher number of IPOs in Malaysia can potentially also benefit other exchanges such as Singapore’s over the longer term, as some listed firms could seek secondary listings on the Singapore Exchange (SGX) for greater exposure, experts said.
Malaysian companies that have secondary listings on the SGX include glovemaker Top Glove, IHH Healthcare, oil palm plantation TSH Resources and Malaysia Smelting Corp.
Still, hitting the 2024 IPO target will not be easy, with firms still likely to hold back on going public due to high interest rates and low valuations as well as political uncertainty within the country.
Mr Umar agreed that more must be done.
“We have been seeing the fixed deposit pool in Malaysia growing since 2018, so we need to mobilise some of those funds and channel them back to the equity markets to get new businesses moving.”
To encourage more companies to list, Bursa Malaysia and the country’s capital markets regulator shortened the approval time for IPOs on both the Main and Ace markets to three months from four to 12 months starting from March. In comparison, the IPO process for SGX takes around four months.
The Main Market of Bursa Malaysia is the prime market for established companies, while the Ace Market is designed for growth companies. A third board, the Leap Market, is for accredited investors.
The exchange is getting more actively involved in identifying young and promising SMEs with funding needs, and taking a more aggressive approach to help them prepare for an eventual listing.
In December 2023, Bursa Malaysia and credit ratings firm RAM Holdings launched a debt fund-raising platform for SMEs, allowing them to raise debt funding of up to RM5 million (S$1.4 million) over a minimum tenure of one year.
Besides giving such companies alternative access to debt to do business, the intent is also to establish relationships and build trust with the business owners to understand their longer-term growth plans and funding needs.
“The question we put to them is, are you looking to offer your company for sale or raise capital? If it is to raise capital through a listing, we want that listing to be with us,” Mr Umar said.
At the same time, Bursa Malaysia is also rolling out strategies to attract a new generation of investors to encourage more depth and liquidity on the exchange over the long term.
A liquid market allows transactions to be completed quickly and at stable prices. Companies with liquid stocks can also draw more investors, enhancing their ability to raise capital.
“Younger investors have different ways of investing and most of them don’t quite understand equities, or see the amount needed to invest as too huge. We want to demystify investing in equities for this generation.”
In February, financial technology company Futu Holdings was given a licence to launch its online trading platform Moomoo in Malaysia, enabling account holders to invest in some 1,000 Malaysia stocks through a mobile app.
The platform also provides access to educational materials, such as beginner-friendly tutorials on fundamental investing, in the hopes of luring younger investors and those new to stocks.
These developments come after regulators in September 2023 allowed the fractional trading of shares on Bursa Malaysia to make share trading more accessible and affordable for retail investors, particularly younger ones.
A fractional share is a portion of a stock that is less than one standard board lot of 100 units.
As part of an effort to rebrand itself as a multi-asset exchange and offer more products to investors, Bursa Malaysia in January also launched a digital gold trading app that allows investors to buy and sell physical gold with an initial investment of RM10 using their mobile phones.
“By giving them new products that are easy to use, we can engage with younger investors, and potentially introduce new stock trading ideas to them as we build up trust and begin to understand their needs,” said Mr Umar.
He added: “The primary reason for an exchange to exist is to allow companies to raise capital to grow their businesses, turn a profit, pay taxes and employ people. We then need a liquid secondary market to enable these shares to trade.”
PwC in a January equity markets report said: “We expect the IPO market in Malaysia for the year 2024 to remain at least the same level as in the year 2023 and to continue to be dominated by Ace Market listings in terms of number of IPO deals.
“The capital market initiatives introduced by the Malaysian regulators will further boost the competitiveness and attractiveness of new listings in Malaysia.”
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